Over the last two weeks, SSA Global has been reminding the IT community that software company acquisitions are not just for big vendors such as IBM and Oracle. In early August, the iSeries application vendor announced that it will acquire Epiphany, a vendor of customer relationship management (CRM) software. Last Monday, SSA completed a double play by snapping up Boniva Software, a small firm that specializes in human capital management solutions. Taken together, the acquisitions provide SSA with assets that will help it compete not only with other iSeries application vendors, but also with the giants of the software industry.
By acquiring Epiphany in a stock transaction worth $329 million, SSA Global will gain CRM solutions that many in the industry consider to be best of breed for marketing automation and customer analytics. Just as importantly, SSA will gain over 475 customers and a revenue stream that could top $60 million this year. Unfortunately, that revenue figure will be lower than previous years, as Epiphany has been struggling financially in the face of fierce competition from hosted CRM solution providers such as Salesforce.com. By taking shelter under SSA’s wing, Epiphany gains privileged access to the vendor’s 13,000-plus customers and the deep financial pockets of SSA’s backers.
According to SSA executives, Epiphany’s solutions will be integrated into the vendor’s current CRM solutions. The integration effort should be relatively easy as both vendors base their solutions on Java and Web services standards. Just as importantly, both vendors use IBM’s WebSphere middleware to support their solutions and provide the framework for their services-oriented architectures.
After enriching its CRM capabilities with the Epiphany acquisition, SSA turned its attention to its human resources solutions by purchasing Boniva Software last week for an undisclosed sum. While the California-based company has fewer than 50 employees, it has developed some robust Web-centric offerings for employee recruitment, assessment, retention, and training. These capabilities will be integrated into SSA’s own human capital management modules to enhance their functionality.
With Epiphany and Boniva under its belt, SSA Global could realize revenues of more than $750 million in 2005. This may enable it to maintain its position as the fifth largest vendor of enterprise resource planning (ERP) software behind SAP, Oracle, Sage Group, and Microsoft’s Business Solutions division. That position was placed in jeopardy back in June when Lawson and Intentia agreed to merge, putting the combined iSeries vendors on track to exceed SSA on a revenue basis. However, SSA’s latest acquisitions put it in a neck-and-neck revenue race with Lawson-Intentia.
More importantly, Epiphany and Boniva Software help SSA to beef up its product lines in areas where both sales opportunities and competitive threats are growing. Among the medium-size companies that SSA targets, CRM spending is growing at a faster rate than almost any other software category. By purchasing Epiphany, SSA can capture some of that growth instead of forfeiting it to competitors.
Among those competitors, none represents a greater long-term threat to SSA than Microsoft Business Solutions (MBS) and its CRM offering. Already, Microsoft CRM has become a favorite among small and medium-size businesses. Microsoft intends to use that popularity to its advantage by tightly integrating the product with its other MBS applications. This will give any customer that purchases Microsoft CRM one more reason to consider the company’s Great Plains, Navision, or Axapta business applications over those of mid-market vendors such as SSA. To blunt Microsoft’s attack, SSA must have top-notch CRM capabilities.
At the same time, SSA is keeping one eye on SAP and Oracle, two vendors that are increasingly promoting their CRM offerings to mid-market firms. Both vendors already offer extensive CRM capabilities in their products, and both could acquire other CRM vendors in the near future to broaden their customer bases. Should such acquisitions occur, the number of standalone CRM providers will significantly dwindle, leaving a handful of large vendors with the bulk of the functionality that customers need. This makes it all the more important for SSA to have Epiphany in its stable.
In short, SSA Global’s recent acquisitions should make a significant contribution to the vendor’s viability in a rapidly consolidating software market. It will be interesting to see how Lawson-Intentia and Infor – SSA’s chief competitors in the iSeries market – respond to their rival’s latest moves. An easy (and obvious) guess is that part of the response will be more industry consolidation. I’ll be watching for the next turn of the merger and acquisition crank, so stay tuned.