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Is SSA GT Betting Infini(um)tely On Acquisitions? Part Four: Challenges and User Recommendations.

Written By: Predrag Jakovljevic
Published On: December 16 2002

Challenges

An ERP vendor that many have long considered gone south' seems not only to be shyly coming back onto radar screens, but has rather noisily been re-creating a sort of an IBM eServer iSeries (formerly AS/400) platform-based ERP empire, which was also once considered vanishing like Atlantis.

On October 28, SSA Global Technologies, Inc. (SSA GT), www.ssagt.com, a worldwide enterprise solutions and services provider, announced it has entered into an agreement to acquire 100% of the common stock of Infinium Software (NASDAQ: INFM), www.infinium.com, another like provider, although mainly within different industry segments. In the agreement, each outstanding share of common stock will be converted into the right to receive $7.00 per share in cash. The agreement specifies that the transaction is subject to approval of Infinium's shareholders as well as regulatory and certain other customary conditions. The transaction is expected to close before January 1, 2003 at which time Infinium should become wholly owned by SSA GT.

However, the varied product portfolio now under the SSA GT banner will take serious pondering and soul-searching and may likely act as a distraction from SSA GT's primary product strategy. It doesn't take a rocket scientist to realize a number of potential product redundancies within the following overwhelming set of product: BPCS, Infinium, CAS, KBM, MANMAN, Masterpiece/Net, MasterPiece/Net HRMS, MAXCIM, MK Logistics, MK Manufacturing, PRMS, SSA GT MAX+ and Warehouse BOSS.

It, however, might indeed take a rocket scientist to figure out how to fully integrate organizational structure where employees are best integrated, service offerings best coordinated and cross-selling opportunities best tracked and pursued. Although not considered as a differentiating offering, Infinium offers Manufacturing and Logistics suite that offers solid material management functionality like several of its new siblings. The suite offers the following modules: production planning, materials management, order entry and processing, inventory management, and project management, while finite scheduling, plant maintenance and distribution & transportation are delivered via product alliances (e.g., Rippe & Kingston for its METHOS Maintenance System).

SSA GT has unequivocally said that it does not intend to discontinue any of acquired brands, but will rationalize the organization structure, as already seen in letting almost half of former interBiz' staff go, which will have caused inevitable disruption in a short term. When it comes to Infinium, it will likely not be that severe (except for some managers' bruised egos) given more focus disparity between the companies, and given Infinum's lean structure having recently severely pruned its staff levels. Still, owing to possibly cumbersome management of the remote Infinium HQ at Cape Cod, MA, with most of its current executive board being located somewhere in Virginia and commuting to and fro, there may be a temptation to consolidate operations within the SSA GT's HQ in Chicago, IL, which would then result with serious staff departures.

User companies will still need serious convincing that SSA GT will not stabilize' or even discontinue some brands, since, although SSA GT has stated its intention to fully involve the relative user groups, many former interBiz customers have yet to be contacted by SSA GT's representatives. Some of them have even proactively attended the Forum 2002, only to be pleasantly surprised with the plans for their product instance, but also being dismayed with not being informed about it whatsoever. Moreover, even in the cases where the company has been showing close attention to its customers' wish lists, its crucial tenet of operation is profitability and setting realistic goals (the ROI justification works for the vendor as well). It does not appear very realistic to expect the equitably due attention to over a dozen products, though, as only the enhancements that will result in marketing value to SSA GT will pass.

The first major overlap conflict off the cuff would be between Infinium and Masterpiece/Net, as both operate on AS/400. Although there is a significant Masterpiece installed base on this platform, one of its strengths is its multi-platform capabilities. Yet these two products are also applicable to similar markets. Look for many more similar brainstorming cases within the SSA GT's expanding portfolio.

Continuation of an unfocused, multi-product and multi-technology strategy in the markets with diverse dynamics typically multiplies and overstretches sales, R&D, and service & support resources jeopardizing the chances its products could stand a chance of long-term success in their respective niches. Geac, Epicor, Ross Systems, and SCT Corporation are recent examples of companies where this strategy has failed: all have had to eventually resort to divestiture and to a focus on core competencies. With SSA GT stating its insatiable appetite to acquire more vendors to reach $500 million in revenues within next 12 months, it might be flying into face of these negative experiences, and it may soon have too much on its platter to handle.

Additionally, SSA GT has an inordinate scope of functionality to cover through external partnerships, which gets increasingly complicated to track for several dozens products and their multiple releases. While the best-of-breed approach has its merits and is a necessity for some plant-level applications that ERP vendors do not typically provide (e.g., data acquisition), it inadvertently leads to additional integration costs and complicates service & support arrangements. Interfaces between disparate applications like ERP, CRM and/or e-business usually require significant tailoring, which should now be multiplied by the number of newly acquired products and their different product versions. This can be a barrier to future changes as further modifying already modified code is notoriously time consuming, costly, and risky.

This is Part Four of a four-part article on recent developments at SSA GT.

Part One covered the announcements.

Parts Two and Three discussed the Market Impact.

