Has Your ERP Solution Vendor Been Acquired?
Consolidation within a mature industry is common and is considered normal in a healthy market. Mergers and acquisitions are nothing new in the Enterprise Resource Planning (ERP) business; it has been an ongoing phenomenon for more than twenty years, with a few big-name vendors gobbling up smaller rivals, consolidating the market into 4 or 5 mega vendors, and a relative handful of smaller contenders. After a few years, new vendors emerge and the consolidation continues.
In the context of free-market economics, this is ideal. The young upstarts can only be successful if they bring a competitive edge to the marketplace, something new or unique, and not just in lower pricing, although that is sometimes a part of the appeal. Often, the new vendor starts with a vastly improved solution or functionality that is sold as a third-party add-on to current ERP users. Some will grow their offerings into full-blown ERP systems. Still, the immature systems lack functional depth outside of their “killer app” that takes years to evolve into genuinely competitive ERP products.
Why do the Larger Companies Want to Buy the Smaller Ones?
As companies install new systems or interfaces to their existing ERP system, they gain the attention of the more prominent, established vendors.
If enough customers begin to buy and implement the new or improved function, the established vendors must either develop their own version, which takes time and costs a lot, or they can buy the company and have a proven functional solution immediately available that can easily migrate into the mainline product.
In some cases, a functionally rich, full-fledged ERP system might be acquired because it better serves a particular vertical market (niche) wherein the acquirer has found it difficult to serve. Or the acquirer might simply want to add to their user base and, at the same time, reduce the competition.
ERP system users are understandably concerned when their ERP vendor is acquired or when they merge with another vendor. What will happen to their current system, its support, and future development? Will their package be supported and enhanced, or will it disappear as the acquirer buries it within the larger organization?
The sad truth is that there is no way to know what the future holds for your beloved system. The acquiring company will indeed offer assurances about future support and continued development, and they might mean it at the time, but there are no guarantees. They could change their minds and shift the focus back to their original product or a different product.
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