Archive for the ‘ERP’ Category

The Politics Behind Oracle Open World By Albert Pang

Sunday, September 30th, 2012

For years Oracle has deftly used a blend of political skills and its growing influence in the enterprise marketplace to position Oracle Open World as the preeminent event for IT buyers and corporate executives, not to mention a long list of partners critical for its long-term success.

In fact the politics behind the massive conference, which is expected to draw more than 45,000 attendees to San Francisco this year, is rich in symbolism, and perhaps more important than what’s being said at OOW.

Like everything else that greases the wheels in business dealing, good politics begets power and OOW is no different. In its early days OOW, which began as a user forum until 1997 when it was taken over by Oracle, was a relatively small affair attracting a few thousand DBAs and developers to see the latest in Oracle’s database technology. Oracle held a separate event for its E-Business Suite applications customers called AppsWorld that was later folded into OOW after it bought PeopleSoft in 2005.

The more acquisitions Oracle makes, the bigger OOW gets. So has the prestige that Oracle accords to not just OOW calling it the biggest software event in the world, but also many technology companies that have shared the limelight through the years.

As Oracle has become arguably the world’s most powerful hardware and software company for the enterprise, OOW has also emerged as the arbiter of power and prestige within the Oracle ecosystem. The sponsorship program of OOW has 11 levels from the lowly media to Global, a new badge of honor created this year.

Not only does a top sponsorship connote one’s standing in the enterprise IT world, it also reinforces one’s status within the ecosystem. In other words, you are not really considered a top Oracle partner until you become a top OOW sponsor. If one’s standing slips in the OOW sponsorship pecking order, it goes without saying that trouble is brewing and it may be a good time to reevaluate one’s relationship with Oracle.

Two examples come to mind. The sour relationship between Oracle and HP, once a perennial presence in OOW, has gotten to the point that the latter has not been a top sponsor since 2010. HP does have a booth with a non-boldface listing in the show guide. Apparently boldface-listing goes to the top sponsors.

The same friction erupted last year when Salesforce.com, a top OOW sponsor that had to move at the last minute the venue of the presentation of its CEO Mark Benioff away from OOW to a nearby hotel. Essentially Oracle exerts total control over what could be seen or heard by OOW attendees.

This year the top status goes to Fujitsu, which for years has been one of Oracle’s key partners and this year is given the leading role as the Global Partner sponsor. Fujitsu, which has become one of Oracle’s biggest OEM partners, now resells hundreds of millions of dollars in Oracle databases and other products to its customers in Japan and elsewhere. In addition to its consulting business(also heavy on Oracle), Fujitsu has been working closely with Oracle to incorporate its technologies into its supercomputer and high-performance computing offerings.

The following table lists the top sponsors of OOW since its major expansion in 2006.
OOW Sponsors

For the second year in a row, Deloitte is the marquee sponsor of OOW and in return for spending millions of dollars to plaster its name all over OOW and the concurrent Executive Edge, an invitation-only event for CIOs, CFOs and the likes, it has profited handsomely by building one of the biggest Oracle practices in the world with hundreds of millions of dollars in ERP implementations every year. By the way, Deloitte has been one of the first Oracle partners to invest heavily on implementations of Fusion Applications.

Another interesting development is the rise of Intel. In addition to continuing as a Diamond sponsor for the third year in a row earning it a keynote spot this year, it is also a major sponsor of a 90-city seminar series on Oracle Cloud, positioning its chip, networking gear and security products as the key enablers behind the data center of the future, which seems to be where most Oracle Exadata systems are being used these days.

Another set of new partners to this year’s top sponsorship are Arrow, Avnet and Tech Data, which are playing a pivotal role behind the growth of Oracle into new markets from resellers to emerging countries. Tech Data, for example, recently expanded its relationship with Oracle by distributing applications and hardware, in addition to database and middleware products, to customers around the world. Together the three mega-distributors could generate billions of dollars in sales for Oracle this year. Along with other resellers and distributors, they represent the building blocks of the new Oracle’s indirect sales arm responsible for more than 40% of its $38 billion in projected sales this year.

On the other hand, there are some that have failed to make the list this year. HP is not a top sponsor in 2012 or the year before. Dell was a Diamond sponsor last year, but this year it has fallen off the top sponsor list. Coincidentally Dell had a major presence at Salesforce.com’s Dreamforce last week, but that’s another story. By the way, Salesforce.com was a Grande sponsor in 2011. This year Netsuite seems to have taken its spot by becoming not just a Grande sponsor, but earning a session spot.

In summary, the politics behind OOW illustrates how one company can dictate the future of enterprise IT by simply inviting or disinviting certain partners to the biggest party in town.

Send me questions and comments about Oracle Open World @appsruntheworld on Twitter.

Posted in ERP, Oracle, Oracle Open World, Uncategorized

As New Reality Sets In, Oracle Braces For The Future By Albert Pang

Tuesday, September 11th, 2012

As an avid enterprise IT watcher, I am constantly amazed at the uncanny ability of Oracle to reinvent itself after relying on its bread-and-butter database software for more than 35 years.

It is a classic tale of how one company refuses to give in, despite the increasing odds that stack against its core business. When one part of the company is in trouble, it quickly plugs the hole with a quick fix while scrambling for long-term solutions. When its customers are clamoring for Cloud offerings, Oracle wastes no time to meet their needs.

Recently Oracle’s accelerated push to embrace the Cloud has taken on a new urgency. In rapid fashion, Oracle has announced plans to acquire social marketing outfit Vitrue, social intelligence aggregator Collective Intellect, social markup language developer Involver, clinical-trial operations specialist ClearTrial, network virtualization vendor Xsigo, and facilities management provider Skire. That’s on top of its acquisitions of RightNow and Taleo spending billions of dollars along the way on eight deals in less than eight months.

