Consolidation Continues as Enablers Add to Solution Portfolios

Infor snaps up SSA Global, SAP gets Frictionless Commerce, Sterling Commerce nabs Nistevo; the big get bigger, but is that better?

Infor snaps up SSA Global, SAP gets Frictionless Commerce, Sterling Commerce nabs Nistevo; the big get bigger, but is that better?

New York  May 19, 2006  Consolidation continued apace in the supply chain solution provider space this week as a flurry of acquisitions saw Infor, SAP and Sterling Commerce beef up their portfolios with the additions, respectively, of SSA Global, Frictionless Commerce and Nistevo. Details follow, with an analysis by AMR Research examining the question of whether bigger is better at the conclusion.

Infor Snaps up SSA Global

Enterprise solution provider Infor has signed a definitive agreement to acquire SSA Global in a move that Infor said would create the third-largest global enterprise software provider.

Under the terms of the agreement, Infor has agreed to pay $19.50 per share in cash to SSA Global's shareholders. The deal, expected to close in the third quarter, has been approved by SSA Global's directors and is subject to certain customary conditions, including receipt of regulatory approvals and SSA Global shareholder approval.

Shareholders representing approximately 84 percent of SSA Global's outstanding shares reportedly have entered into voting agreements to support the merger.

SSA Global offers a range of enterprise business software, including enterprise resource planning, financial management, human capital management, customer relationship management, product lifecycle management, supply chain management and supplier relationship management.

"With this acquisition, Infor will become the third largest enterprise software provider in the industry, with approximately $1.6 billion in revenue," said Jim Schaper, Infor's chairman and CEO, clearly setting his sights on enterprise resource planning (ERP) providers SAP and Oracle.

Infor, formerly known as Agilisys, has been on an acquisition tear, swallowing 20 companies in the past three years, according to AMR Research, including such solution providers as daly.commerce, Geac, Lilly, MAPICS, Mercia Software, NxTrend and, most recently, in January, asset performance management and catalog services specialist Datastream Systems.

SSA itself had been accumulating a portfolio of solutions through a dozen acquisitions that have included, over the past five years, Max International, interBiz Product Group, Infinium Software, Ironside Technologies, Elevon, Baan, EXE Technologies, Arzoon, Marcam, Boniva, Epiphany and, most recently, in March, Provia.

"In a rapidly consolidating marketplace we have seen that size and scale matter," noted Mike Greenough, chairman, president and CEO of SSA Global.

SAP Gets Frictionless Commerce

And speaking of scale, German uber-ERP player said that its acquisition of supply management solution provider Frictionless Commerce would give its customers access to a fast onramp for sourcing. The addition of Frictionless Commerce, SAP said, will also provide it customers with a migration path to SAP's supplier relationship management solution, mySAP SRM.

"Acquiring Frictionless Commerce extends the value of SAP applications, representing a key component of the company's strategy to offer the preferred global purchasing platform for organizations of all sizes and across all industries," SAP said in announcing the deal at its annual conference, SAPPHIRE '06, being held in Orlando, Fla., this week.

Terms of the all-cash transaction were not disclosed.

Headquartered in Cambridge, Massachusetts, Frictionless Commerce serves large and midsize enterprises across an array of vertical markets, including banking, insurance, professional services, consumer products, discrete manufacturing, life sciences, telecommunications and utilities.

SAP said that the Frictionless acquisition is consistent with its strategy to use "targeted, fill-in acquisitions" that add functionality to its current solution portfolio while continuing to grow its business organically.

Frictionless products are already certified as "Powered by SAP NetWeaver," meaning they are compatible with SAP applications, which should help minimize product integration concerns and assure a solution road map as customer requirements grow, according to SAP.

"With today's announcement, SAP continues its extension of mySAP Supplier Relationship Management to include an on-demand option for e-sourcing," said Shai Agassi, president of the Product & Technology Group and executive board member at SAP. "Sourcing on-demand offers customers a fast and consistent way to automate labor-intensive negotiations."

SAP anticipates that the acquisition will be completed in July 2006. Headquartered in Cambridge, Massachusetts, Frictionless Commerce employs approximately 70 people and has an additional office in London, England. SAP said that it intends to continue operations in these offices. The company said it would provide additional details about the integration upon the closing of the transaction.