The Bottom Line Matters

Also, the profit margins for third-party products are typically lower than for natively provided functionality, which again lessens the bottom line. Vendors such as IFS, J.D. Edwards, SAP, Oracle, Intentia, Baan, QAD, Ross Systems, Geac, MAPICS and many others that offer more unified solutions running on many platforms, and that have strong vertical presence, may therefore give SSA GT's prospects a value proposition that can be difficult to decline. More importantly, except for Cognos, many partnerships, which have certainly served purpose, are either in their infancy or are just another bite at the cherry. For partnerships to solidify and result with a true commitment and solid products, one needs time and significant user acceptance (read new sales), both of which have yet to happen in earnest. Also, while embracing the IBM WebSphere platform for e-procurement, CRM, portals and other components integration strategy cannot be debated, the caveat lies in the fact that the company has done it only very recently, implicating likely product immaturity.

While SSA GT plans to keep previous BPCS versions (e.g., V4.05CD) alive was prudent and necessary as to avoid an adverse revenue shortfall, the need to make any new functionality backward compatible and to devise an enterprise architecture to tie multiple versions together with a common portal will likely impede the speed of delivering these. The story seems to be quite compelling although one should be cognizant of the magnitude of the efforts to execute it. This may also mean that users of the most current product versions will see their annual maintenance revenues being dissipated to enhancements for V4.05CD (and now to possibly a dozen of other products) and not to the current versions.

Still, SSAGT has recently shown that it can win new business, with a third of business in the last quarter being new customers, particularly in the Asia Pacific. It has also experienced a dramatic increase in the number of companies returning to support & maintenance lately, mainly because of increased product quality.

Nevertheless, it has to ensure that the erosion of companies that have already initiated a switchover replacement strategy (either due to bad market perception of certain products' viability or due to SSA GT's lack of approaching them) or that are being merged or acquired by other companies having other renowned ERP products is outnumbered by new accounts and new reactivated customers. Some companies may still need more value proposition than the SSA GT CEO's often cited mantra that "changing an ERP system is like a brain surgery should be performed only if the patient is dying". Still, given SSA GT's rollercoaster history, assuming the huge venture capital funding philosophy holds out and profitability continues to grow, the company might move faster than many could currently comprehend and give it credit.

User Recommendations

While SSA GT's large cash coffers are assuring, a more positive sign is the company's intent to reinstate itself as a true software-developing vendor, not simply a software collector and dealer. Thus, combined respective BPCS and Infinium customers should consider this event as a move toward a more viable position for their IT investment, and treat it in a business as usual manner' but with open eyes. The "catch 22" for current and potential users is to discern SSA GT's corporate strategy viability within the product line/industry in question.

Users will benefit from approaching SSA GT and informing themselves about what the company plans for future service & support (or discontinuation and/or product stabilization?) of its individual products are, and what would the ramifications of migrating (or not) to its new product offering be. Users should vigorously question SSA GT on its future options and investigate all alternative solutions now to fully understand their situation and options.

Existing customers, particularly former interBiz ones, that have been yearning to rejuvenate their almost outdated technologies in place should welcome the above SSA GT's plans and check whether Infinium product might be a fresh replacement, although changing owners is typically a bumpy road for users of legacy applications.

Less technologically aggressive global companies and/or their divisions that have been happy with their product instance's performance may be better off by staying with older BPCS instances or any former interBiz product for the time being. Nevertheless, not only MANMAN users will have to undergo thorough what if' scenarios' assessment such as, e.g., porting onto another platform, keeping the status quo, migrating to another SSA GT product, going for another ERP provider, etc. Identifying and approaching your local SSA GT sales representative and vigorously negotiating assurances and firm commitment to future product roadmap, and service and support would be the best course of action at this stage. For more rationale on what to do about your legacy application in place, see The "Old ERP" Dilemma: Replace or Add-on, The Old ERP Dilemma: How Long Should You Pay Maintenance?

Become involved in Global Guide groups, since by voicing your concerns/requirements that might have otherwise been overlooked by SSA GT you will be increasing the likelihood of your system's future enhancements. Be aware that no core development enhancements will likely be provided for very old products, but the benefit of OEM partner products might likely be extended to these as well. Also, XML interfaces cannot be retrofitted over a few generations' old products; therefore SSA GT has had to deliver the BPCS Enable layer for users of BPCS V4.05CD release, while users of interBiz products will have to see what similar SSA GT's plans in that regard are.

Some products will likely not receive major functional enhancements owing to aging technology. The SSA GT MAX+ suite that supports client/server-based Unix and Windows NT systems, and BPCS, Infinium, PRMS and other products providing scaleable and flexible ERP and e-business systems built on IBM middleware technology are the most likely recipients of R&D funds. However, many overlapping modules will likely be rationalized even amongst these as to minimize duplicated R&D costs. Until the new product components, particularly through the OEM partnerships, have been officially delivered and put through their paces by reference customers, we advise potential and current users to evaluate the product with due diligence even within SSA GT's industrial sweet spots.

Finally, very detailed information for some SSA GT products is contained in the ERP Evaluation Center http://www.erpevaluation.com.

 
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