Home
 > Research and Reports > TEC Blog > Stalled Navision + Mixed Bag Damgaard = Satisfactory Navi...

Stalled Navision + Mixed Bag Damgaard = Satisfactory NavisionDamgaard

Written By: Predrag Jakovljevic
Published On: March 27 2001

Stalled Navision + Mixed Bag Damgaard = Satisfactory NavisionDamgaard
P.J. Jakovljevic - March 27, 2001

Event Summary

In February, NavisionDamgaard a/c (CSE: NAVI), a Danish provider of enterprise business solutions for mid-sized companies, released its semi-annual report for fiscal 2001 that ended on December 31, 2000. The merger of Navision Software and Damgaard (for more information, see Does NavisionDamgaard Merger Mark Further Mid-Market Consolidation?) is reportedly proceeding faster than anticipated. NavisionDamgard achieved a 7% combined annual revenue growth to DKK 713.9 million (~$84.5 million) compared to the combined last year's results of then separate companies. While revenues from Navision Financials showed a dismal increase of only 2%, revenues from Damgaard Axapta flagship product showed a whopping 227% increase. However, the other Damgaard product lines, Damgaard C4/C5 (marketed solely in Denmark) and Damgaard XAL had 18% and 22% revenue decreases respectively. Combined net income was DKK 58.3 million (~$6.9 million), which is a 30% decrease compared to the combined last year's results of then separate companies.

NavisionDamgaard's solutions are sold exclusively through a worldwide network of close to 2100 partners, although less than 5% of them offer the entire NavisionDamgaard product range. The company currently has more than 121,000 installations worldwide, and derives 74% of its revenue from the international market outside of Denmark.

In the first half year, NavisionDamgaard released a number of new versions and products specifically targeted to customers' needs for e-business and CRM functionality. It introduced new versions of Damgaard Axapta (2.5) and Damgaard XAL (3.1), both with notable enhancements. For Navision Financials, the browser-based customizable User Portal was launched. Also a Wireless Applications Protocol (WAP) Resource Kit was introduced, which makes information in Navision Financials available via mobile devices. The company plans to introduce in the second half of fiscal 2001 the combined Navision Financials/Siebel eBusiness MidMarket Edition, the e-commerce applications Commerce Gateway for Navision Financials and Damgaard Axapta, and the new version of Navision Solutions (3.0).

Market Impact

The marriage of convenience has been turning into a synergy. Navision's dowry was a strong international presence, proven execution and a profitable business model, although the company had begun to run out of steam just prior the merger (for more information, see Navision Executes At a Slower Pace). Damgaard, on the other hand, contributed with a more scalable product for the higher end of the market, Axapta, that also featured a significantly broader functionality footprint and vertical focus (heavy manufacturing, project control, warehousing management, HR, etc.), is Web-enabled and well-suited for multi-site and multi-national enterprises.

Both product lines are technologically compatible (Microsoft-centric) and will be maintained concurrently. This should enable the Research and Development (R&D) team to gain economies of scale by building application components that can be deployed within the entire product portfolio. To that end, additional e-business and e-collaboration initiatives should be expected. The company has been developing the concept of Commerce Portals, Commerce Gateways, and enterprise-focused Role Based User Portals to allow users to interoperate with trading communities. It has also been pursuing ASP partnerships as an important business model for its target market, although the company admits only symbolic revenue from it to date.

NavisionDamgaard has so far achieved significant cost savings because of the elimination of overlapping units, such as physical infrastructure and duplicated field organizations worldwide that resulted in 95 jobs cuts, but has vowed to keep R&D intact for now. Significantly increased R&D investment that constituted approximately 20% of revenues in the first half 2001 speaks to the commitment.

However, the merger still has some hurdles to overcome. Despite the complementary nature and different target markets of the main products, the growing pains in appropriate positioning of multiple products continue. The company will have to revise its strategy to optimize the sale of three major product lines with somewhat overlapping functionality. It will also have to avoid internal competition, not to mention the need of showing 'one face' to customers and probable brand recognition/confusion. Given the fact that the market opportunity for Axapta it is at first sight larger than for XAL or Navision Financials, and due to Axapta's strong Web-enablement, manufacturing focus and scalability capabilities, we should imagine it to tacitly become the main offering for the company in the long run. That is not going to happen any time soon since Navision Financials has much stronger name recognition and solid niche functionality.

The challenge of further international expansion and brand awareness remains. While NavisionDamgaard has done a respectable job of establishing its North American network, it has been facing a fierce challenge from a slew of incumbent competitors.

Moreover, NavisionDamgaard can expect growing pains (and added costs) in merging disparate product lines, and in cross training and vertically specializing the newly extended affiliate channel, which is still closely focused along previously separately run product lines. It will be difficult to support existing customers and existing products, while blending those somewhat competitive product lines.

Finally, the great challenge will be to defend the territory against Great Plains' aspired onslaught on the global small-to-mid-market boosted by its recent acquisition by Microsoft (for more information, see Microsoft And Great Plains - A Friendship That Turned Into A Marriage) but also by Tier 1 vendors that are looking for additional revenue and market share growth (for more information, see SAP Claims Big Gains In The Low-End Battleground and PeopleSoft Joins The Hunt For SMEs).

The increased M&A activity in the mid-market continues (the merger of AremisSoft and Fourth Shift being the most recent example) and, therefore, we regard this merger as a promising, although indisputably challenging venture. The current market trend is towards vendors that can provide complete solutions for the entire spectrum of medium-sized companies. NavisionDamgaard seems to have a fair shot at delivering that.

User Recommendations

Potential and existing NavisionDamgaard customers should certainly consider the new offering, bearing in mind what the other vendors have to offer. We recommend identifying your unique needs and doing comparison shopping, at least for the sake of negotiation leverage. As with all new releases, users should employ a critical approach in their evaluation of NavisionDamgaard, and require all vendors involved in a selection process to demonstrate specific technological and functional capabilities.

More comprehensive recommendations for both current and potential NavisionDamgaard users can be found in Does NavisionDamgaard Merger Mark Further Mid-Market Consolidation? and Navision Software a/s: Mid-market invasion.

 
comments powered by Disqus

Recent Searches
Others A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

©2014 Technology Evaluation Centers Inc. All rights reserved.