Despite the moves, there are signs that the company has reached its limits on how to grow its core business, while moving aggressively to turn around the Sun hardware operations that it acquired in April 2009 at the risks of alienating long-time partners like HP.

Recently a California judge ruled in favor of HP’s Itanium suit against Oracle, throwing another monkey wrench into Oracle’s quest to become a provider of complete technology stack from database to applications and from middleware to servers.

Additionally, Oracle’s performance in the fourth quarter – traditionally its best and the brightest – of fiscal 2012 paled that of its closest competitor SAP.  SAP’s 18% jump in total revenues in 2Q12 eclipsed Oracle’s 1.8% gain in 4Q12 by a long shot.

The stark contrast cut across all regions. Bogged down by its sluggish hardware business, Oracle’s software license revenues rose 14% in the Americas, dropped 5% in EMEA and gained 8% in Asia Pacific during the quarter. SAP outperformed Oracle in all three regions with increases of 32%, 22% and 25%, respectively.

In Japan Oracle’s total revenues posted a modest 6% rise, compared with the 27% spike for SAP Japan. The former is twice the size of SAP Japan.

Based on our estimates, Oracle applications and middleware business in the United States was one of the rare bright spots in 4Q12, but that was largely because of incremental revenues from its recent acquisitions, which target mostly US customers.

Decelerating Database

A more unsettling, yet unavoidable, trend is the slowdown of its core database business, which until 2006 accounted for the bulk of its license and maintenance revenues. Clearly the 2005 acquisition of PeopleSoft was the catalyst that shifted the priorities of the company, or the mindshare of its customers for that matter. Its multiple acquisitions in the middleware space pushed database further away from the spotlight.

For example, Endeca, the search technology acquired in October 2011, and Fatwire, acquired in June 2011 and now part of Oracle WebCenter for Web Experience Management, helped contributed $63 million in Middleware license revenues in 4Q12. That followed growing revenue contributions from Sun Middleware  as well as a host of others like AmberPoint, Datanomic, GoldenGate, Passlogix, and Silver Creek Systems.

The last major deal Oracle did in database was the acquisition of Sun, which brought with it MySQL, an open source database, which means anyone can download it for free. The highest list price of a commercial license of MySQL from Oracle is $20,000, compared with $47,500 for the Oracle Database Enterprise Edition. If you are one of the thousands of Oracle salespeople, which one would you sell.  Based on our research, for every dollar Oracle gets from MySQL license sales, it gets $35 to $40 from its core database licenses.

That raises the question of the future of Oracle database business, which has been the growth engine for much of its history. CEO Larry Ellison likes to point out that Oracle got its start by selling secure databases to the CIA, not selling secure applications or secure Cloud products to anyone who puts their faith on its products.

The truth is that Oracle’s database business is not secure anymore. Until FY 2009, SAP and HP were among Oracle’s 10 biggest database resellers, accounting for $147 million and $43 million in revenues, respectively, according to transcripts from the lawsuit filed by HP against Oracle for withdrawing product support for HP’s Itanium server customers.

Assuming a drop in FY10 because of the recession and a rebound in FY11, both companies could still represent at least $200 million in annual revenues for Oracle. A pittance perhaps when one compares that with an estimated $4 billion in database license revenues Oracle gets every year.

Both SAP and HP are forgoing the sale of Oracle database to their customers, the former now in favor of its own database Sybase ASE as well as a high-performance alternative called SAP HANA, and the latter is locked in a hostile hardware battle against Oracle, its erstwhile partner.

Database Commodity

The problem is that once you open the floodgate letting in non believers, you will never recover after they start using cheaper but equally compelling substitutes. It wasn’t too long when one would question the value of a generic cholesterol-reducing drug vs that of Pfizer Lipitor. Now people couldn’t care less if they wipe their nose with a store-brand tissue or Kleenex. In the new era of Big Data, what’s important is not the database one uses, but rather how you can make sense of the massive data repository in real time. Coincidentally 4Q12 was the first quarter in a long time when we saw deterioration in Oracle’s core database business, judging from the flat license revenues of its database and middleware products.

It’s possible that Oracle could revive sales of its database by bundling it with its hardware perhaps at a steep discount. After all, Oracle has done it recently by dangling 10 Exadata boxes plus five-year maintenance for free in front of Alcoa hoping that to dissuade it from adding more HP servers. Again that’s from the transcripts of the HP and Oracle trial.

Anyone who contemplates giving away Oracle’s crown jewel should have their head reexamined. For one thing doing that would suggest that Oracle’s high-end hardware strategy is losing more ground to competitors like EMC Greenplum, HP Vertica, IBM Netezza and Teradata Aster Data, after its reduced expectations of Exaline business made during its 3Q12 earnings call.

Since IBM acquired Netezza in 2010, it has grown its installed base by 40% from 370 to more than 525. In recent months IBM has sold out all of its Netezza. The real problem with Oracle’s hardware strategy, especially on the high end, is that it’s competing with enemies on all fronts and the safest place for its salespeople to call on remains its installed base of database customers, which may start shrinking.

By comparison, IBM Netezza can be sold not only to its Cognos, Infosphere customers, but also those using  Microstrategy or Informatica, while HP Vertica can be easily plugged into Microsoft SQL Server accounts. EMC Greenplum is aligning itself with SAS. With more customers than Oracle Exadata, Teradata can sell to any of its estimated 1,500 longtime data warehouse accounts. In other words, Oracle is fighting with everyone all at once just to get into the door.

