Softworld ’99 – Rumours fuel mid-market anxiety

With its #166m 1999 spending spree, Sage may have set off a chainevent in London last week. Nick Huber and John Stokdyk report on who’s buying what. reaction of further acquisitions and mergers in the accountancy software marketplace. If nothing else, it appeared to fuel the rumour mill at Softworld Accounting and Finance, which took place at Olympia, London last week.

Because of the time and cost involved in installing enterprise software, the bigger vendors felt the squeeze first. Their response – to move downmarket – is pressuring mid-market vendors, which are also being targeted from below by the likes of Sage and Pegasus. Everyone, it seemed, had something to contribute to the whispering war.

After recent warnings over quarterly loss forecasts, Dutch ERP software developer Baan was the focus of much of the gossip. It appeared to be an open secret that Baan had put Harrogate-based Coda up for sale.

Since Baan bought Coda last year, analysts and competitors have questioned whether Baan could integrate the stand-alone Coda Financials package into its product family.

Phillip Taylor, company secretary and founder of SquareSum, helped set up Coda before leaving in 1988.

‘I’ve heard from sources in the City of London that Baan was offering Coda for sale. But I don’t know what it’s worth,’ he said at Softworld.

Because of the way Baan handled the takeover, Coda sales and support staff left in droves, he said. ‘All that’s left in Harrogate are some of the developers.’

Over on the Baan stand, the message was that Coda Financials was here to stay. Richard Anning, Baan’s UK product marketing director, said: ‘One of the key strengths of Coda is its ease of use and integration, Around 95% of its users use it with something else.’

He shrugged off gossip that the company’s poor financial performance might damage its relationship with Big Five implementation partners. ‘Ernst & Young have just announced a new team working with Baan front office,’ he said. A further announcement is expected from PricewaterhouseCoopers.

The joint Accountancy Age/Martrak research project is pointing towards a slowdown on software spending over the next six months, thanks to the millennium bug. Anning, however, remained bullish about Baan’s future, despite last year’s job cuts and profit warnings. ‘If there is a squeeze on spending, it is more likely to be at the top of the market. This will benefit Coda which is very well known in the mid-market. We’re returning to our roots.’

Acquisition fever will intensify as IT spending drops. Dennis Keeling, chief executive of the Business and Accounting Developers Association said: ‘The economic dip is accelerating the acquisition bandwagon. This is going to be the biggest shake-out we’ve ever seen. It’s mainly because it’s only now that we’ve got publicly quoted business software companies.’

Shareholders are not as tolerant of dips as company founders, said Keeling, and vendors were increasingly prey to the whims of financial analysts who do not understand software lifecycles. ‘The easiest way to show growth is to acquire a company and put its revenue into your own. We’ve seen this at Sage and at all the ERP vendors.’

There was further financial manoeuvreing at Navision, the Danish financial applications specialist, which is planning to offer 28% of its shares on the Danish stock exchange in April. US-based Solomon Software was also readying for a placing on the NASDAQ exchange.

On the Friday before Softworld, directors of TIS Software, the enterprise management specialist that developed the Strategix family, completed a management buy-out. The TIS team was advised by Group A firm Smith & Williamson and will retain 50% of the company’s equity. They estimate annual revenues of around #10m.

PwC set tongues wagging with the announcement of a fast-track implementation partnership with Platinum Software, the US-based mid-range ERP specialist.

The UK partnership builds on an existing relationship in the US with ten PwC consultants implementing Platinum Era. The consultants will focus on back office, financials and manufacturing. With Agresso and Coda already in its practice portfolio, PwC is taking on rival accountants Deloitte & Touche and Mazars Neville Russell in the mid-market.

Ian Du Cross, a senior manager at PwC’s global risk management practice, said: ‘The big ERP vendors are targeting the mid-market, but their software is over-functional for what a lot of businesses need.’

Platinum loses sheen

In whichever direction you turned, mergers and their aftermaths were hanging in the air. Platinum, for example, is still recovering from the battering its shares took in the US when analysts started to worry that it would not hit its financial targets for 1999. The integration with Dataworks, which Platinum bought last year, was ‘less than smooth’, according to the scuttlebutt.

Peter Dryer, marketing director of Foundation Systems, which integrates ERP software, including Platinum’s, said there was too much overlap between the two companies: ‘There are a lot of opportunities for Platinum to become meaner and leaner with product and staff overlap in some areas.’

With so many conference rumours circulating, software users and vendors should brace themselves for a few more pre-millennial surprises.

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