Ask most pundits for their top three trends and it’s pretty certain one will be consolidation. Whether it’s retailing, manufacturing or the service sector, the big are getting bigger, the small becoming ever more niche and the middle… largely disappearing.
In IT it is the same. Reciting the litany of who has taken over who starts to sound like an Old Testament genealogy: Dallas joined Neptune, they both became Exe, Exe became SSA… and so on. While Manhattan has engulfed the likes of Avere, Streamline, Streamsoft, Return Central and Logistics.com, SSA Global Technologies has absorbed EXE, Baan, Elevon, Ironside, Infinium, Marcom, Arzoon, Interbiz and Max International.
Latest to get on the acquisition trail is Catalyst, following last year’s acquisition by venture capitalists Comvist. With money in the bank Catalyst is embarking on an aggressive expansion programme aimed at increasing turnover five-fold to e200m within two years. Interestingly, part of that move will be to bring supply chain execution and planning together in a streamlined offering largely through acquisition. ‘Integrating demand planning with supply chain execution is a logical move,’ says vp sales and marketing EMEA Steve Barker. ‘Forecast the demand and then execute to make it happen.’ With retailers eager to move away from dismembered point solutions, yet reluctant to embark on massive enterprise resource planning (ERP) projects, it seems a step in the right direction.
A step that Retek, itself acquired earlier this year by Oracle, is also taking. Its Retek Predictive Application Server (RPAS) is similarly designed to bring traditional supply chain planning components together with the sexy optimisation tools familiar from revenue management. While not so heavily into the execution side of the supply chain as Catalyst, Retek argues for forecasting, planning, optimisation and fulfilment to be combined into a single integrated software application giving seamless data flows through the organisation and across departments.
But while some IT mergers and acquisitions are driven by a vision that will ultimately produce a better offering for the end user, they tend to be in the minority. If SAP had got its hands on Retek as seemed likely earlier this year, one can be fairly confident its applications would have been absorbed into the SAP model, just as Oracle has absorbed Peoplesoft or, in an earlier era, NSB snapped up Coalition and RTC. As in the retail arena, the big get bigger by buying market share and geography rather than preserving the image of those they buy. If it were otherwise, southern English shoppers might still be enjoying their familiar Safeway stores and Sir Ken Morrison would be a happier man.
The danger of consolidation
For retail and distribution IT buyers, the danger of consolidation is the reduction in choice and innovation it brings. Small companies are often key innovators. Subsume them into a multinational giant and their original products simply become a pull-down menu option on the core solution. The people are important too. Ask many IT buyers why they picked the system they did and the words culture and relationship frequently occur.
Much IT functionality is fairly standard these days – the difference is often in the corporate culture or service ethos. Buyers often buy because they like doing business with the chosen company, not because the software is intrinsically superior. Take those people away and you have a lot of unhappy customers.
It is a salutary experience to check on IT systems changes in an organisation a couple of years after a big takeover. Companies that were once happily wedded to their mid-tier IT supplier change horses. They may pick an alternative giant player offering much the same as the incumbent but it will be one with whom they feel comfortable. Companies strong on M&A certainly have a vision. But if that vision is to develop away from the core activity of their acquirees, moving more into manufacturing or pharmaceuticals than retailing, for example, to reflect the strengths of the melting pot, they must expect casualties.
Catalyst is wedded to retailing, as are Manhattan and Retek (now renamed Oracle Retek), how they each develop in the next 18 months will be worth watching.