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The enterprise resource planning (ERP) market continues to consolidate. Infor, owned by Golden Gate Capital, a San Francisco-based private equity group, will acquire SSA Global in a transaction worth $1.4 billion. SSA itself is the amalgam of serial purchases of several enterprise software vendors, among them Baan, Epiphany, Infinium and Marcam. This new purchase follows Extensity's announcement a week earlier that it will buy U.K.-based Systems Union. Extensity, also owned by Golden Gate Capital, was created largely through the acquisition of Geac (itself a combination of enterprise software vendors Dun & Bradstreet Software and Comshare). Golden Gate has been rolling up manufacturing and supply chain enterprise software companies into Infor and finance- and administration-oriented vendors into Extensity. Once the transactions close, there may be some realignment of the pieces, since we think Infinium (nee Software 2000) and Epiphany more logically belong in Extensity.
The implications for user organizations are clear: They will have fewer choices and pay higher prices when it comes time to replace existing software, particularly in the case of manufacturing companies. The manufacturing software market has been highly fragmented, particularly in the second and third tiers of vendors. These stand-alone companies were always less profitable than they needed to be and lacked critical mass for long-term software development. This consolidation will be important in the coming decade because of major shifts that will occur in software architecture and create a need to rewrite all of these applications. The consolidation will leave Infor/Extensity, Microsoft/Dynamics, Oracle and SAP as major players. However, smaller companies are not going to disappear soon. Particularly in the manufacturing sector, we believe vertical specialization will continue to trump size (and therefore overall economic viability) as a consideration for customers.
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