Enterprise Resource Planning (ERP) software vendors have been subject to a tremendous amount of merger and acquisition activity. How does this affect industrial ERP users?

1. IFS ERP Survey: Impact of
Mergers & Acquisitions
Overview

2. Background
In the fall of 2011, a study was
conducted among manufacturing This study was
executives and professionals of conducted by IFS
North America
middle market to large and Mint Jutras
manufacturers to better understand , an independent
the impact on customers when research-based
consulting firm
solution providers grow through that specializes in
acquisition. analyzing the
business impact
This study illuminates: of enterprise
• Concerns of customers applications
• How they respond

3. Major Areas Explored
 What percentage of companies Applications included:
are impacted by acquisitions?  Enterprise Resource
Planning (ERP)
 How are these acquisitions  Customer
Relationship Mgt
perceived? (CRM)
 What actions are taken by  Enterprise Asset
Management (EAM)
customers post-acquisition?  Project/Portfolio
Mgt (PPM)
 Supply Chain Mgt
(SCM)

4. Key Findings
• Over half (54%) of survey respondents have “experienced” an
acquisition of their software vendor
• Acquisitions that result in broad portfolios of products are not
necessarily viewed negatively but this will depend on the
nature of the portfolio
• Concerns primarily arise over the continued support and
innovation of products that are implemented at the time of
the acquisition

5. Type of Business
Process Mfg 38%
Discrete Mfg 36%
Other 12%
Consultant 7%
Contracting/Industrial Projects 5%
Utility 1%
0% 10% 20% 30% 40%

6. Size of Company by Revenue
$100M -
$2.5B billion or
$150M, 16%
more, 29%
$150M -
$250
M, 14%
$250M - $1B - $2.5B, 11%
$500M, 16%
$500M -
$1B, 15%

7. Applications Currently
Implemented
90% 78%
60%
39% 42%
34%
30% 18%
6%
0%
ERP CRM PPM EAM SCM Other

8. Have you used a product from a
vendor that was acquired?
35% 31% 31%
30%
25% 23%
20% 16%
15%
10%
5%
0%
Yes – product Yes – product was No Don’t know
acquired before acquired after
selected selected

9. Post Acquisition: Still running it?
70% 68%
60%
50%
40%
30%
20% 14%
10%
10% 4% 4%
0%
Yes, and plan to Yes, but plan to Yes, but plan to No, we have No, we have
continue using replace it through replace it with a replaced it with a replaced it with a
this product a competitive product from the product from the product from a
selection "acquiring" "acquiring" different vendor
vendor
Most continue to run software post-acquisition. But whenvendor
replaced, the incumbent vendor does not necessarily have the
advantage. A search for replacement is > 3X as likely to be put out
to bid.

10. Typical Goals of Acquisitions
• Grow market share:
– Growth of customer base is quick and in “steps” rather than
gradual
– Can be cheaper to acquire large blocks of customers than
selling them one at a time
– Recurring revenue stream benefits from larger base
• Grow share of customer wallet:
– Cross sell and up sell opportunity
– Quicker to acquire a solution than to develop it internally
– Strengthen internal expertise immediately
• Enter new markets

11. How does the customer
benefit?
• Grow market share:
– Stronger financial position
– Can “bail out” struggling companies
• Grow share of customer wallet:
– Broader solution
– Potential synergies between merged companies/solutions
– Can accelerate (or slow) innovation processes
• Enter new markets
– Little to none unless customer is in (or entering) a market
that is underserved by original vendor (questionable choice
originally)

12. View of a broad portfolio of
products?
50% 44%
40%
30% 27%
20% 15%
10%
10% 4%
0%
Very unfavorably Somewhat Somewhat Very favorably I don’t care
unfavorably favorably
NOTE: Did not distinguish between a broad portfolio with the intent
o buy market share (e.g. a large number of ERP solutions) versus
those with the intent to broaden the solution footprint (surround
ERP with complementary products).

13. Concerns?
The product may be discontinued, forcing us
to move onto another product from the… 58%
The owner of the product may not continue
to invest in or evolve the product in the… 55%
The product we use may not be well
integrated with the rest of the product… 48%
We could wind up running a collection of
separate point solutions owned by the… 33%
None 10%
0% 25% 50% 75%

14. About IFS
IFS is a public company (OMX STO: IFS) founded in
1983 that develops, supplies, and implements IFS
Applications™, a component-based extended ERP
suite built on SOA technology. IFS focuses on agile
businesses where any of four core processes are
strategic: Service & asset
management, manufacturing, supply chain and
projects. The company has 2,000 customers and is
present in more than 50 countries with 2,700
employees in total.

15. IFS ERP Survey : Impact of
Mergers & Acquisitions
Contact Information:
Charles Rathmann, Analyst
IFS North America
262.317.7419
chuck.rathmann@ifsworld.com