ERP Vendor Consolidation -- How it affects ERP users

IFS ERP Survey: Impact of Mergers & Acquisitions

Overview

Background

In the fall of 2011, a study was conducted among manufacturing executives and professionals of middle market to large manufacturers to better understand the impact on customers when solution providers grow through acquisition. This study illuminates: • Concerns of customers • How they respond

This study was conducted by IFS North America and Mint Jutras , an independent research-based consulting firm that specializes in analyzing the business impact of enterprise applications

Major Areas Explored What percentage of companies

are impacted by acquisitions? How are these acquisitions

perceived? What actions are taken by

customers post-acquisition?

Applications included: Enterprise Resource

Planning (ERP) Customer

Relationship Mgt (CRM)

Enterprise Asset Management (EAM)

Project/Portfolio Mgt (PPM)

Supply Chain Mgt (SCM)

Key Findings

• Over half (54%) of survey respondents have “experienced” an acquisition of their software vendor

• Acquisitions that result in broad portfolios of products are not necessarily viewed negatively but this will depend on the nature of the portfolio

• Concerns primarily arise over the continued support and innovation of products that are implemented at the time of the acquisition

Type of Business

Utility

Con-tract-ing/

Indus-trial

Projects

Con-sultant

Other

Dis-crete Mfg

Process Mfg

0% 10% 20% 30% 40%

1%

5%

7%

12%

36%

38%

Size of Company by Revenue

$2.5B bil-lion or

more; 29%

$1B - $2.5B; 11%$500M - $1B; 15%

$250M - $500M;

16%

$150M - $250 M; 14%

$100M - $150M;

16%

Applications Currently Implemented

ERP CRM PPM EAM SCM Other0%

30%

60%

90% 78%

39% 42%

18%34%

6%

Have you used a product from a vendor that was acquired?

Yes – product acquired before

selected

Yes – product was acquired after selected

No Don’t know0%5%

10%15%20%25%30%35%

23%

31% 31%

16%

Post Acquisition: Still running it?

Yes, and plan to continue using

this product

Yes, but plan to replace it

through a com-petitive selection

Yes, but plan to replace it with a product from the "acquiring" ven-

dor

No, we have re-placed it with a

product from the "acquiring" ven-

dor

No, we have replaced it with a product from a different ven-

dor

0%10%20%30%40%50%60%70% 68%

14%4% 4%

10%

Most continue to run software post-acquisition. But when replaced, the incumbent vendor does not necessarily have the advantage. A search for replacement is > 3X as likely to be put out to bid.

Typical Goals of Acquisitions• Grow market share:

– Growth of customer base is quick and in “steps” rather than gradual

– Can be cheaper to acquire large blocks of customers than selling them one at a time

– Recurring revenue stream benefits from larger base• Grow share of customer wallet:

– Cross sell and up sell opportunity– Quicker to acquire a solution than to develop it internally– Strengthen internal expertise immediately

• Enter new markets

How does the customer benefit?

• Grow market share: – Stronger financial position – Can “bail out” struggling companies

• Grow share of customer wallet:– Broader solution– Potential synergies between merged companies/solutions– Can accelerate (or slow) innovation processes

• Enter new markets– Little to none unless customer is in (or entering) a market that

is underserved by original vendor (questionable choice originally)

View of a broad portfolio of products?

Very unfavorably Somewhat un-favorably

Somewhat favorably

Very favorably I don’t care0%

10%

20%

30%

40%

50%

4%

27%

44%

15%10%

NOTE: Did not distinguish between a broad portfolio with the intent o buy market share (e.g. a large number of ERP solutions) versus those with the intent to broaden the solution footprint (surround ERP with complementary products).

Concerns?

None

We could wind up running a collection of separate point solu-tions owned by the same vendor instead of a well integrated

ERP

The product we use may not be well integrated with the rest of the product portfolio

The owner of the product may not continue to invest in or evolve the product in the future

The product may be discontinued, forcing us to move onto another product from the same vendor

0% 25% 50% 75%

10%

33%

48%

55%

58%

About IFS

IFS is a public company (OMX STO: IFS) founded in 1983 that develops, supplies, and implements IFS Applications™, a component-based extended ERP suite built on SOA technology. IFS focuses on agile businesses where any of four core processes are strategic: Service & asset management, manufacturing, supply chain and projects. The company has 2,000 customers and is present in more than 50 countries with 2,700 employees in total.

IFS ERP Survey : Impact of Mergers & Acquisitions

Contact Information:Charles Rathmann, Analyst

IFS North America262.317.7419

[email protected]