CRM Market Consolidation
Enterprise software consolidation is a constant in the fast paced and volatile software technology industry and CRM software consolidation has become routine to the point of predictability. Analyst firm Gartner Inc. forecasts that about one-third of the CRM software vendors will take part in merger and acquisition (M&A) activity in 2008.
However, while continued CRM industry consolidation is a certainty, the combined business results of merged software companies are not always so predictable.
Two classic and contrasting M&A integration examples from Oracle and Microsoft bring history and visibility to successful and less than successful business software integration strategies. Over a two and a half year period beginning in about 2006, Oracle made 21 business software company acquisitions. Oracle succeeded its acquisitions with a clear one company vision, successful post-acquisition company integrations, detailed product roadmap's and an overarching integration project (Project Fusion) to bring the applications into a common technical framework.
Microsoft jump-started its entry into the business software applications market with the acquisition of Great Plains Software at the end of 2000 and the follow-on acquisition of Navision Software in mid 2002. The combined Microsoft acquisition portfolio included additional companies such as Axapta, Solomon Software, RealWorld Software and FRx. However, unlike Oracle, Microsoft either failed to articulate or execute a clear post-integration strategy for the acquired companies. While Microsoft did originally brand the combined ERP (Enterprise Resource Planning) and CRM applications under a common (Great Plains) Dynamics banner and initiate an enterprise level integration project, code named Project Green, intended to merge the applications into a common code base over a multiple year period, the project failed and was ultimately cancelled.
Today, the portfolio of Microsoft ERP and CRM products clearly overlap, show no group synergy and cause significant customer confusion. The Microsoft products lack a one company focus, well defined product roadmap, common framework, common development teams (some development teams such as Solomon are actually outsourced and appear to be little more than software maintenance evolution) and common distribution channel (most Microsoft partners are authorized for only one of the many business applications).
Microsoft's entry into the Software as a Service CRM market demonstrates either flexibility or the same lack of clarity depending upon the buyer's perspective. While Microsoft does now offer on-demand CRM applications, the company shows no interest in offering its back office ERP applications in a hosted model. The lack of vision for enterprise-wide hosted business software systems is apparent and Microsoft's CRM hosting strategy of mixing the hosting options between itself and a plethora of partner companies appears confusing to customers and prone to hosting delivery inconsistencies. As with most things Microsoft, the company generally gets it right on fourth release or abandons the market. Currently, Microsoft business applications remain in their infancy and appear to lack executive team focus when compared to Microsoft's flagship platform products. However, if the software giant chooses to focus, end the executive turnover within the business software ranks and articulate a clear vision, a dramatic rebound and leadership position could await.
Brian Prentice, research director of emerging trends and technologies with Stamford, Conn.-based Gartner, describes three categories of CRM companies making acquisitions, including holding companies, transitional vendors and ecosystem providers. Holding companies, like Consona (previously called M2M) with its acquisitions of Intuitive ERP, Made2Manage ERP and Onyx, or CDC Software's acquisitions of Pivotal, Ross and Saratoga, acquire software companies without a roadmap for single company integration. This model is popular and in fact Infor has become the third largest ERP and CRM software company in the world simply by acquisitions. In these cases, product strategy and customer service generally remain unchanged. According to Prentice, "Really the first thing customers need to do is look at is how is the vendor going to take advantage? If you have a good relationship, you're happy with product, happy with partner, there's nothing to worry about."
In a transitional vendor acquisition model, one where the acquirer is buying multiple CRM products and companies with a public integration plan, customers need to evaluate how the roll up will impact their own business software strategy and determine how much of the vendor's message of synergy and future benefits is credible or is hype. Gartner's Prentice states that "Vendors can be prone to pitching the value of this larger organization when that value isn't really there ... That's where you need the external help. You need to start looking for some external sources to validate that."
Ecosystem acquirers generally promote a flagship product and use M&A as an expansion or vertical market strategy.
Irrespective of the acquisition model, customers of acquired CRM software companies can inherit long-term value if the benefits of the upward migration outweigh the costs. Upon an acquisition notice, users should begin their assessments by understanding and vetting the vendors specific migration strategies and ultimate product roadmap's.