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Midrange vendors have seen a lot of consolidation, but the latest deal is undoubtedly the biggest.
Theresa W. Carey, CFO Magazine
March 1, 2001
The announcement may be four months old, but the industry is still buzzing about Microsoft's acquisition of Great Plains Software. While only time will tell what effect the deal will have on midrange accounting software, companies that suddenly find themselves competing with the world's largest software maker are vowing to respond with more aggressive marketing, better technology, and savvy partnerships. All of that should be good for customers, although a certain amount of fear, uncertainty, and doubt may complicate the market for a time.
In some sense, it's ironic that the Microsoft-Great Plains deal should cast such a pall over this technology sector, because it is an area in which acquisitions and consolidations have run rampant for the better part of two years. In 1999, Sage US bought both Peachtree Software and Best Software, and ASA International acquired Design Data Systems. Great Plains kicked off a buying spree in January 2000 by acquiring RealWorld Corp., then picked up not only archrival Solomon Software, but also businesses in England and Germany. AccPac International purchased SBT Accounting Systems, and as the year drew to a close, AccountMate Software was purchased by Softline, an accounting and payroll software supplier based in South Africa. Navision and Damgaard, both from Denmark, merged late in the year and stepped up their efforts in the U.S. market.
If the pace of mergers and acquisitions has been constant, so too is the commitment on the part of these companies to sell almost exclusively through value-added resellers, or VARs. While software makers that cater to enterprise clients usually sell direct, midrange players prefer to rely on their partnerships with VARs, because the sheer volume of potential customers in this space makes it impossible to sell direct. VARs usually concentrate on geographic regions or vertical industries, and provide installation and other support that midrange companies, which have smaller IT staffs, rely on. That makes it incumbent on buyers to evaluate not only the products, but also the quality of service from a given VAR. The health of the relationship is also worth looking into, since most of these vendors admit that, with the competitive landscape in constant flux, they may reevaluate existing VAR partnerships at any time. We recap some notable developments below.
Mating Game: AccountMate Software Corp.
President Ben Tse reports a difficult, but profitable, 2000, and believes that being acquired by Softline was a great development. The AccountMate line will become Softline's flagship product, he says, and since Softline's other products have little presence in the United States or in AccountMate's other markets, cannibalization should be nonexistent.
AccountMate plans a major software release, dubbed Visual AccountMate, during the second quarter of 2001. The software will allow VARs and other resellers to easily customize the product, since the source code (in Visual FoxPro) is available. The product line will include a customization tool to allow custom code to move from one version to another. "We don't look at ourselves as an accounting software company anymore," says Tse. "We're a technology company that supplies accounting software." That distinction may be lost on customers, but as AccountMate and some of its competitors add wireless, Internet, and other capabilities to their core software, it is becoming increasingly clear that midrange clients will soon enjoy the same sophisticated product enhancements that large companies do.
Beyond Accounting: AccPac International
David Hood, AccPac's CEO, points to three reasons for last year's acquisition of SBT Accounting Systems: to expand AccPac's distribution channel, to acquire additional marketing talent, and, as with AccountMate, to offer source-code versions of the technology to facilitate custom enhancements. Prospective customers can choose between a modifiable alternative (the Pro Series) and the company's existing Advantage Series. AccPac has also been aggressively pursuing the Internet/E-business model, adding its eAdvantage suite of products, which includes eTransact, a Web store solution. As with many companies in this space, AccPac wants to expand beyond accounting functions and offer a wide array of back- and front-office applications. As Hood says, "Every company understands the need for accounting software. Taking it to the next step--educating our customers about opportunities to increase sales and reduce costs--is the bigger challenge."
At Your Service: Deltek Systems
As a provider of accounting and related software for professional services organizations, Deltek Systems has turned its focus toward Web-based reporting and an expanded product line, including CRM (customer relationship management) and time-and-expense reporting. "Those are important products to a services company," notes Richard Lowrey, vice president of business development, "so those were our top priority." During 2001, says Lowrey, "we will put out resource scheduling and delivery functionality so that our customers' best resources are on the job, and profitably deployed." Deltek bolstered its own resources in 2000 by acquiring Semaphore, a former competitor and specialist in automating architecture and engineering offices. In addition, it formed several strategic partnerships, including one with Adaytum Software that led to the introduction of a budgeting tool that enables clients to comply with recent full-disclosure rules (Reg FD) advocated by the Securities and Exchange Commission.
