This week's shake-up in the enterprise marketplace has dual implications for the user community, according to analysts.
J.D. Edwards Co. and Baan International BLV were sold to PeopleSoft Inc. and an investment consortium, respectively. The combined PeopleSoft-J.D. Edwards entity created by the $1.7 billion deal will be the No. 2 vendor of business applications behind SAP AG. Baan, which will be merged with Chicago-based SSA Global Technologies, will perhaps be the fourth-largest ERP vendor, suggested a research note written by John Bermudez, an analyst at Boston-based AMR Research. (SSA Global Technologies, like Baan, specializes in manufacturing applications.)
"In the last two days, the leadership of the enterprise resource planning market has shifted more than it has in the last five years," Bermudez said.
Nevertheless, according to John Moore, an analyst at ARC Advisory Group Inc., a Dedham, Mass.-based consultancy, these acquisitions don't represent a seismic shift in the industry. Instead, they merely reflect the current market.
"There are too many suppliers, and they are unsustainable in the market with the number of customers that are available, period," Moore said.
The circumstances around each of the mergers differ. J.D. Edwards and PeopleSoft are both stable companies that are doing relatively well, despite a slowdown in IT spending that has dragged on for more than two years now. On the other hand, financially troubled Baan was acquired by Invensys PLC during a buying frenzy and is just one of a number of companies to be sold off again.
The newly joined J.D. Edwards/PeopleSoft will have considerable clout in the marketplace when the deal is completed by the end of the year, with $2.8 billion in annual revenue, 13,000 employees and more than 11,000 customers in 150 countries. For its part, Baan predicted that its newly combined company will represent $600 million in revenue and 16,500 customers once that merger is in place several months from now.
"What it signals is that we'll end up with only very large players here, which is neither good nor bad," Moore said. "It's good for the customer in that they get a more viable supply base. But what is bad is that they may not have quite the same negotiation room they had in the past."
At the very least, this week's shift will be a boost to PeopleSoft, which needed "credibility in manufacturing and a critical mass of customers," said Joshua Greenbaum, an analyst at Enterprise Applications Consulting, in Daly City, Calif.
While this is great news for both companies' customers, it's bad news for both SAP and Oracle Corp. "The competition for the next generation of apps in the manufacturing space just got a lot more real," said Greenbaum.