Frictionless customers include such companies as Revlon, Aetna, Bristol-Myers Squibb, MetLife, Alticor, CIGNA and Philip Morris U.S.A.

Sterling Commerce Nabs Nistevo

B2B connectivity specialist  and AT&T subsidiary  Sterling Commerce has agreed to acquire Nistevo, a provider of on-demand transportation management solutions. The transaction is subject to Nistevo shareholder approval. Terms were not disclosed.

Sterling said that the addition of Nistevo's Collaborative Logistics Network would expand its supply chain application portfolio. The Nistevo network is a Web-based network that enables shippers and carriers to view, plan, execute, settle and report on their shipments.

To date, some 60 shippers have adopted the Collaborative Logistics Network, creating a community of over 6,400 carriers and managing approximately 65 million transactions annually through the solution.

"The opportunities for our customers are significant," said Sam Starr, president and CEO of Sterling Commerce. "Our combined solutions will not only provide customers with a way to cut costs in an industry estimated by analysts to be almost $1 trillion in the U.S. alone, but also improve customer satisfaction and loyalty through an integrated, end-to-end solution that improves visibility and control over their entire supply chain."

"We are seeing increased demand for end-to-end solutions delivered through innovative methods," said Kevin Lynch, president and CEO of Nistevo. "The expertise of Sterling Commerce in multi-enterprise collaboration and the power of its global presence will help increase the value of our solutions and bring them to a broader market."

Privately held and based in Eden Prairie, Minn., Nistevo has approximately 45 employees. Nistevo's clients include Church & Dwight Co., The Dial Corporation, Tractor Supply, Ocean Spray, Smithfield Foods, Cargill and General Mills, among others.

What's It All Mean?

Writing about the Infor-SSA deal this week, AMR Research analyst Simon Jacobson noted that the ERP players have opted to fill in "white space" in their offerings through acquisitions for the simple reason that it is faster and cheaper than building out the necessarily capabilities themselves. These acquisitions also give the larger players a quick and dirty way to enter new markets and add to their customer bases.

The flurry of deals also represents a change in the way that the ERP players are looking to position themselves, expanding beyond "systems of record" to solutions that help companies manage their extended, and expanding, operations.

"ERP vendors are extending themselves beyond their comfort zones of being the financial backbone of the business, storing necessary corporate planning, financial, materials and HR data," Jacobson writes. "They are now expanding into functions that can calibrate and coordinate a global supply network, such as CRM, PLM, production operations, and the planning and scheduling functions of SCM  functions that traditionally best-of-breed vendors have dominated."

The analyst also believes that the acquisitions trend is moving from the high-end into the mid-market solutions space as midsize enterprises start ramping up their own investments in enabling technologies. In this market environment, buyers are sensitive to the total cost of ownership (TCO) for their technology investments, and the larger vendors believe they can offer  at least on paper  a more cost-effective enablement roadmap.

"[Buyers] are looking to get as much as possible from one vendor instead of dealing with the complexity and cost of stitching together multiple applications to run their businesses," Jacobson writes. "With that in mind, Infor now joins Oracle and SAP in having to convince enterprise buyers that it can deliver beyond its marketing messages  customers want low TCO support of their key business processes."

The challenge for Infor, SAP and other enterprise software in an acquisitive mood will be to demonstrate not only that they have cash to spend to tick off more checkboxes on their functional capabilities but also that they can make all their acquired tools work together, that the integrated solutions actually add value to one another, and that, rather than simply being "consolidators" or "aggregators" of disparate applications, the solution providers themselves can bring real innovation to the table that will help their customers meet the supply chain and other operational challenges facing them now and in the future.

Additional Articles of Interest

 Long-time e-procurement users share their best practices for driving value in an article that highlights initiatives underway at leading manufacturers. Read more in "The Veterans," cover story in the April/May 2006 issue of Supply & Demand Chain Executive.

 Financial accountability laws offer an opportunity to elevate the importance of Supply Chain to the C-level suite. Find out more in "The Impact of Sarbanes-Oxley on Supply Chain Management," in the April/May 2006 issue of Supply & Demand Chain Executive.
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