Will Solomon Finally Satisfy Great Plains’ Insatiable Appetite?

Will Solomon Finally Satisfy Great Plains' Insatiable Appetite?
P.J. Jakovljevic - May 26, 2000

Event Summary

On May 1, Great Plains announced it intends to significantly expand its mid market e-business community through the acquisition of Solomon Software, its direct competitor. The combined company, Great Plains, will have more than 130,000 customers, 2,200 team members and a worldwide network of 2,000 channel partners. Great Plains intends to acquire Solomon Software by the issuance of approximately 2,600,000 shares of Great Plains common stock and $35 million in cash. The parties have entered into a definitive merger agreement. The transaction is expected to close in June, the first month of Great Plains' fiscal year, and would be accounted for as a purchase accounting transaction.

"For nearly 20 years, Great Plains and Solomon have pursued the same vision: to deliver superior customer value through a premier partner channel," said Doug Burgum, chairman and CEO of Great Plains. "This synergistic combination of people, products and technologies creates unparalleled business opportunities for our respective partners and increases our ability to help transform mid market businesses into e-businesses."

"The past success and future commitment to the Dynamics, Solomon, and eEnterprise product lines, and the expertise of the organizations behind those products will give us much broader and deeper functionality," said Gary Harpst, chairman and co-founder of Solomon Software. "With these product lines, our partners will be able to help mid market businesses gain a competitive advantage in the new economy." Going forward, Harpst will continue at Great Plains in a key product strategy role.

Solomon Software will operate as the Solomon business unit of Great Plains. Michael S. Rupe, current president and chief executive officer of Solomon Software, will serve as president of the Solomon business unit. The business unit will continue to deliver and enhance the award-winning Solomon line of business management and e-business solutions and will also provide industry-leading services to Solomon partners and customers. The existing Great Plains business units and the new Solomon business unit will work together to share best practices and collaborate on next-generation research and development activities.

Market Impact

This is a marriage of convenience, with Solomon benefiting more. The privately held company was facing a tall order of delivering huge chunks of missing functionality, which seemed impossible with its current limited resources. Great Plains was not taken for a ride either. The acquisition gives it more than 20,000 customers, 500 new affiliate partners, $50M in revenue, and 380 employees to bring the combined company to more than 130,000 customers worldwide.

This was also a strong defensive move for Great Plains. Solomon had for some time been indicating an interest in matrimony as a solution for overcoming its business hardships. A partnership or merger with a fierce European competitor like Navision or Sage would have clearly threatened Great Plains' global position. The following factors should contribute to the synergy of this merger: products technology compatibility (Microsoft-centric), the companies' similar market segment focus and a similar service & support business model (with 10%-15% of their affiliate partners already specializing in distributing both products).

However, the downside of the merger is that it will not expand combined product functionality per se. Great Plains will still have to beef up its multi-site manufacturing and distribution functionality as well as vertical focus and multi-national capabilities (multi-byte character set support, support for more languages, etc.) in order to remain the leader in the SME market. It will still trail Navision and Epicor in this regard. Moreover, the company will have to revise its sales strategy of how to optimize the sales of two product lines with fairly overlapping functionality and avoid a likely internal competition. Not to mention the need of showing 'one face' to customers. Finally, Great Plains can expect growing pains in merging disparate product lines and training the newly extended large affiliate channel.

User Recommendations

We generally recommend including Great Plains and Solomon in a long list of an enterprise application selection to the lower-end of the mid-market companies (with $2M-$250M in revenue), which are staunch users of Microsoft technology and have significant financial accounting, project management, distribution, and service requirements, while currently not needing complex manufacturing functionality. Great Plains should be included on any package selection short list within the SME market where electronic business and accounting modules are the main pillars of an enterprise application.

Any organization evaluating Great Plains should consider existing functionality only, and, in the case of final selection, should negotiate incorporation of new applications components now at negotiated license fees, in expectation of its future product introductions. Potential clients should also conduct preliminary research on industry expertise and reference sites of a regional Great Plains/Solomon value added reseller (VAR). Solomon distributors offer vertical solutions on an opportunity-by-opportunity basis only, which we find insufficient to satisfy the stringent requirements of a highly competitive market.

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