Sunday, August 31, 2003

All over, except for the shouting

In an interview with CNet, PeopleSoft CEO Craig Conroy says he's no longer concerned about Oracle's hostile bid for PeopleSoft. He points to the fact that, so far, Oracle has received tenders for only 8% of PeopleSoft's stock, and also to PeopleSoft's shareholder rights provision and staggered board of directors--corporate measures that make it all but impossible for Oracle to achieve success. Indeed, at this point, no one I know thinks that Oracle will win.

In a related note, prospective buyers are getting a bit tired of the takeover actions of the big software players. I attended a software demo recently for a prospective buyer. After the initial introductions, one executive in the back of the room spoke up, "I just have one question. Who are you buying, and who's buying you?" Enterprise system investments are supposed to last at least 7-10 years. Therefore, customers are looking for stability and predictability in their software vendor relationships. Amidst all the noise about who's buying whom, vendors had better remember that the ultimate stakeholder in these deals is the customer.

Tuesday, August 19, 2003

Who's next on SSA's shopping list?

According to Michael Dominy, senior analyst with the Yankee Group, SSA may target additional vendors in the supply chain management space, following its acquisition of EXE Technologies announced yesterday. Quoted in an article in the Daily Deal, Dominy specifically mentions Adexa, Prescient Systems, and Optiant. Adexa (formerly known as Paragon) is a supply chain vendor with strength in the automotive and high tech electronic verticals. In 2001, Freemarkets nearly acquired Adexa for $340M but called it off due to weak market conditions. Adexa would certainly go for less today. Prescient Systems is a small (50 employees) supply chain planning vendor focused on the consumer products vertical. Early in 2003, Prescient announced it had doubled its license revenue over the previous year, bucking the negative trend generally. Optiant (formerly SupplyChange) is small (42 employees) provider of supply chain analytics and optimization solutions. With overall supply chain technology spending flat, niche vendors such as Adexa, Prescient, and Optiant are probably better off as part of a larger portfolio, such as SSA's.

Update, Aug. 22: ARC Advisory Group's John Moore speculates that MAPICS (MAPX) may be SSA's next target, based on the fact that General Atlantic Partners (GAP), which owns 25% of SSA, also has a "sizeable stake" in MAPICS. However, in my opinion, MAPICS is not acting like a company that wants to be acquired. It just made the strategic move to acquire Frontstep, giving it a full product suite based on Microsoft .NET architecture. And it has lowered its cost structure, allowing it to maintain profitability even in these weak market conditions (see my post on August 5). Although GAP's 30% stake in EXE Technologies was, no doubt, a major factor in SSA's acquisition of EXE, GAP only owns 6% of MAPICS--not enough to ensure a deal, although they surely could initiate a discussion. Watch whether GAP tries to increase its stake in MAPICS. That would be a sign that a deal might be coming.

Monday, August 18, 2003

SSA is buying EXE Technologies

EXE is a well-regarded provider of supply chain execution and warehouse management systems. The company was formed as the result of the merger of Dallas Systems and Neptune Systems in 1997. The company went public in 2000. In the most recent quarter, EXE had a loss of $822,000, on revenue of $19.8 million. SSA GT is offering just over $47M for EXE, significantly less than its last year's sales of $70M.

EXE Technologies is generally considered one of the Tier I players in the warehouse management space, although it has been losing ground to Manhattan Associates over the past three years. I evaluated EXE's EXceed offerings a few years ago and was quite impressed with their functionality. But with EXE's weak financial position, the acquisition by SSA makes sense. SSA makes no secret of its strategy to acquire weaker vendors. And EXE surely has been having a rough go of it these past few years. On the other hand, SSA already has a good warehouse management system in its portfolio, in Warehouse BOSS. But Warehouse BOSS is limited to the IBM iSeries (formerly AS/400) platform, whereas EXE claims deployment across all of IBM's hardware platform. In fact, IBM is a strategic partner for EXE. This fits well with SSA's strategic alignment with IBM.

There's a press release on SSA's Web site. The same press release appears on the EXE web site.

