Monday, April 04, 2011

Epicor, Activant ... last one out, please turn off the lights

Zowie.  Sometimes the initial instinct for snark fails, and you just have to sit back and take another look at the industry.

Today, the private equity firm Apax Partners announced they were coming two steps closer to putting your humble blogger out of business - by taking out both Epicor and Activant in one fell swoop.  The combined price tag is said to be about $2 billion.

(h/t to The 451 Group's Brenon Daly, who said "If nothing else, we now know the clearing price for 'vintage' ERP companies."  He noted that the Apax offer for Epicor, and Infor's offer for Lawson are 2.5x and 2.4x trailing twelve months revenues.)

Here's a quick comparison of some notable numbers (from company filings):

Epicor Activant
Revenues (TTM) $440MM $372MM
Total Debt $244MM $497MM

Five years ago, Activant had already been recapitalized by a group of PE funds that were said to "bring a strong track record of helping software businesses achieve their strategic and financial objectives."  Hmm.

The estimable Ray Wang says it's all about scale:  "There is a race to get to $1 billion [in revenue]. At $1 billion, software companies gain economies of scale that allow the right amount of R&D. It's imperative to get to that size to compete and invest."

Gosh, I don't know.  This is a drum that Ray has been beating for some time, but it feels a bit like these companies are fighting the last war.  My own view, to which I've treated readers of this blog for years, is that it's all about cold hard cash, period.  Specifically, the gazillions in private equity dollars that are sitting relatively idle in funds around the world, looking for something better to do than grow moss in the shade.

Talking with IDG's Chris Kanaracus, Ray does acknowledge that point as well:  "Private equity firms focus on squeezing out costs from companies they acquire before selling them at a profit, Wang said."

Well, yes.  And how many times do we have to see this story before customers wise up, and realize that it's all about the a) the fees on the initial deal, and b) what they make on the flip?

I'd be very curious to know what kind of R&D breakthroughs people have seen from, say, Infor (which claims revenues of TWICE the magic $1 billion cited by Ray, but has turned out a succession of integration and middleware failures that would make a real software company blush).

I think Thomas Wailgum is closer to the truth in his blog for the, ahem, SAP User Group, bemoaning the diminishing amount of choice in the ERP world:  "as the overall number of options dwindles and lock-in becomes more evident, just how much 'free choice' will actually exist? It all may be just one big illusion."

Yes.  Yes!  Yes!!!  Does anybody really think that things will improve for Epicor users and partners?  Let alone those of Activant (whose PE recap five years ago followed a spree of mini-Infor style acquisitions in the distribution space).  And how long will it be until this new Epicorivant decides it needs to acquire another mini-Infor like Consona (and, not inconsequentially, provide an exit for its own PE investors)?  How about the Lawson customers, as they wait to see if Oracle will jump in once the price comes down? And does Infor really have a strategy besides someday, somehow, getting to an IPO and paying off their own PE investors with dumb money from the public?  Because unlike Wailgum, Jim Shepherd, and many others, I just don't see SAP or Oracle ever buying them.  Who's going to buy all that PE debt, except for another PE firm?

Wailgum edges up to a sentiment that I've been hearing from dedicated ERP professionals for years:  "This means something."  He's still talking mainly about the acquired companies being household names, not penny-ante little nobodies, but I'd like to expand the point.  This is serious business, this ERP software.  And with every deal that comes down the pike, I get more and more of a feeling that it's just another financial instrument, with knobs and levers to be jiggled by the geniuses at the PE firms.  Package up the recurring revenue from the customer base that is locked in to the old crappy software, run your discounted five-year cash flow models, work in your fees, and come up with a number - like we're securitizing deadbeat mortgages or something.

God help me, I feel like Martin Sheen in the original Wall Street movie (hold the Charlie jokes, please - that's for another blog).  Don't these people make anything?

Brothers and sisters, there is an answer. The choice that Thomas Wailgum is looking for.  The ongoing R&D investment that Ray Wang is looking for.  The way that business management software users of all shapes and sizes can take control of their destiny, and not wait for it to happen to them.  The answer is open source ERP like xTuple, and it is growing and improving and expanding, literally every day.

If you'd like a personal demonstration of what it can do for you, just drop us a line :)

FAQ response, 4/5:  I will update the Graveyard Scorecard after any deal(s) are finalized, including Epicorivant and Lawson.


  1. Not very hard to figure out that his blog is created by someone that is part of Xtuple.
    Open source with a price....

  2. Yes, it's not very hard to figure out because I say so, all over the page.

    Rather than, say, posting as "Anonymous."

    And what on earth do you mean by "open source with a price"? My whole point in the conclusion of this post is that you can download the free product with no strings attached - build a pilot, even take your company live on the free software. As thousands of companies have done worldwide. Without spending one red cent with the software vendor.

    Tell me again what your problem with that is?

  3. This consolidation slow march is the last wimper of the 20th Century ERP economies of scale. It's true that Epicor and other ERP vendors had to develop significant amounts of middleware and "applistructure" to create transactional, robust and moderately extensible client/server architectures.

