Users struggle to keep pace with apps consolidation

Products in the mid-market financial and CRM sector are disappearing so quickly, as a result of acquisitions, that users are struggling to keep pace.

Only this week CRM vendor Onyx got a new owner (see boxed story) and other application companies that have been acquired in recent years include Pivotal, Systems Union, Great Plains, Damgaard, Axapta and Navision.

The rapid pace of consolidation is driving some customers to tier-one providers such as SAP, Oracle and Microsoft to establish more concrete product roadmaps.

Vendors are buying 'critical mass' which they gain with the client bases of the acquired companies, said Martin Wildsmith, business solutions director of Eclipse Computing - a Microsoft reseller.

He said the takeovers lead to forced migrations for customers who are put on a path where choices are limited.

"Customers are not willing partners in this process; they want stability and direction," Wildsmith said.

"While software prices have dropped 50 percent since 2001 and will continue to be very competitive, but the real cost is ease of use, not the upfront fee; that is why we have a number of PeopleSoft customers on SQL Server moving to Microsoft."

Restricted by legacy accounting software, water garden supplier Waterwerks settled on the Oracle e-business suite with the company's CIO Ben Stewart claiming its previous software was holding the company back.

The rapid expansion of the firm, he said, was restricted by software, which was expensive to upgrade and unable to adapt to each new business need.

"We couldn't keep pace with the speed at which the business was growing because our software was inflexible and limited our ability to integrate systems," Stewart said.

Last month, Extensity (formerly Geac which underwent a name change following its takeover earlier this year by Golden Gate Capital for $USl billion) announced plans to acquire Systems Union, which has customer sites in 194 countries. System Union comprises SunSystems, MIS, Vision, Pegasus, RedTechnology, ncSoft and Foundation Systems.

Another player, Pivotal - which has 1700 customers - was acquired by Hong Kong- based software maker CDC Corp while Microsoft bought Great Plains, Damgaard, Axapta and Navision. w SIDEBAR: Hopes dashed by Onyx CRM provider Onyx has dashed CDC's dreams of adding it to its arsenal by signing an agreement to be acquired by M2M Holdings.

CDC Software, which recently bought out competing mid-market CRM vendor Pivotal, made two offers in early 2006 worth $50 million and $90 million respectively to acquire Onyx, both of which were refused.

The transaction, expected to close in the third quarter of 2006, is valued at about $92 million and will place Onyx in M2M Holdings asset company, Made2Manage systems.

M2M CEO Jeff Tognoni said the acquisition will allow it to expand its role in the CRM market and said its financial resources will assist Onyx to grow.He said that there is no plan to change Onyx's product roadmap; moreover it intends to include Onyx CRM software among its own ERP products. "Onyx's target market is the services sector and it has relatively little presence in manufacturing. [M2M] will evaluate the potential for incorporating Onyx software into [its own] manufacturing-specific CRM products," company officials said. w - Darren Pauli

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