Event Summary
On April 8, SSA Global Technologies, Inc. (SSA GT), a worldwide enterprise solutions and services provider, announced it had acquired the supply chain management (SCM), financial management and human resource (HR) management product lines of interBiz, the eBusiness applications division of Computer Associates International, Inc. (NYSE: CA). The acquisition will add many proven solutions to SSA GT's also well-recognized offerings to the industrial sector. Financial terms of the agreement were not disclosed.
Through the acquisition, SSA GT believes it is on a path to regain a leading position in its target markets by solving industry-specific business challenges and creating a heterogeneous application environment that works seamlessly with other back-office applications. The combined company will serve more than 9,000 longstanding, market-leading companies in over 90 countries from more than 70 offices worldwide. On the other hand, CA, which is under investigation by the Justice Department and the Securities and Exchange Commission (SEC) for alleged accounting irregularities, said in a statement that it will focus on its core enterprise-management, security, storage, application development, integration, business-intelligence, and portal offerings.
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 BPCS product strategy. 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 cause inevitable disruption in a short term. User companies will also need serious convincing that SSA GT will not 'stabilize' some brands which was CA's modus operandi, although SSA GT has stated its intention to fully involve the relative interBiz user groups. Yet, although the company has been showing a close attention to its customers' wish lists, its crucial tenet of operation is profitability and setting realistic goals. It does not appear very realistic to expect the due attention to almost a dozen products, though, as only the enhancements that will result in marketing value to SSA GT will pass.
This is Part 3 of a 3-part article discussing the acquisition of interBiz by SSA GT.
Part 1 detailed the announcement and provided background information.
Part 2 discussed the Market Impact and Strengths.
Challenges
One can always wonder if SSA GT, which has its own share of trouble, will be able to achieve success with such an unwieldy set of disparate products, considering that a vendor of CA's stature was not able to do much with them. SSA GT took a long time to put its house in order and to upgrade a single product. What are the chances that it will repeat this success for almost a dozen products, some being of vintage '78 or '82 tag (which some may refer to the medieval era of computing)? 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 resort to divestiture and to a focus on core competencies.
The management's rhetoric might even suggest that SSA GT is banking its future mainly on its installed client base. The possibly insufficient revenue stream might, therefore, require some additional downsizing in the future as well as the R&D programs cutbacks. Any attempt to increase revenue by, e.g., bloating significantly support & maintenance fees, may backfire in customers' defections to the competition. Additionally, SSA GT has an inordinate scope of functionality to cover through external partnerships.
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.
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, Navision, Ross Systems, Geac, SCT, IBS, 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 and SynQuest or Manugistics (for an advanced planning & scheduling (APS) product add-on), the above partnerships, which have certainly made a splash, 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 sales), both of which have yet to happen in earnest.
Also, while embracing the IBM WebSphere platform for e-procurement, CRM, and other components integration strategy cannot be debated, the caveat lies in the fact that the company has done it only very recently. To that end, much more aggressive interaction with the analyst community and more perspicacious explanation of positioning of its Semantic Message Gateway (SMG) and Direct Data Gateways (DDG's) interconnectivity technologies would be important. There have been indications that SMG's had exhibited poor performance, hence the addition of DDG's. However, the DDG's have reportedly only been tested once for an adapter for SynQuest integration. There are no performances statistics/benchmarks available, and there have been no other DDG's officially announced, which may ominously resemble the experience many interBiz users have already had with their systems.
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 (and even as a commercialized Private Trading Exchange (PTX) further in the future) 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 interBiz products) and not to the current versions. Furthermore, the company's silence about MAX product it acquired not so long ago (see SSA Acquires MAX Hoping To Leap From Its MIN) might indicate that it was an impulse purchase and that the company has not many ideas as what to do with it, since MAX essentially competes with its own BPCS NT product. It is not that difficult to imagine the possible magnitude of confusion, products' overlaps and conflicts with a slew on new products in the picture.
The above challenges may impede SSA GT's ability to leverage its existing client base and channel, as illustrated in the fact that more than 3,000 BPCS users, and a few thousands of interBiz users have yet to be possibly reinstated with maintenance contracts. Also, SSA GT has only recently delivered a Web Browser Interface in V8 product release that is browser-based, which makes it quite behind its competition regarding e-business capabilities, and consequently vulnerable to their attacks. Portal solution, however, is only envisioned with versions 8.2 and beyond. As a summary, while SSA GT's gallant attempt to regain credibility in the industry is noteworthy, it still has much more catching-up to do, with the market keeping a close eye on its execution. Time will tell whether it is possible to mate two old horses in the same stable in order to produce stallion-like offspring.
User Recommendations
Existing SSA and interBiz customers that have been yearning to rejuvenate their almost outdated technologies in place should welcome the above SSA GT's plans, although changing owners is typically somewhat a bumpy road for users of legacy applications. Less technologically aggressive global companies and/or their divisions with an inclination towards lean manufacturing philosophies may be better off by staying with BPCS for the time being. This also holds for users of interBiz products in their sweet spots. Nevertheless, keep a close eye on the company's moves and develop contingent plans for moving to a new technology if need be. 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.
Become involved in Global Guide groups, since by voicing your concerns/requirements you will be increasing the likelihood of your system's future enhancements. Be aware that no core development enhancements will 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 SSA GT's plans in that regard are, and whether BizWorks wrappers can serve the purpose. Also, be aware that the enhancements for non-iSeries based products (e.g., UNIX and NT) will have only a secondary priority.
Until the new product components, particularly through the above-mentioned partnerships, have been officially delivered and put through their paces by reference customers, we advise potential and current users to evaluate the product cautiously even within SSA GT's automotive, consumer packaged goods, electronics, pharmaceutical and chemical industries sweet spots. Potential interBiz customers may want to postpone their evaluations until the merger is fully consummated. Users of interBiz Banking applications and of BizWorks platform, which were not the part of the acquisition, should approach CA to inquire about its plans with regards to these products.
Learning about BPCS V8 features would be beneficial, at least for information and leverage against other vendors, but bearing in mind the product's maturity. There are the indications that the real benefit and maturity of the Lean Manufacturing module will likely come with the version 8.1, released in March. We also suggest evaluating the bells-and-whistles, price, reference sites within your industry, and corporate viability of other vendors before making a selection.
For more rationale on what to do about your legacy application in place, see The "Old ERP" Dilemma: Replace or Add-on and The Old ERP Dilemma: How Long Should You Pay Maintenance?.
This concludes Part 3 of a 3-part article discussing the acquisition of interBiz by SSA GT.
Part 1 detailed the announcement and provided background information.
Part 2 discussed the Market Impact and Strengths.