Back-to-Front: Epicor Software
Need more proof that it's not just about accounting anymore? Consider the ever-growing core of Epicor Software. John Hiraoka, senior vice president of marketing and business development, says that last year the company released more software than it did at any other time in its history: "We've expanded beyond accounting, and now have manufacturing, front office, CRM, and E-intelligence decision support." Epicor released upgraded software across all product lines, and, as Hiraoka puts it, "added E-business capability everywhere." The ultimate goal, he adds, is to move beyond traditional back-office finance and manufacturing applications, and provide software that allows customers to generate additional revenue. "Many people appreciate enterprise management applications for their cost benefits," he says, "but we see an expansion of revenue possibilities."
Big & Better: Great Plains Software
Having swallowed up a number of its competitors even as it was being swallowed up by Microsoft, Great Plains Software is vowing to avoid indigestion. Last year, the company grew to 2,000 employees, with 2,000 channel partners and 130,000 customers. Amid all that tumult, it rolled out what vice president of product development Jeff Trosen calls "the most significant product release in our history, strengthening multinational and international capabilities and focusing on buy- and sell-side economics." The new release, 6.0, also includes enhanced E-commerce and B2B solutions, as well as distribution functionality and supply-chain management.
Another initiative was the launch of Great Plains's Business Document eXchange architecture (BDX), designed to facilitate the integration of E-commerce and back-office applications, with additional connectivity to Siebel CRM and other third-party solutions. "You could call it an enterprise application integration solution," says Trosen. This year should mark the launch of the first of many releases for the Microsoft.Net platform. Meanwhile, Great Plains plans to release Solomon 4.5 this summer, along with eEnterprise 6.5. The company's executives vow that once the Microsoft deal is consummated, they will spend more time in the field with customers and VARs--answering lots of questions about Microsoft, no doubt.
New Color: Khameleon Software
Khameleon is the newly christened entity that resulted when Design Data Systems was acquired by ASA International. Along with the new name came a new focus on such high-tech companies as software vendors and service providers. The company is tailoring its products to serve this not-insubstantial niche. For example, its latest version, release 5.8, provides functionality for recognizing revenue, often a thorny issue for software firms. Contract maintenance likewise got a boost, as did the billing component of 5.8. This year, Khameleon will provide its software in an ASP model through a partnership with New Orleansbased Protier.
All Together Now: Macola Software
CEO Bruce Hollinger believes the day is coming when clients will take fully integrated E-business suites for granted, and he plans to have his company positioned to offer them. "Last year and the year before, we saw disconnected E-commerce and CRM solutions," he observes, "but these applications don't really add value unless they're integrated." However, this shift doesn't come easily, for either clients or vendors. "Last year as a business year was a strange one for everybody," notes Hollinger, as everyone struggled to understand where E-business is heading. Education and knowledge transfer was a big priority throughout 2000. "We couldn't spend time bringing people to class and doing field training," he says, so the firm invested heavily in Web-based methods. Macola is also tapping the Web as a sales tool, encouraging prospects to log on to a schedule of live Web demos, for example, to get an overview of an entire suite or a single component.
Double Threat: NavisionDamgaard
Another late-in-the-year merger produced NavisionDamgaard, a Danish company with a growing presence in the U.S. market. Randy Keith, president of the company's U.S. operations, says that while the company plans to evolve the Navision and Damgaard product lines toward a common technology platform, it will nonetheless maintain both families and not force customers to migrate. The company has a global customer base of more than 120,000 installations and an international business partner channel of more than 2,000 business partners. NavisionDamgaard's main product lines are Damgaard Axapta, Navision Financials, Damgaard XAL, and Damgaard C5. Currently, Navision Solutions offers end-to-end business management solutions, including E-commerce, using the Microsoft BizTalk framework. This application has XBRL (extensible business reporting language, a finance-specific subset of XML) capability built in. Navision Solutions is designed to meet the needs of smaller midsize companies, ranging from a dozen to several hundred users, while Damgaard Axapta is primarily designed for midsize and larger companies, and can be scaled up to 1,000 users.
