TechnologyEnterprise software: hard to swallow

Enterprise software: hard to swallow

Enterprise wide software systems require a big investment of time and cash. But are suppliers more interested in gobbling up rivals than customers needs?

It’s difficult for software vendors and their resellers to convince finance
directors that they need to update the applications they have in place, so
organisations with growth ambitions are adopting a number of strategies.

Some are focussing on emerging markets such as Eastern Europe. Some are
specialising on vertical markets such as distribution and manufacturing, while
others are buying competitors’ customer bases and niche best of breed suppliers
in their attempts to be the biggest and best at everything.

The market for enterprise systems is in a constant state of flux, and the
organisation that owns your software developer today may not be the one that
owns it tomorrow. Sometimes this is a good thing, sometimes it’s a bad thing,
sometimes it’s a mixed blessing. The success or otherwise of any acquisition is
relative: it depends on what is being bought or sold, and why, and who is
sitting in judgement.

Investors are interested in seeing an acceptable return in a reasonable time
frame; employees are worried about their jobs; and customers want to see the
software their business relies on in safe hands. But meeting the expectations of
myriad stakeholders can be a tricky business, so businesses have to be pragmatic
and prioritise.

In an ideal world, customer needs would be near the top of the list. After
all, without them you simply don’t have a business. In the real world, customer
satisfaction is way down the post-acquisition ‘to do’ list – despite software
vendors’ protestations to the contrary. They’re not going to come right out and
say that you are nothing more than a number in a spreadsheet; it’s just too
Gerald Ratner. But this doesn’t stop them treating you this way; and there is
very little you can do about it.

Most enterprise software developers are at least one step removed from
end-users because they sell through a network of resellers. So when Oracle buys
a PeopleSoft or Infor buys a Systems Union, they can use their resellers as a
human shield, safe in the knowledge that this is where the ‘customer
relationship management’ buck will stop.

Theory and practice

In theory, if you don’t like this state of affairs you can up sticks and take
your business elsewhere. In practice, very few of you will. How many FDs want to
replace an enterprise-wide software system unless there is absolutely no
alternative? It’s costly, disruptive and time consuming; and if you didn’t
choose a different supplier in the first place you probably had a pretty good
reason.

Consequently, when software suppliers go shopping, their priorities are more
likely to mirror the needs of their investors than their end users. As long as
they can make the numbers add up, they can waffle on about ‘fusing the acquired
products into a coherent software suite’ or ‘integrating complementary product
sets to provide a rich vertical market experience’, without offering end-users
any guidance on how or guarantees as to when.

Oracle recently posted its results for the first quarter of 2006, showing net
profits up 29% to $670m (£362m) on sales of $3.6bn. So providing an
ever-increasing number of corporates with access to an ever-increasing product
line, probably looks like a good strategy to investors. Customers may see things
differently. But it’s not easy for JDE or PeopleSoft users to change ERP
supplier even if they are unenthusiastic about their current home.

Maybe customers will eventually get what they need, maybe they won’t.
Meanwhile, Oracle can safely concentrate on building a network of
interconnecting applications

that will make it easier to sell its captive user base more products and
services, without worrying that too many of them will vote with their feet any
time soon. This may be frustrating, but at least Oracle end users can take cold
comfort from the fact that they know who and what they’re dealing with – not
everyone is this fortunate.

There’s been so much movement in the enterprise marketplace over the past few
years that some end-users have lost the plot. Ask a collection of SunSystems
users who own their software developer and you get a variety of answers. These
range from Systems Union (the previous owner) to Infor (the current owner) via
Sapphire Systems and Eclipse, both resellers. Not one came up with the magic
words Golden Gate Capital.

But this private equity company owns 73% of Infor, so it’s got a major stake
in its future and significantly more influence over the software companies in
its portfolio than any of their end users – of which there are many. Since it
was created in 2002, Infor has grown at an astonishing rate. It now owns Baan,
Mapics, Extensit and SSA Global, and more, and has over 70,000 business
customers.

Only time will tell how its growth strategy influences product development,
or affects the service and support that end users receive. But Infor likes its
resellers to stop selling competitive products, so it seems pretty clear that
doing what’s best for the customer is less of a priority than what’s best for
the investor.

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