Spring clean at Softworld

A shadow passed across the Softworld in Accounting and Financeining. exhibition at Earls Court last week. The past three months have seen six acquisitions in the financial applications market. By common consent, the UK accounting software market is too crowded. Some exhibitors may not be there when the show camps in Birmingham in the autumn.

The buzzword of this spring’s biennial gathering of the software clans was ‘consolidation’, triggered by the z53m bid from Baan for Coda, a stalwart of the UK mid-range accountancy software industry.

From the banners and posters around the show, the other big topic was the single European currency. Along with the millennium, the euro is likely to be a major factor in the software industry shakeout, said Scala’s UK MD, Mike Burdett.

‘The research and development costs are getting higher. It’s getting much harder for two blokes to create a global solution in their back bedroom,’ said Burdett. ‘Scala has estimated it will take 22 man-years of development to handle EMU. Not every vendor can afford to do that.’

Scala is no stranger to consolidation: it consolidated its distribution network. Over 30 separate entities merged into Scala Business Solutions over the past year.

Wide resources in the UK

Sage, the UK market leader for PC accounting software, doesn’t appear to be losing its appetite for acquisition. It recently added US software house State of the Art to its stable, as well as PACS, the developer of Audit 2000.

At Softworld, the company introduced its mid-range product, Sage Line 200. The demonstration reinforced the Sage working methodology. Line 200 has emerged from the remains of what was once the UK developer Multisoft, but the product now carries the look and feel of Sage’s Line 100 and Line 50 products.

But rivals such as Exact Software’s UK general manager Raj Patel question whether the Sage magic formula will work as its portfolio fills with more disparate products.

Although Patel questions the extent of Sage’s hunger for new prey, he is open about Exact’s expansion plans for the UK. ‘We’re actively looking for key players with loyal customers, a proven product strategy and a strong dealership channel,’ said Patel.

Sage differs from Exact, he adds, ‘Because they’re not doing it for strategic reasons. They have to report growing turnover and profits to the board every quarter.’ Exact, a privately held company, can continue to invest in building its global business model, including significant investment in the UK, said Patel.

‘Even though staff and support costs are 33% higher in the UK than Holland, it reduces our risk of skills shortages,’ said Patel. ‘Because there are more competitors in the UK, more resources are available.’

Consolidation is strong

Baan’s offer for Coda confirmed the software squeeze is tightening. Coda founder Rodney Potts admitted to a tinge of sadness, but favoured the Baan offer as ‘good for shareholders and employees’.

‘Baan should do well. In the UK it will give them a big leg up, because Coda is so strong. Coda’s Financials will give Baan a good answer to SAP,’ said Potts. Coda had made losses in recent years, mainly due to its expensive attempt to expand into the US. This part of the organisation would link well with Baan’s US operation, which has been doing extremely well, he said.

Consolidation does not have to involve acquisition. Hyperion produces analytical applications that sit on top of ledgers. Last year, the company entered a strategic relationship with Baan. In the US, Hyperion markets a financials application, but this is likely to be superseded by the Coda-based product.

Hyperion, according to its European marketing director Garrey Melville, is relaxed about the Coda-Baan tie-up. Hyperion has decided to stop developing the financials application and is concentrating on analytical tools that sit on top of ledgers and other business applications.

At Softworld, Melville previewed the company’s family of MBA (multidimensional business analysis) software. Due for shipment in July, Hyperion’s MBA for ledgers will be based on the Applix TMS Server 7.0 multidimensional database, which it has in common with Baan applications. Later in the year, the company will offer tools to link a wider range of target systems, said Melville.

Echoing the marketing mantra invoked by several vendors, Melville said the route to survival in the software industry was, ‘Get big, get niche or get out.’ Hyperion is taking the middle course.

Since software sales depend partly on the customer’s confidence in the supplier’s long-term stability, nobody would admit their company’s strategy fell into the third category. But it was clear the consolidation question was on their minds.

While some soothsayers predicted the shakeout would take hold in 1998, Great Plains UK MD Neil Robertson took a more optimistic view. ‘The volume of business out there for the next 18 months will keep people happy,’ he says. ‘But when the market toughens, expect to see some serious casualties.’