To help Oracle solve its current predicament, my advice is as follows:

  1. Defend its core database business at all costs, which mean that it needs to identify a loss leader among its vast product portfolio. It could be something like Hyperion Essbase for reporting or Golden Gate for enterprise information management. Deploy that tactic judiciously to help sell its hardware, database, or applications products.
  2. If it fails to grow its hardware business as it promises to do in the current fiscal year, license the technology liberally to anyone who wants to put it into the data center of the future, expanding that into an Intel Inside-like program powered by Oracle Engineered Systems. If that still doesn’t work, sell the hardware business to the Chinese.
  3. It’s time for company cofounder Larry Ellison, who turned 68 on August 17, to articulate a succession plan. It may be painful for Ellison, who probably has many more things that he wants to accomplish in his remaining years, to give up control. However relinquishing his CEO position would be imperative for Oracle to stake its future away from its database, another crucial step for the company to reinvent itself.

Oracle is no longer a database company anymore. Since its acquisition of PeopleSoft, Oracle has been locking horns with others in the Enterprise Resource Management space. To stay buzzword-compliant, Oracle should align all its products with the Enterprise Cloud in mind. Database just happens to be one of the resources that the enterprise needs to better manage in the Cloud.

The new reality is that it needs to position itself as the technology vendor most capable of harnessing the Enterprise Cloud backed by its long history of developing its basic building block.

Tell me what you think of the future of Oracle @appsruntheworld onTwitter.

Posted in ERP, Oracle, SAP

SAP Chases Constant Cloud Customers By Albert Pang

Wednesday, February 22nd, 2012

The completion of SAP’s acquisition of SuccessFactors raises as many questions about the future of SAP as there are about its past.

One of the key questions is when and how many of SAP’s 183,000 customers would migrate to the Cloud, something that SuccessFactors and its peers have embraced with gusto and benefited handsomely from it as a result.

The obvious answer is that with 14% of SuccessFactors customers, representing nearly 500 organizations, already using SAP applications, it’s just a matter of time that many more SAP customers will choose SuccessFactors as their onramp to Cloud deployment either as a matter of necessity or convenience.

For anyone interested in using SuccessFactors to improve their eRecruiting, performance management, succession planning and even Cloud-based Core HR business processes, SAP will position SuccessFactors as the front and center of its Cloud strategy.

SuccessFactors and its Cloud technologies will take precedence over SAP’s evolving Cloud offerings resulting in the shelving of products such as Career OnDemand, according to SAP.

SuccessFactors will also become the designated Cloud model for SAP to sell and deliver HCM products including Core HR and talent management applications. By May 2012 SAP is expected to come up with specific plans to integrate its entire Cloud portfolio with its existing on-premise products.

Lars Dalgaard, CEO of SuccessFactors, is expected to join the powerful SAP Executive Board as its sixth member(the others are its two co-CEOs, CFO, COO and CTO) capable of shaping the future of the company. I would not be surprised that Lars’ real title is the Chief Cloud Officer of SAP.

All these mean that SAP’s $3.4-billion deal to buy SuccessFactors has transformed the company with its Cloud strategy taking the center stage and evolving from context to core.

Will Customers Buy It?
SAP’s emphasis on the Cloud comes at a time when enterprise applications customers are also transforming themselves in a trajectory similar to moving from Casual Cloud to Constant Cloud.

As Rentokil Initial, a $4-billion business services company, and a growing list of other organizations are favoring Cloud-based applications over on-premise software, the implications for vendors like SAP are significant. Since 2007 Rentokil Initial, which employs 66,000 around the world, has drastically reduced its investment in on-premise applications specifically those from Oracle following increased adoptions of Cloud systems from Salesforce.com to Workday.

Similarly hundreds of SAP customers like ConAgra Foods, Hilti, and Kimberly Clark have been using SuccessFactors for years suggesting that their spend with SAP would have increased had the vendor provided an equally compelling Cloud-based option.

As a result, SAP’s positioning SuccessFactors as the front and center of its Cloud strategy is no longer a matter of convenience, but rather a necessity for the vendor to win in the future.

That brings us to the issue of using SAP’s track record to determine whether the SuccessFactors deal and the current Cloud push would be a ringing success. One is tempted to equate SAP’s current Cloud obsession with its foray into eCommerce(remember SAP Markets?) during the Dot Com boom in 2000. Every software vendor was doing it then, as they are now.

After the Dot Com bust, SAP quickly reverted to its core business of selling big ERP systems. Its subsequent acquisitions including Frictionless Commerce for its on-demand sourcing applications, Triversity in retail, Crossgate in B2B integration and more recently the deal to invest in SAF AG for forecasting and replenishment have been made to augment its sales pipeline. Their impact has been modest at best.

Business Objects and Sybase were bought to help SAP shore up a specific product category. The former has made a stronger impact than expected and one could argue that SAP’s recovery from the deep recession would have been held back longer without the help of the business intelligence products from BusinessObjects. On the other hand, it’s too soon to gauge the ready acceptance of Sybase database among SAP’s installed base despite growing signs that Sybase is being fully integrated into SAP’s sales operations.

In short, most of SAP’s past deals have been more opportunistic than cataclysmic. The question is whether the inclusion of SuccessFactors will become the catalyst to shake SAP at its core. Today SAP is much more diversified with its fledgling in-memory agenda as well as the ambition to become the fastest-growing database company, not to mention its all-important business analytics strategy.

Even with a stated goal of building a €2 billion Cloud business by 2015, compared with €201 million from the combined SuccessFactors and SAP’s Cloud subscription and support revenues in 2011, the target amounts to about 14% of SAP’s applications license and maintenance revenues if they continue to grow at 10% annually through the projected period.

Still the steeper the ramp of its Cloud revenues, the more likely its license and maintenance revenues would be eroded. In the coming months, any unexpected shortfall on either could wreck havoc to its stock price as much as to its ability to target Constant Cloud customers, while easing its dependence on on-premise business.

