Company Acquisition is Customer Acquisition

A lucid read from AMR Research (I found this by way of The ERP Graveyard), which nicely discusses issues involved in enterprise software consolidation. I’m linking to this because I just mentioned in my previous post, the notion that the Infors (Golden Gate Capitals) of the world may be buying all the enterprise software vendors they can in order to accumulate maintenance customers and thus the revenue from those customers.

In some ways this may help the customers and AMR lists the reasons but there are also many problems this presents for customers. According to the AMR article, the strategy is likely concerned with packaging large customer bases (for future sale) rather than rounding out product functionality.

…this type of consolidation comes at a price that, unfortunately, customers must pay. By acquiring many competing products, aggregators tend to reduce competition within a market and cast the pall of acquisition over the remaining players. Because it is very expensive for customers to switch their enterprise applications, most companies have little choice but to stay put, pay maintenance, and hope for the best. While they may have had great leverage with the small vendor that originally sold them their software, they have little with their aggregator today.

So if the majority of a company’s IT budget is going to old projects I suppose this could be quite a concern. Unfortunately, and this may have been beyond the scope of the article, AMR did not really comment on how this affects innovation in the products.

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