Before the economy started crumbling in September last year, specialized ERP vendors looked like a group on the rise. Deltek was actively recruiting a channel through the efforts of Taylor Macdonald. Activant had made a nice move buying Intuit's distribution business. Few of us had heard of Versata and CDC Software was preparing to spin out of its parent.
A year later, it's less certain. Activant couldn't have picked worse businesses to be in - its other segments include automotive, hardlines and lumber. Deltek's architecture and engineering market rises and falls with the construction industry. So it fell, although fortunately, Deltek's government business stayed healthy. CDC Software, which operates in several verticals, went public in August and almost immediately started buying back its American Depository Shares. That says volumes about the market's reaction.
You can throw in Infor here, which has several specialized lines, including the hard-hit automotive industry, but also plays in the apparel and footware, beverage and aeropsace markets. Then, there's Consona, whose products include the Made2Manage manufacturing line, along with much more specialized products in manufacturing.
As Guns N' Roses sings in "Sweet Child of Mine," "Where do we go? Where do we go now?" (This would be a perfect place to start an audio murmuring in the background through the rest of the article.)
Well, we seem to be on the same path. Infor just acquired Softbrands, which makes the FourthShift manufacturing line, along with software for the hospitality business. Versata got Everest Software, which has a number of verticals in its ERP kit.
The companies in a buying mode are grabbing more than just ERP. Their targets include CRM and infrastructure vendors. Versata, for example, has picked up more non-ERP companies than financial businesses. But besides getting Everest's specialties, the Versata unit (its subsidiaries and affiliates keep their names) operates in a number of ERP verticals.
What's going on here? It's good old-fashioned economics and remember that this process started well before the economy took a broadside from a bunch of subprime torpedoes. Many of the specialists can't fuel R&D, in particular, because they don't have markets in which they can grow revenue enough, against which they can effectively spread their costs.
One vendor playing a different angle is Microsoft, whose efforts have been led for the last few years by Joe Corigliano, who has developed what is probably the world's best catalog of ERP companies. Corigliano has spent his time trying to convince specialized vendors to stick to their specialties, while letting Microsoft Dynamics provide the accounting engine.
Both the Microsoft effort and the spate of acquisitions in the last five years remind us the same factors that drove consolidation in the GL markets in the first half of this decade are at work here. And they don't appear to be near the end, yet.
