Why Infor wants to be third in ERP line

When Infor CEO Jim Schaper last week declared that his firm was now the third-largest enterprise software provider in the industry, he could have added “and the third-least well known” and people probably wouldn’t have been surprised.

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By  Peter Branton Published  May 21, 2006

|~|35286commentbody.jpg|~|The real winners of the Infor-SSA Global deal could be SAP and Oracle.|~|When Infor CEO Jim Schaper last week declared that his firm was now the third-largest enterprise software provider in the industry, he could have added “and the third-least well known” and people probably wouldn’t have been surprised. How many people can honestly say they actually had heard of Infor until last week? For those of you who still haven’t, last week Infor announced it was buying SSA Global Technologies in a deal worth around US$1.4 billion. The combined company can now indeed lay claim to being number three in the enterprise software market, behind the big guns of SAP and Oracle, albeit a distant third. Infor is a US-based firm, owned by two private equity outfits, and has been buying up smaller enterprise software firms for the past few years now. SSA Global itself has been buying up companies over the past few years, most notably former JBOPS stalwart Baan in 2003, a move which brought it to wider attention in the industry, and last year’s capture of customer relationship management (CRM) maker Epiphany. According to its CEO Mike Greenough, those buys hadn’t been enough, as he stressed last week that “size and scale matter.” With Oracle having swallowed the combined PeopleSoft/JD Edwards outfit and CRM supplier Siebel Systems (amongst others) in the past 18 months or so, and SAP having made some key purchases of its own, the number of players in the software market is now a lot smaller than a couple of years ago but is it small enough? Analysts were quick to point out that Schaper’s eagerness to lay claim to the number three position in the market fits in with the theory that markets can only maintain that number of big players. A business book “The Rule of Three: Surviving and Thriving in Competitive Markets”, published in 2002, claims that the only other players in any market have to become niche providers if they want to survive. While Greenough said that the move would benefit all the “stakeholders” in SSA Global, its investors, its customers and its employees, at least one of those groups may be more doubtful. Infor is, at the end of the day, owned by private equity firms. Such organisations have been investing heavily in the enterprise software market in recent years because they see good money to be made in it: not because they want to look after the long-term interests of customers or staff. It seems unlikely that Infor will be able to retain all the product lines it now has, which will mean some pain for some customers down the road. The real winners could be SAP and Oracle as both will look to prise away any discontented customers from the combined outfit. There is a saying in sporting circles that first is everything, second is nothing: Schaper could well find that third in the enterprise software market may not be such a great achievement after all. ||**||

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