Consolidate or Die

The enterprise applications market continues to evolve (devolve) as the larger fish swallow tthe smaller fish. The most recent example is last week's announcement that Infor Solutions (formerly known as Agilisys) would acquire MAPICS for roughly a 10% premium over the lastest closing price and about 2x 2004 sales.

With the acquisition, Infor, which has been buying companies left and right, now boasts of having over 17,000 customers worldwide. All fine and good, but is it sustainable? MAPICS suffered under the weight of its own acquisition of Frontstep and a depressed market that saw MAPICS increasingly being outflanked in the market, a market that is increasingly being targeted by those with far greater resources (e.g., Microsoft, Oracle and SAP) . Combining a morbund MAPICS with the host of other has beens that Infor has acquired and one is left wondering what Infor will do to bring some synergies to this hodge podge collection of enterprise apps they have acquired (both sales and development).

As a private company, they do not have to divulge anything to the market as to what their plans are. For the time being, it looks like the strategy is to milk the base for maintenance fees (a very high margin business), do the minimum to keep products "fresh" and continue to build through acquisitions. Fine or now, but longer term this could be like a house of cards and tumble down once customers start asking for more and development resources are spread thin across so many product lines. A risky strategy Infor has going and though on the outside does not appear to be much different then SSA-Global, inside, Infor's strategy to bring its products into a common development environment is still very elusive. At least SSA has clearly stated its plans.

The simple fact is consolidation in the enterprise market will accelerate this year as companies look to acquire the last viable companies available. Acquisition targets will also be on the look-out for suitable parents as they will increasingly ffind it difficult to compete in the global market. Who are likely candidates? As the Oracle acquisition of PeopleSoft showed, virtually all app vendors are in play with the exception of Microsoft, Oracle and IBM. Stay tuned, this will be a very interesting year.