Earlier this month, SSA Global announced that it is acquiring Epiphany, a $75 million CRM vendor. Epiphany was a big name during the dot-com era, when its CRM analytics were (and still are) an important part of e-commerce business development. Epiphany's products have been widely implemented among companies that have large numbers of direct customers, such as wireless carriers, financial services firms, and utilities. Epiphany boasts customers such as Nestle, The Gap, Citibank and Microsoft Corp.
SSA is paying $329 million for Epiphany, which had revenues of about $75 million and a loss of $16 million in the last 12 months. In fact, Epiphany has not ever shown a profit in any fiscal year since it went public in 1999. Furthermore, through its acquisition of Baan, SSA already has considerable CRM functionality.
So, why does SSA want Epiphany?
I listened to SSA's conference call regarding the acquisition, and SSA indicated that it plans to blend Epiphany's product into SSA's CRM suite. SSA claims that 20% of Epiphany's customers are already customers of SSA, so there are already synergies.
Furthermore, SSA claims there is actually very little overlap of Epiphany's CRM offerings and those that it acquired from Baan. Epiphany brings functionality for marketing automation and analytics, sales force automation, and online sales e-commerce, whereas SSA with its Baan product line has strong functionality for order management, field service, and sales order configuration. So, in fact, the two product offerings are complementary.
All this makes sense from the sales side.
Buying the Developers
But I think the key motivation is on the development side. SSA made a big point in the conference call and its press release about Epiphany's J2EE technology and component based architecture, that it was quite close to SSA's own technical direction. But that's the big difference. Epiphany's technology is already incorporated in its products. SSA's technology is just a statement of direction. SSA's products will need much retooling to conform to the vision of a service oriented architecture, and its going to need developers experienced in these technologies.
By buying Epiphany, SSA acquires a development organization that is already at the place where SSA wants to be. With demand for leading edge software developers increasing, the job market is tightening. SSA may have just satisfied a big part of its staffing need with this acquisition.
CRM Party with a No-Host Bar
The CRM market has been picking up this year, so SSA's timing might be perfect. But interestingly, with these sudden riches of CRM functionality, SSA still does not have an offering in the hottest corner of the CRM market: software on-demand. During the call, SSA said it has not considered the acquisition of a hosted CRM vendor. In fact, management indicated that they still see more opportunities for "on-premise" software--in other words, the old software licensing model.
SSA is swimming against the tide here. Although SSA points out that it does offer some hosted solutions, particularly in transportation management, it is highly organized around and committed to the traditional license sales model. There's something to be said for staking out a position and sticking to it. I'm just wondering whether SSA is on the wrong side on this one.
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1 comment:
The question is whether SSA installed base users will be looking for a hosted CRM solution. There are a lot of companies that would like to have a CRM system but they don't want to go through the time and expense of another major implementation. If SSA doesn't offer that option, its own customer are easily going to go to Salesforce.com or some other hosted provider.
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