Earlier this week, Infor announced it was acquiring Lawson, a slumping ERP provider with very limited procurement capabilities relative to SAP and Oracle, let alone best-of-breed procurement vendors. Given Infor’s furious acquisition pace in the past decade, it’s shocking to me that the ERP/business application roll-up does not take procurement more seriously given the growth in the broader sourcing and supply management market (which by our rough estimates, has easily realized double-digit CAGR recently in most key areas including P2P, spend analysis, sourcing, supplier management, and contract management).
Moreover, given SAP’s enthusiasm for the space, and the strong growth it has realized both within its SRM product set as well as through its e-sourcing platform (originally acquired from Frictionless) which now includes sourcing, contract management and supplier management — not to mention SAP’s investment and active partnership with Hubwoo, which is also realizing significant growth within its SAP-enabling portfolio of solutions — you’d think that Infor would get the message. But still, they continue to put procurement technology on the acquisition/organic growth back burner relative to core financials, supply chain and related areas.
This is a shame for multiple reasons:
- Infor has a large and very diversified installed base, especially in the upper middle market, where it would have very strong potential to up-sell a source-to-pay capability
- Given the strategic importance of procurement and commodity management (and procurement/commodity management technology today) within its diversified manufacturing installed base in the current climate, such an acquisition would allow the vendor to engage on a much more strategic level with technology and business executives alike
- Procurement and supply chain — especially when it comes to areas like supplier development/collaboration, working capital management, etc. — are requiring increased collaboration and hybrid/dual offerings are beginning to make more sense from an application standpoint (e.g., sourcing technology that can explore multi-tier options for production, inventory, planning etc.)
While many shareholders will no doubt applaud Infor for buying Lawson at what appears to be a relatively depressed valuation — even factoring into account the ERP player’s software stagnation in recent years — there is more than simply “plug and chug” financial deals in being strategic to your customers. If Infor is serious about creating business application value for its user base and shareholders, they should stop paying short shrift to the most critical and fastest growing business application areas: procurement, sourcing, and commodity management.
And Bruce, if you’re reading, we know that you understand the importance of this area. We just hope the rest of the management team does as well, as there’s more to building a great software company than looking at acquisition targets with only a trusty HP calculator to guide the decision.
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