If you are a regular visitor to the CIPD’s HR Software Show (taking place on 21-22 June at Olympia,London) one of the games you can play to fill idle moments is to guess which of the exhibitors is likely to get swallowed up before next year’s event.
A couple of years ago, the likes of Oracle and Northgate were cannibalising rivals at the “enterprise” end of the market, which caters for the world’s largest organisation. There are only so many giants that can operate in that space, but the predatory urge has filtered down into smaller regional markets such as the UK.
So far, 2007 has been a vintage year for industry consolidation, with Bond International kicking things off with an £8.9 million deal to acquire Gowi Group in January. Gowi itself is no stranger to the consolidation game, having built up an organisation of 120 people and an 850-strong customer base by acquiring the Intellect HR suite and payroll software provider Rutherford Webb in recent years.
Another big name that will be appearing under new corporate ownership is Snowdrop, acquired for £17 million last month by Newcastle-based business and accountancy software giant Sage.
While Sage is very strong in the payroll scene, and poised to launch a companion HR application for its popular Line 50 accounts application, it acquired Snowdrop to plug the gap in its portfolio for a mid-market HR application, Sage business development director Gavin May said.
“The needs of both sectors are different and Snowdrop was one of the organisations with products and a strong reputation in that sector. Together, the companies cover the space nicely. Snowdrop comes with integrated payroll, while we bring commercial expertise and synergy with our other products,” May explained.
Anything Sage can do, so can its rival IRIS, which has been spending almost as much time with investment bankers as Sage of late. This week, IRIS broke the news that it will merge with Computer Software Group, developer of the Chorus HR management software suite and a range of learning management, training administration, compliance and payroll/accounts applications.
Having weathered several consolidation waves in the past, ASR’s marketing manager Tony Flanagan says changes of ownership such as these are a fact of life in the industry.
“Historically there have been lots of other suppliers who have consolidated,” he said. “Sage’s acquisition of Snowdrop was the most interesting, as Snowdrop were one of the key mid range independent suppliers and the acquisition has definitely left a gap.
“My personal feeling is that when a supplier is eaten up by a bigger rival there is inevitably a period of turmoil for the acquired companies’ customers and employees. For example, the company that has been acquired may experience a series of redundancies, which is never a good thing for morale and negativity is likely to filter through to their customers. Also, which products will be developed or even continued to be supported can be a bit frustrating for a customer who may have just purchased software from an acquired company.”