Perception, duly noted in the Dot Com era, now matters more than reality. The mere act of SAP’s throwing its weight squarely behind the Cloud and thusly reconfiguring its business model is akin to what Amazon.com was aiming to achieve by turning the world of retailing upside down.

The latter has done it with conviction and clarity and I am eagerly awaiting the former to do the same.

Send comments and questions about this blog and how we can help meet your enterprise applications research needs to info@appsruntheworld.com.

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Posted in ERP, HCM, Oracle, SAP

Deltek Profits From Project-Focused Markets By Albert Pang

Thursday, June 2nd, 2011

With a knack of automating professional services organizations and government contractors, Deltek has what it takes to steer these customers and ultimately reshape the way they manage the lifeblood of their operations – complex and long-term projects.

In fact, Deltek, which has been selling into project-focused organizations for nearly 30 years, is experiencing an upturn in its core market, enlarging its global presence, and realizing the benefits of its recent acquisitions.

After a long recession that has dealt a blow to its customers in professional services and government contractor verticals, Deltek is seeing shoots of green in areas that could hold the key to its future.

With its unrelenting focus on project-focused customers, Deltek’s perseverance has begun to pay off as it parlays its domain expertise into new market opportunities and expanded product offerings.

Kickstarting Insight
At Deltek Insight, its annual customer conference held recently in Nashville, Deltek announced its plans to take aim at fast-growing markets from on-demand applications delivery to real-time analytics, while shoring up the project management and market-research capabilities of its long-time government contractor customers.

The key announcements included Deltek First, the vendor’s on-demand applications for small and mid-sized government contractors. Leveraging its industry-specific knowledge and the framework from its GCS accounting solution, Deltek First offers robust project accounting and reporting, time and expense collection, and fixed assets capabilities, along with viagra development and market intelligence add-ons.

Under a partnership with BI vendor QlikTech, Deltek has introduced Deltek Costpoint Analytics, a dashboard and analytics solution for professional services organizations to better track project performance, manage budgets and optimize profitability with the use of advanced business intelligence.

The vendor also introduced Deltek PM Compass, which allows program managers and project leaders in the government contractor space to have an aggregated view into complex programs. It augments their capabilities with automated workflows, alerts and notifications, as well as built-in data-mining and other tools to help them manage programs from one central location.

These announcements kickstarted a new growth period for Deltek following its recent acquisitions, product enhancements, and more importantly the expansion of its industry content and international operations.

Compelling Synergy
In March 2011 Deltek acquired Washington Management Group including its FedSources, complementing its INPUT business, which enables companies to identify and develop new business opportunities with public sector organizations. Combining its GovWin software with market intelligence and business development tools from FedSources and INPUT allows Deltek customers to have a better shot at winning government contracts.

Last year Deltek also acquired Maconomy, which has established a major foothold in Europe and other regions with its full suite of applications designed for automating financial and project management functions at professional services organizations especially those involved in marketing communications, public relations, as well as accounting, consulting, and legal services.

In the first quarter of 2011, half of its biggest deals came from international sales as a result of the Maconomy acquisition. Hill and Knowlton, Leo Burnett and Ogilvy Public Relations are among Maconomy’s long-time clients.

Deltek’s flagship product Vision, which offers localized versions in Dutch, French, and Spanish, has enjoyed global acceptance with recent wins including Valstar Simonis, a Dutch engineering company with 85 employees. Tauw, a large engineering firm in the Benelux region, has standardized on a full suite of Deltek’s CRM, ERP and project management applications.

With an installed base of more than 14,500 customers and 1.8 million users, Deltek caters to architecture, engineering and construction firms as well as a slew of government contractors and professional services organizations that rely on the vendor to manage their back-office and increasingly customer-facing operations.

Moving upmarket
Though many of its customers are considered small and midsized companies, Deltek has also succeeded in selling into big firms including SAIC, one of its major accounts that has 40,000 users running its applications.

In fact the acquisition of Maconomy, which already offers multicurrency and local statutory support, has enabled Deltek to pursue bigger deals. Two of its major deals in the first quarter of 2011 came from organizations with more than 5,000 employees.

Regardless of their size, what these companies have in common is that because of the nature of their projects, whose duration can stretch from weeks to years, their business processes for costing, compliance and project management have grown in complexity.

Budget cuts from government agencies, coupled with increased competition, are also forcing Deltek users to look for better business development, customer relationship management and analytical tools to help them identify, pursue and capture new market opportunities.

As a result, the new products and services ranging from on-demand applications delivery to off-the-shelf analytics and Maconomy’s offerings for big professional services organizations underscore the integrated approach by Deltek.

By addressing the needs of professional services organizations holistically, Deltek is taking the high road similar to the transformation under way among its customers, which have had their share of mergers and acquisitions in order to achieve the economy of scale needed to replicate successful projects across sectors and geographies.

Deltek is replicating such best practices as well. For example, integration between Deltek Vision and Maconomy People Planner for resource management is under way. The same applies to consolidating the databases between content repositories from INPUT and FedSources.

Sustaining Momentum
Deltek’s recovery is still a work in progress and any sustainable organic growth will depend on the health of its mainstay – millions of small and midsized professional services organizations that subsist on a mix of government and commercial projects.

With an eye toward integrating its acquisitions as well as delivering new and expanded offerings for everything from project management to business intelligence, Deltek is on the path of showing solid growth with increased revenues and expanded installations.

After peaking at $289 million in company revenues in 2008, Deltek’s sales slumped because of the recession. Now incremental contributions from its recent acquisitions will push Deltek’s business to new heights topping $360 million in 2011. The move toward on-demand delivery and global expansion will entail Deltek’s reaffirming its commitment toward project-focused organizations, while ensuring that it has the right solutions to exploit untapped opportunities in new regions.