Cracking the Code: Open Systems
"Single source is our theme," says CEO Michael Bertini, and he means it in more ways than one. Open Systems has long made a selling point of the availability of its source code, which lets VARs and other partners, or customers themselves, modify the software. And, like other vendors, Open Systems is adding a variety of functions to its core product line in an effort to become a one-stop shop for clients. Manufacturing applications are under development, as are CRM, Web-based shopping, supply-chain management, and automated help desk applications. "We're developing all the products internally because we want to make sure we have the price point and features for the midmarket," says Bertini. "We're avoiding the creep into the higher end." That creep, he believes, is a price that customers sometimes pay for their vendors' success. "As our competitors go public," he says, "they tend to move upmarket, going after the bigger dollars. Their smaller clients in the midmarket get left behind."
Something for Everyone: Sage Software
Thanks to a spate of acquisitions in the last three years, Sage is solidly positioned in second place, behind Great Plains. Its product line now includes its own software as well as products from Best Software and Peachtree Software. One rationale behind the buying spree was to be able to offer different products to different market segments. Peachtree, Sage DacEasy, and Sage BusinessWorks are aimed at small businesses of up to 50 employees, while Sage MAS 90 and client/server-based Sage MAS 200 are targeted at midsize businesses with up to 500 employees. Sage Enterprise Suite, formerly Acuity, is designed for larger businesses of 500 employees or more.
David Butler, Sage Software's chief operating officer, sees a fundamental shift in the buying proposition these days. "During the period 1997 to '99, there was a boom in the industry because of Y2K," he says. "Now people are buying because they find a strategic advantage in changing systems." Since companies don't, as a rule, like to change systems, vendors have to make a compelling case for why a customer should leave one product for another.
For Sage, that means stressing integration. Last year, the company announced a significant upgrade to the MAS 90 product line that included integration with products from Interact Commerce Corp. (makers of ACT and SalesLogix) and an expanded business-to-business self-service module, as well as a new business-to-consumer module. Web-enabled services were added to existing workflow functionality, and an "executive insight dashboard" was added to give a real-time view of the company's operations. This year, Sage plans to expand the insight concept by creating a full browser-based navigation system that will surround it. As with other companies in this market, Sage will also add an interface for the Palm Pilot personal digital assistant (for time and expense tracking), and it plans to roll out a sales-order-inquiry function through either a dockable or a wireless Palm. "Instead of buying a $5,000 laptop," notes Butler, "our customers can buy a $500 Palm device and have full lookup capabilities."
New Directions: SouthWare Innovations
In November, SouthWare released version 8.0 of its Excellence Series, adding international transaction capability and a rental management module. Last spring saw the release of its first E-business product, SouthWare NetLink. More important, perhaps, was the addition of a database directory, which allows SouthWare's customers the freedom to use the Excellence Series with its native ISAM database or with those made by Oracle, Sybase, Informix, and others. SouthWare began with a wholesale distribution product in 1984, and over the years it has added financials, POS (point of sales), lot management, contact management, service, and other capabilities. The release of the rental module significantly broadens the market, since sales, service, and rental businesses are a major part of the company's customer base. SouthWare plans to roll out an ASP offering by midyear.
Stars-Struck: Syspro Impact Software
"We're pushing functionality as well as technology this year," says Syspro president Brian Stein. The company's forthcoming release 5.1 will allow the generation of general-ledger statements in XML form as well as browser-based drill-down capability for income statements. Stein isn't concerned about Microsoft's acquisition of Great Plains, and is more focused on what capabilities might be made possible by new platform enhancements from the software giant. "We'd like to see what we can release this year based on their new .Net technology," he says. "That technology will push the envelope as far as what we can offer." With an added focus on ease of use, the changes to Syspro's offerings this year are aimed at making customization and implementation simpler for its mostly manufacturing customers. Toward that end, Syspro has implemented what it dubs a structured technique to achieve rapid solution (STARS) approach, which provides a structured methodology for implementation aided by several project-management tools. "As software companies," says Stein, "we have been the biggest culprits of throwing so much at people they're overwhelmed."
Theresa W. Carey is a freelance writer based in Palo Alto, California.
A Note on Listings: All products have GL, AP/AR, and fixed-assets functionality. Functions and platforms listed apply to products commercially available as of February 1, 2001. Some functions may be in development; contact vendors for information.