The Hindu Business Line : Change of hands doesn't hurt

You go in for an enterprise resource planning (ERP) package and then your vendor is bought by another company. What happens to the package? May be it's like a baton in a relay race that doesn't lose value with change of hands.

WHEN titans clash, where will I place my bet? That is the question bothering Chief Technology Officers (CTOs) of companies on the verge of implementing an Enterprise Resource Planning (ERP) package. With a spate of mergers and acquisitions among different ERP vendors making headlines each day, several customers are holding back purchases as they wait for a clear picture to emerge. After all, buying an ERP solution is a long-term investment.

But a cross-section of experts feel customers should not be unduly worried about market consolidation. Choosing the right product, the experts told eWorld, is more important.

"Even if there is a hostile takeover, it is the responsibility of the company to provide a clear roadmap for the target company's products. The intention of most acquisitions is not to kill competition but inorganic growth by taking on new customers and products. In such cases, the company that acquires another entity is quite interested in taking care of the existing customers of the latter," says Monica Deveshwar, Industry Manager (Software and Software Services) at consulting firm Frost and Sullivan.

Rohan Rodrigues, Vice-President (Sales), at Infinite Computer Solutions Ltd, takes the argument further. Citing the example of Oracle's hostile bid for PeopleSoft, he says it will be very difficult for Oracle to kill PeopleSoft even if that was the objective behind the takeover attempt. "I feel that instead of killing PeopleSoft, Oracle will try to take it to greater heights. Not doing so could make them lose a 100 big clients that they can ill- afford. In fact, the merger duel could actually benefit customers in the long run," says Rodrigues.

PeopleSoft's customers do not appear to be unduly worried despite the 16-month old drama and uncertainty. PeopleSoft has taken on board 155 new customers in the July-September quarter and logged nearly $160 million in licence revenues, according to the company's Director, Corporate Public Relations, Steve Swasey. "We are very much in the market, we are still competing for clients and we continue to win customers. We had a customer-assurance programme that offered our clients a monetary compensation if the company was taken over and the product was discontinued. For the current quarter, however, our board has not yet announced whether the programme will continue," Swasey told eWorld from New York.

Of course, availability and cost of upgrades would be a concern for every customer. But upgrades, Rodrigues feels, are a continuous process across the entire IT industry. "The industry keeps changing continuously. From mainframes, now we have come to servers. Similarly, it would be wrong to say that an ERP is a strictly one-time investment. Just like computerisation is a long-term commitment, ERP is also more of a management's decision to do business in a certain way. For all softwares, including ERP packages, interportability — the ability to talk to each other — is an important consideration," says Rodrigues.

And, if Microsoft continues to provide upgrades for its old products, customers can rest assured that upgrades from time to time will be available for ERP packages as well.

Checklist for customer

So what exactly should be a customer's checklist while evaluating and implementing an ERP package? According to Chandrashekhar Kakal, Vice-President and Head (Enterprise Solutions) at Infosys Technologies Ltd, the customer should understand that ERP implementation is a complex and long-drawn process. So, the organisation must confirm whether the vendor will be able to complete the process within the timeframe mentioned. Plus, one has to keep in mind the functionality aspect, as each organisation has diverse business needs and it is important to verify whether the vendor can meet them.

The customer also has to be clear about the `de-support' date after which the vendor will not provide support and make sure that only the latest version is taken, as upgrades are costly. Finally, the organisation has to be clear about the value perception, that is, whether the investment is driving business value and how long it would take to recover the costs incurred in implementing the ERP package.

So, while ERP companies may be popping poison pills to make themselves less attractive targets, customers can go ahead and place orders because such integration keeps happening in the industry all the time, says Deveswhar. After all, PeopleSoft, which acquired JD Edwards, still supports its products.

Picture by R. Ragu

eworld@thehindu.co.in

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