Interestingly, starting early this morning, before any news reached the wire, the Spectator suddenly began getting web site referrals from Google for users doing searches with the words "SSA," "exe" and some variation of the word "acquisition." Obviously, the word got out before the announcement.

Saturday, August 16, 2003

Wal-mart suppliers face October deadline for Internet-based EDI

In about two months, many of Walmart's suppliers will reach Walmart's deadline for adopting Internet-based EDI (EDI-INT, AS2), in place of older VAN-based EDI. Many of these suppliers have already made the switch, mostly with help from a few software vendors that provide interoperable solutions, such as iSoft (which Walmart uses), Webmethods, bTrade, Cleo Communications, Cyclone Commerce, IPNet, and Sterling Commerce. As I've written previously, Walmart's mandate is a huge shot in the arm for such software providers. And as I predicted last September, other retailers (Home Depot, Lowe's, and others) have followed Walmart's lead in converting to Internet-based EDI, creating strong incentives for adoption of these standards throughout the retail supply chain.

Internet e-commerce is not getting a lot of buzz in the trade press these days, but in fact it's becoming a way of life for many companies.

CNet has an update on the trend.

Thursday, August 14, 2003

Word on the street: IT spending is up, but not across the board

In discussions with technology sales people here in Southern California, I'm hearing mixed reports regarding corporate IT spending. The bottom line is that IT spending is picking up, but not in all areas. Here's the buzz.
  • In the mid-market, spending on new ERP and CRM systems continues to be slow. Most mid-market companies are still attempting to extend the life of existing systems with add-on's or complementary products and are only buying new ERP systems when existing systems are clearly inadequate. There is a pick up of mid-market activity is some verticals, such as life sciences, health care, and defense contractors, but among many verticals, such as high tech electronics, there is not much appetite for large investments.

  • With large companies, on the other hand, spending is stronger. But it revolves around streamlining IT processes and cost savings. Specifically, there is a lot of interest in anything that reduces space requirements, such as blade servers.

  • Data center facilities are now hot properties. Nationwide there is strong demand for new data center space. The need is driven by several regulatory mandates: HIPAA, which drives increase in electronic records in healthcare, Federal Reserve regulations that require banks to have backup sites outside the region of existing data centers, and Sarbanes-Oxley requirements for stronger internal controls such as audit trails, which increase demand for data storage. One source mentioned a case where several banks got into a bidding war for an empty data center facility that came on the market.

  • Phoenix and Nevada appear to be strong markets. This is being driven by the high cost of doing business in California and the proximity of Arizona and Nevada, which makes them attractive as backup/recovery sites.

  • When companies go shopping for new application systems, they are showing strong interest in Linux-based systems, mostly because of perceived cost savings. Consistent with this, enterprise system vendors such as Oracle and PeopleSoft are promoting Linux because it allows them to lower the cost of hardware and operating systems in the deal, leaving a larger share of the budget available for software licenses.
Certainly, we're not in the technology boom times of the 1990s. But that doesn't mean IT spending is moribund. It's just happening in different directions today.

Tuesday, August 05, 2003

MAPICS outsourcing most software development to India

CIO Magazine has a profile of Sandra Hoffman, CIO at MAPICS, who also carries the title of Chief People Officer. The article gives an interesting perspective to the changes that vendors needed to make to survive the downturn in technology spending that began in 2000. In the case of MAPICS, the changes included consolidating functions previously built around separate product lines, moving most employees to home offices, and offshoring large parts of the development function. Concerning outsourcing, MAPICS now outsources all development and maintenance activities to the Indian firm, HCL Technologies. System architecture, design, training, information development, and quality assurance work remain in the US, however. Hoffman estimates that the outsourcing strategy cuts software development costs in half. The changes seem to be working. MAPICS returned to profitability in 2002 with earnings of $14 million on revenue of $128 million.

MAPICS is not unique in moving software development offshore. Oracle is known to have large parts of its development organization offshore and a number of other vendors, such as IFS, have similar arrangements.