Feel free to email me at apang@appsruntheworld.com and tell me what you think of the future of enterprise applications in the professional services vertical.

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Posted in ERP

SAP Targets One Billion and One Users By Albert Pang

Thursday, May 26th, 2011

If SAP has its way, its software will reach one billion and one users by 2015. The first billion is SAP’s stated goal, the superfluous but no less important singular user is my addition. Whether it succeeds or not, SAP’s future is at stake.

Before the goal can be reached, SAP, whose software has already been in use by 109,000 customers and hundreds of millions of people, has laid out a series of measures to prepare for and capitalize on the onslaught of new and existing users.

That was evident at the recent SAPPHIRE NOW held at the Orlando Conventional Center, which was configured as a trade show, dedicated theaters, group discussions around conference tables, and new media experiences on a global scale all rolled into one.

One of the narratives of the theme-infused SAPPHIRE NOW was the rise of mobile applications. Sybase, following its acquisition by SAP for $5.8 billion, was spotlighted as the key enabler with the rollout of Unwired Platform 2.0 and the primary mobile applications developer.

Other recurring themes included combining Rapid Deployment solutions with in-memory computing to boost reporting capabilities; leveraging AWS and Azure Cloud Computing platforms under expanded alliances with Amazon and Microsoft, respectively; as well as sustaining customer interest with both on-premise and on-demand offerings including the latest business analytics applications for line of business executives and the revamped Business ByDesign for midmarket businesses.

A Touch of Mobility
Dozens of mobile applications from Sybase, which has become one of the biggest SMS messaging backbones responsible for processing 1.5 billion text messages per day, will start hitting the market in the coming months capable of automating such tasks as workflow approvals for HR processes like employee profile lookup, vacation request and scheduling and time capture. Other mobile apps Sybase plans to release are designed for customer relationship management, travel and expense management and industry-specific functions. A healthcare mobile application on iPad, for example, allows doctors to access records from patient history to medical images.

The quasi-electronic health record application from Sybase, which does not have full-blown scheduling and specialty features like oncology treatment plan, comes amid the EHR push by the US government to help providers defray the costs of incorporating such systems into meaningful use of their daily practices through billions of dollars of subsidized programs that aim to boost quality of care as well as eliminate medical errors and bloated expenses associated with manual systems.

Altogether it represents SAP’s first major foray into developing hundreds, if not thousands with the help of other ISVs, mobile applications that could unite businesses and their customers all revving to tap into the wonders of mobility with easy access to mountains of information at their fingertips.

With sales of smart phones approaching 100 million every quarter(Apple alone shipped nearly 19 million iPhones in the first three months of this year), such mobile applications will become the impetus behind SAP’s ambitious goal of reaching one billion users.

A Momentous Event
Unlike previous SAPPHIRE events where much of the action either took place on the show floor or behind the doors of private meeting rooms, the conference has taken on an added dimension by infusing new media including social networking and live webcasting into everything about the show. Blogs, tweets and Facebook posts about the event reached untold millions of people around the world as they happened.

The command center of the new media strategy sat next to Studio 3 where the Sybase announcement was made. With an air of a NASA control room, hundreds of video servers, laptops and LCD monitors were stacked from floor to ceiling transmitting TV production-quality images to a global audience. The Orlando show was connected simultaneously to four regional events in Europe.

Suffice it to say that the vendor’s positioning SAPPHIRE NOW 2011 to break last year’s record of reaching more than 50,000 people onsite and online was to surpass Oracle Open World, the competing event that drew 41,000 attendees in 2010.

There are legions of customers and buyers who would attend both events and compare their strategies before making their final decisions. Thus the bragging right of who holds a bigger event is symbolically important in an age where the actual number may carry less significance than its underlying implications.

Given the outsized presence of both in the enterprise(what’s at stake is at least 30% shares of the $34-billion worldwide ERP market between them and the future leadership), any purchase decision underscores how enterprises view the future of computing in general.

Oracle, in trumpeting its Exadata database machine, favors high-volume data-processing(we’re talking about petabytes of data here) in a box approach, while SAP gravitates toward in-memory computing, which foresakes reading of data from disks or flash storage and instead keeps the processing tasks, including calculation and planning and data management within the main memory, thus rendering a dedicated database like Oracle obsolete.

Both claim to deliver superior performance. SAP cited an example of pairing its in-memory computing engine with SAP Business ByDesign to handle what used to be considered batch processing of dunning analysis of outstanding account receivable items. Using the in-memory system, the task takes 13 seconds, compared with 77 minutes previously.

Power of A Single User
Which brings us back to the superfluous user, who could be the CFO or CEO needing to pick up a real-time sales report before a board meeting. In fact there are no shortages of executives who would prefer accessing a report on the fly on their mobile devices, rather than asking someone else to generate it for them, let alone waiting 77 minutes for that to happen.

Hence in an age where there is an unlimited amount of information anyone can access, what a useful piece of technology is supposed to do is to help furnish a timely report that is relevant, accurate and in the right context.

Indeed the future of SAP, or any technology vendor for that matter, may ride on that individual who feels empowered by the promise of the technology to help fulfill his/her version.

After all, SAP’s target of reaching 1000000001 users is as symmetrical and symbolically important as factoring in that single user who could make the whole difference in the world.

Feel free to email me at apang@appsruntheworld.com to tell me what you think of SAP, future of computing, or for that matter power of the individual in the digital age.

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Posted in ERP, Oracle, SAP

Are Activant, Epicor Overpriced, Lawson Undervalued in ERP Buyout Frenzy? By Albert Pang

Monday, April 11th, 2011

The ongoing M&A transactions involving Activant, Epicor, Lawson, and a phalanx of others waiting in the wings are expected to enter a new phase of intense negotiations all in the hopes of securing the best possible deals for their shareholders.