    In the 21st Century, middleware has been commoditized - whether .Net or open source. Vendors can focus on business value rather than holding customers hostage with proprietary technology.

  4. Open source is a great idea, but open source ERP can't be had for free, or even cheap.

    Enterprises, unleashed from the restrictions monolithic business systems, will tend to drive the pendulum back to captive IT resources.

    SaaS (or Xaas) is a probable early winner in the deconstruction of ERP systems.

  5. Doug and Les seem to be in some amount of disagreement. Is open source cheap or not?

    I would agree that "captive resources" inside companies are among the winners here - Forrester's Tim Harmon made a similar observation in a note I cited here. That win, he said, was delivered by open source and to some degree at the expense of SaaS.

    Les, I'm not sure I get your transition to the plug for SaaS. If captive internal resources are the winner, at least partially because they're bringing open source technologies inside, how does it then follow that they're going to outsource everything to a SaaS provider?

    (Which is going to be demonstrably more expensive than open source, and even some proprietary on-premise incumbents - just ask NetSuite customers if their costs have gone down or up).

  6. I guess you may want to place a twitter button to your website. Just marked down this blog, although I must do it manually. Simply my $.02 :)

  7. Doh! Thought there was one already, thanks. Added.

  8. Do you think Open Bravo can be a good fit for replacing Activant Eclipse.

    Or any specific Open source ERP solution jumps to mind?

  9. I can't speak to OpenBravo, but I can certainly recommend xTuple ( Very strong in distribution, despite (or perhaps because of) its roots in manufacturing. Drop us a line at if you have particular questions, or would like to see a guided demo.

  10. Actually, there are other significant viable off-the-shelf ERP options. IFS is one of the only single platform vendors left standing, and with no debt, consistent profitabilty and positive cash flow, and a technologically current and functionally robust platform built for manufacturers, distributors, and asset-intensive industries. Opne Source ERP may be fun for IT to tinker with, but what credible midmarket or larger company actually bets their business on it?

  11. Jason, I agree that IFS is a strong company with a good product and many happy users, and I don't think I've ever said anything bad about them.

    I wish you'd show the same deference before holding forth on something you don't seem to know much about. There are thousands of companies of all sizes who are using xTuple software today. Our customers range from two-person startups to U-Haul, and everything in-between.

  12. So I went to your website and I get it now. You probably get the shell of a software and then you have to buy apps to make it actually do anything.Such as Fixed Assets, automating the job scheduler, managing the bank accoun: xTuple Connect is a powerful extension to xTuple ERP, allowing you to automate scheduled jobs and reports in xTuple ERP, and to manage data exchanges with outsides systems.$2195. So I assume this means if you want any integration to a 3rd party software like or a MS product you have to buy this. Then there is the Arena piece for $5000.00. Then of course there is the consulting fees that go with the installtion. There is nothing for free. Don't give me that. Just another sales gimick.
    A tainted Epicor user.

  13. Well, Anonymous and tainted, have you actually downloaded and installed the software? Might be a good idea before you start casting aspersions.

    As a matter of fact, thousands of companies are using the free version of xTuple, and have no commercial relationship with the company at all.

    Of course there are things that we charge for - services, support, commercial editions of the software that add features for bigger companies, and third party add-ons. For example, yes, the add-on that integrates with the Arena PLM system sells for $5k. That's hardly something that every company will need, and the economics are different than a broad-based General Ledger program.

    I'd suggest you do a little more homework before posting next time. If you'd like to demonstrate more of an open mind, and see a guided demonstration of the software in action (with clear delineations of what's free and what's not), feel free to drop a line to

  14. Fantastic stuff to read, thanks for the openness...

  15. xTuple, OpenBravo, and OpenERP (amoung others) are not distribution specific. We've (an HVAC distributor) tried a pilot of all three which crashed and burned because none of them handled the industry specific oddies in accounting that Eclipse does so well in spite of being a blunder of a software title, technically speaking. There is far more potential in xTuple than the other two mentioned, however.
    I'm speaking as an "IT Guy" relaying what the Purchasing and HR departments have passed on to our department.

  16. Prophet, thanks for the (partial) compliments!

    We'd welcome the chance to engage directly, and better understand what kind of gaps your people were finding. Did anyone from your company ever connect with someone at xTuple?

    I ask in particular because there is a lot of behind-the-scenes stuff going on currently with regard to the distribution market, and it might be worth having a conversation. If you're interested, please drop a line to

    Thanks, and regards,

  17. Ned

    From an African perspective you hit the nail on the head.

    As an ERP consultant in Africa I concur that open source is the way to go - especially the vanilla flavour.

    Being an ex Epicor employee (4 years, how did I manage it?) I have watched them shoot themselves in the foot with the shoddiest management possible and wreck their name in Africa - so much so that their presence is a mere skeleton today. They and I parted ways by mutual agreement last year.

    African customers want quality product and support, at a reasonable price. And they are smart enough in most cases to look after their own systems.

    PS It seems their East European operation may have collapsed, too.