Two of this year’s biggest software deals – the merger between Activant and Epicor bankrolled by UK private equity firm Apax Partners and Infor’s offer to buy Lawson – present striking contrast over the valuation of these ERP applications vendors.

The final outcome could serve as a harbinger for the software sector as the fight over market share intensifies triggering an avalanche of deals for the remainder of 2011.

A closer look at the balance sheets of the ERP vendors being acquired suggested that Apax, or the investors who entrust their money with the private equity firm, could end up paying a lot more than those on the Infor side, which coincidentally is also owned by a private equity firm called Golden Gate Capital.

Between The Lines
It is a telling example of how the two investor groups have placed such different premiums on their targets using common metrics: sales, earnings and long term debt.

As the accompanying chart shows, Apax is paying $976 million, or $12.50 a share, for Epicor, which has not been profitable since 2008. Epicor had about $103 million in cash as of December 31, 2010. Subtracting that, Apax’s offer goes down to $873 million. On the other hand, Epicor’s long-term debt reached $230 million as of the end of last year.

Anatomy of ERP Deals

Despite its recent losses, Epicor 9, its latest flagship ERP release, has been gaining momentum since making its debut in late 2008 with more than 300 live customers and another 600 going live by June of this year. Robust demand for Epicor 9 propelled the vendor’s license sales by 17% to $82 million last year.

Activant is a different story. Apax is paying $890 million plus $69 million cash on hand, totaling $959 million, according to its 8K filing with the SEC. Activant does not have the equivalent of Epicor 9, a go-to-release that its 10,000+ customers could migrate to in droves. Instead Activant offers multiple ERP brands such as Catalyst, Eagle and Prophet 21 that it culled from a series of acquisitions. Despite the purchases, its revenues have barely budged since 2007. For its latest quarter ended Dec. 31, Activant’s systems revenues including license sales rose 5% to $29 million, while services revenues including maintenance were unchanged at $61 million.

What’s astonishing about Apax’s nearly $1 billion offer to buy Activant is the vendor’s sizable debt load, which amounted to $495 million as of the end of 2010. To be fair, Activant has been paring its debt – down from its peak of $633 million in 2007, by selling off assets such as its productivity tools division last year.

It will be interesting to see how the merged company under the Epicor name will fare – specifically whether it can turn a profit – after getting about $2 billion in cash from Apax, whose investors are now saddled with a total debt load of at least $725 million. In 2010 Activant’s annual interest payment topped $31 million, or 8.3% of its revenues, and Epicor’s was $20 million, or 4.5% of its revenues.

By comparison, Constellation Software paid $3.8 million in interest, or 0.06% of its revenues last year after embarking on a series of acquisitions to become a major ERP vendor bigger than Epicor or Activant. Even Oracle’s $754 million in interest payment amounted to only 2.8% of its revenues last year.

Infor’s Offer Is A Steal
If the merger between Activant and Epicor sounds overpriced and it may take years before Apax can get its desired return, Infor’s $1.8-billion offer, or $11.25 a share, to buy Lawson is a steal.

After subtracting Lawson’s $302 million cash on hand, Infor’s offer goes down to $1.5 billion. Lawson’s long-term debt was $230 million and its annual interest was $12 million, or 1.6% of its revenues.

The real gem of Lawson is in its consistent performance, thanks to rising license and maintenance revenues since 2005. In its latest quarter ended Feb. 28, Lawson’s license sales grew 6% to reach $33.7 million, while maintenance revenues rose 9% to $97.4 million. Earnings per share jumped to 13 cents from 1 cent in year-earlier period.

During the quarter Lawson secured 313 deals including six worth more than $1 million and its average selling price spiked 22% to $114,000. The vendor also experienced across-the-board increase in its regions including Lawson EMEA where it advanced 6% in sales as it began to emerge from its doldrums.

What Infor is aiming to purchase is a reliable performer with relatively low debt and considerable traction with its core operations namely healthcare and Human Capital Management, as well as continuous improvement to its M3 product line sold primarily in Europe. By most measures, Lawson, even at its Friday close of $12.37 or 10% premium over the Infor bid, appears to be undervalued and the Infor offer less generous than what Apax is paying for Activant and Epicor.

That brings us back to Constellation Software, which is scouting for a buyer or merger partner after naming BofA Merrill Lynch and BMO Capital Markets as its advisors on the same day Apax announced its purchases.

With a market cap of $1.47 billion, little debt and an eye-popping recurring revenue stream at $337 million in 2010 maintenance sales after jumping 34% from a year ago, Constellation Software could fetch a higher price than Infor’s bid for Lawson, or even the combined purchase of Activant and Epicor.

Then again beauty is in the eye of the beholder and some insanely high or ridiculously low offer could be made and even accepted by Constellation Software, throwing the whole valuation exercise out of whack. Think HP’s bidding war against Dell over 3PAR.

In an increasingly heated buyout environment(16% rise in global M&A activity in first quarter of 2011 by one account), ERP applications vendors, or any software vendor with solid performance, are advised not to jump at the first chance of accepting any seemingly generous offer. Instead they should frame their strong fundamentals to their advantage by harnessing the latest market research resources to buttress their negotiating position.

Feel free to email me at apang@appsruntheworld.com with questions on the latest ERP buyout frenzy and how you can leverage our market research data to help unlock your value.

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Posted in ERP, Infor, Lawson, Oracle, Uncategorized

The Next Great Top 10 ERP Vendor Lineup By Albert Pang

Monday, April 4th, 2011

A series of synchronized moves have rattled the Enterprise Resource Planning(ERP) applications market, challenging the key players in high-growth verticals, while raising the specter of a number of enticing scenarios that could upend the global software marketplace.

Follow The Money
On April 4, Apax Partners, an UK private equity firm, scooped in and paid about $2 billion for two ERP vendors Epicor and Activant to create a powerful bloc in the midmarket as well as strategic verticals such as auto-parts distribution, retail and manufacturing.

The same day Constellation Software, a $630M Toronto-based ERP vendor with more than 20,000 customers in government, construction and transportation verticals, announced that it has hired BofA Merrill Lynch and BMO Capital Markets to act as its advisors for evaluation of strategic alternatives. Whether and how Constellation Software is going to pair up with another ERP vendor, or any buyer for that matter, is unclear. But the handwriting is on the wall that Constellation will assume a different corporate identity.

The above developments followed last month’s unsolicited move by Infor to acquire Lawson for $11.25 a share, or $1.8 billion, a sum that now seems to be woefully inadequate given the trend that Lawson’s share prices have consistently risen above 10% of the Infor bid in recent days.

Meanwhile, TOTVS, one of the fastest-growing ERP vendors in recent years, last Friday paid $6.4 million for the remaining 30% stake of financial software developer TOTALBANCO CONSULTORIA E SISTEMAS S.A., it did not own. The purchase strengthened the hold of TOTVS in the white-hot Latin America enterprise applications market. In 2010 TOTVS added 2,840 customers to reach a total of 25,000 customers throughout the Latin America region.

The Next Great Lineup Of Top 10 ERP Power Players
As the accompanying chart illustrates, all the preemptive moves and interlocking steps will upend the $33.6-billion worldwide ERP market. If the deals go through, the new lineup will look something like this: SAP and Oracle will continue to hold double-digit shares at 19% and 11%, respectively. Both will pursue additional acquisitions in order to sustain their lead. Oracle, for example, acquired ATG for $1 billion in January to shore up its eCommerce capabilities.

Next Great Powerbrokers

The New Top 10 ERP Applications Vendors, Worldwide Software Revenues, $M


On the other hand, the next tier of major ERP vendors Sage, Infor(assuming that it will complete the Lawson deal) and Microsoft own 4.4%, 3.9% and 3.7% shares, respectively. Each of the players will do anything possible to rise above the rest in order to claim the all-important No. 3 spot. Given their industry-specific expertise, they have every intention to close in on the No. 1 ERP leader by marshaling their global resources and ecosystems in any close vendor evaluation process and positioning themselves as the clear alternative to the incumbent.

Then there are Epicor/Activant, UNIT4, TOTVS, Constellation Software, and Intuit finishing the lineup of the top 10 with each securing between 1% and 2% share of the market. With a combination of organic growth and well-timed acquisitions, these five formidable players will continue to excel in their strategic areas(UNIT4 in professional services, for example) while ensuring their supremacy in major theaters and markets(Epicor in Italy, UNIT4 in Benelux, TOTVS in Brazil, Constellation Software in German public transportation market, and Intuit in US accountancy).

Now both Infor and Epicor/Activant have raced ahead in their ranking, throwing into disarray the old list, which includes the following 10 vendors in the descending order:
SAP, Oracle, Sage, Microsoft, Infor, Unit4, Lawson, TOTVS, Constellation Software, and Intuit.

All these mean that the newest top 10 vendors will set their sights on one another or on those that trail behind them. The list includes CDC in Asia Pacific, Cegid in France, Deltek in Washington DC for government contractors, Netsuite in Cloud-based ERP, QAD in automotive, and Visma in the Nordic countries. All these vendors will have extra reasons to be concerned about the rash of mergers and acquisitions among the major vendors.

No doubt ERP, which has been eclipsed by social media and Cloud computing in terms of the buzz level over the past year, will once again be on the minds of a growing list of investors, customers and other key stakeholders all waiting to jump into action, while pondering how they will be able to capitalize on any changes that come their way.

Don’t hesitate to contact me at apang@appsruntheworld.com if you have any questions about ERP market data and how our advisory service can help your business make sense of this string of extraordinary events and prepare for the future.

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Posted in ERP, Infor, Intuit, Lawson, Oracle, SAP

Infor’s Daring Move To Buy Lawson, Shake Up ERP MidMarket By Albert Pang

Sunday, March 13th, 2011

An earthquake of sort jolted the tech world late Friday when Infor made an $1.8 billion bid for Lawson, one of its chief rivals in the Enterprise Resource Planning(ERP) applications market.

The tremor, which is expected to shake up the midmarket space as well as the adjacent software segments, will release considerable seismic activity with competitors scurrying for counter measures and potential bidders joining the fray in the days ahead.

The unsolicited cash offer at $11.25 a share could result in one of the largest ERP buyouts since 2007. With the passing of the ERP consolidation wave that was driven for the sake of filling product gaps and acquiring maintenance revenues, the latest move by Infor suggested a break from the past for a number of reasons.

1. Acquiring similar products – While Lawson and Infor complement each other in many ways, their product lines are strikingly similar. Lawson offers M3 ERP apps for asset intensive industries such as food and apparel manufacturing with functions from costing to supply chain planning, Infor also sells best-of-class applications that address complex factory automation, work order and logistics requirements. On the services side, Lawson S3 ERP product line has been well received because of robust Human Capital Management capabilities including those designed for talent management. Similarly Infor sells core HR applications what used to be known as Infinium, which has been paired with Boniva for strategic HCM projects. Thus the deal is to raise barriers of entry to shut out any potential gatecrasher, while chasing bigger opportunities among existing customers.

2. Winning the midmarket – For companies with between 100 and 5,000 employees, demand for ERP applications is expected to surge past that of XL enterprises with more than 5,000 employees. The aggregated size of the three midmarket segments of the ERP market tops $16.4 billion at a compound annual growth rate of 3.9%, compared with $15.9 billion for the XL segment with a 2.4% CAGR through 2015.

The addition of Lawson, which has an installed base of nearly 5,000 customers with many fitting the midmarket description, will provide Infor, which in itself has more than 70,000 customers(again mostly midmarket organizations), with extensive coverage in key verticals like healthcare, public sector and manufacturing as well as the product breadth needed to dominate the segment.

Moreover the combination of Infor and Lawson could displace the current No. 4 ERP player Microsoft Dynamics, while closing in on the No. 3 Sage, even though it still trails behind the No. 2 Oracle, and the No. 1 SAP in the worldwide ERP market, according to our preliminary estimates.

With combined ERP revenues of about $1.31B in 2010, Infor/Lawson will have 3.9% share of the market, compared with Microsoft’s 3.8%, Sage’s 4.3%, Oracle’s 10.8%, and SAP’s 18.7% based on preliminary estimates. These estimates are preliminary because December 2010 sales from Lawson and Oracle were rolled into their latest quarter ended Feb. 28 with earnings results due out in the coming weeks. Whatever the case, it is fair to assume that Infor, upon the purchase of Lawson, will be considered the frontrunner in the midmarket segment given the majority of ERP revenues for SAP and Oracle is derived from XL enterprises. Sage, on the other hand, excels among companies with fewer than 100 employees.

3. Creating a bigger Cloud – The disruptive power of Cloud Computing has changed the rules of the game and most ERP vendors can no longer rely on maintenance revenues as their cash cow, let alone expanding the recurring revenue stream through tactical acquisitions. While both vendors have not been particularly successful in driving Cloud-based revenues, it is more imperative than ever for the two to leverage the economy of scale in order to define and optimize a common on-demand framework for their existing and future customers. Much of the work will lie in reconciling the differences between Lawson Cloud Services based on the Amazon Elastic Compute Cloud or Amazon EC2 and the Infor Cloud Solutions running on Microsoft Azure platform. The good news is that over the past few years both Lawson and Infor have been aligning their development and portal strategies with Microsoft technologies.

By no means is Infor’s acquisition of Lawson a done deal given the volatility of current economic climate, not to mention the fractious nature of its major shareholders. On one side, its founder Richard Lawson has been keeping his eponymous company independent for years and is revered among long-time employees and customers. On the other side, there are a number of institutional investors namely takeover artist Carl Icahn, who owns 8.3% of Lawson, hankering for their expected returns.

For naysayers, there is the criticism of putting two mediocre players together doesn’t make a winner given the history of their fair but otherwise ineffectual execution(namely the drawn-out integration of Intentia for Lawson that spawned the M3 line, and Infor’s shifting Services Oriented Architecture strategies that undermined the modernization of its legacy systems).

After all, the on-demand strategies at both vendors are a work in progress. The same applies to their challenges in areas such as mobility. For example, because RIM is a customer, Infor has fine-tuned its Expense Management applications for Blackberry, rather than iPhone. The support of iPhone, or lack thereof, underscores Infor’s development limitations. Lawson, on the other hand, is considering bulking up its mobile capabilities in the next release of M3.

In the meantime, the performance of both vendors has been lackluster at best. In 2010 Infor was estimated to post a 9% rise in license revenues following a steep decline in 2009 due to the recession. On the other hand, Lawson’s license revenues fell 6% in the two most recent quarters even though it managed to post a 7% rise for the past 12 months. By comparison, many of their competitors rebounded more quickly with some registering double-digit increases in license and/or subscription revenues in 2010.

If the deal goes through, one can expect the following developments to become more pronounced:

1. Accelerating vertical push – Lawson, which has been making significant inroads into healthcare with its HCM, supply chain and procurement applications, will load up Infor with much ammunition to target integrated delivery networks. Lawson’s recent acquisition of Healthvision added the critical health information exchange component to its already formidable healthcare offerings. Similarly Infor’s Hansen public sector offerings will complement Lawson’s state and local government applications for financial management that comes with best-of-breed features such as encumbrance accounting. Additionally Lawson has carved out a niche in the equipment service management and rental market led by sales into Caterpillar dealers, an advantage that Infor can readily exploit given its experience in the automotive and transportation verticals.

2. Kicking off with HCM duo – When it comes to human capital management applications, the combination of Lawson and Infor could leapfrog many of the niche talent management vendors because of their experiences in selling into a wide swath of verticals from labor-intensive airlines that standardize on Infor Workbrain for workforce management to user-centric organizations in government and healthcare that have been enamored with Lawson’s intuitive features, which have been augmented by its recent acquisition of Enwisen for its popular HR portal.

3. Expanding into emerging markets – Both Infor and Lawson have made great strides selling into emerging markets – the former winning manufacturing and distribution customers in Asia Pacific, while the latter gaining ground in the Middle East. The deal should provide ample opportunity for the combined entity to harness local resources and revamped channel programs, while extending their reach through an extensive product portfolio and rapid implementations for customers of all stripes and regions.

Though it is not possible to predict the outcome of this high-stakes battle, one thing is clear. The aftershocks of a major earthquake could continue for days, but the combination of Infor and Lawson could have lasting impact on the enterprise applications market for years to come.

With a show of brinkmanship and ready capital, Infor, led by its new CEO Charles Phillips who similarly orchestrated a series of acquisitions at Oracle, is aiming to redraw the competitive landscape by asserting control of the ERP midmarket as well as a growing list of verticals. And the proposed deal to buy Lawson may well be the early sign of the main event to come.

Send me an email at apang@appsruntheworld.com and tell me what you think of the proposed acquisition of Lawson by Infor and how it may impact your business. Remember to follow us on Twitter @appsruntheworld for real-time updates on major developments in the ERP market.

Posted in ERP, Infor, Lawson, Oracle, SAP