Consona-Compiere

So mixed emotions here in the ERP Graveyard today. Our sometimes cohorts in the world of open source ERP, Compiere, have been acquired by Consona - the Infor wannabe funded by Battery Ventures and Thoma Bravo that has previously rolled up midmarket packages like Made2Manage, Intuitive, and the like. (See the Scorecard for a full roster)

Here's the press release. A few thoughts, and I'll trust you, gentle reader, to recall my more than usual conflict of interest in commenting on this.

There are two names that are not mentioned in the press release. That of the Compiere author and founder, Jorg Janke - who was Compiere for years and years, and can quite reasonably take credit for the "modern architecture," etc., that Consona highlights. It's true that Jorg didn't always see eye-to-eye with the open source community he helped create, and this was one of many factors that led to the Adempiere fork of the Compiere software.

Of course, probably the major factor was the initial VC investment from NEA back in 2006. And as is often the case when the VC's come in, Jorg was moved aside at some point to make way for Don Klaiss and some other managers transplanted from Oracle. But it was particularly graceless of Consona not to mention Jorg at all here; he deserves better.

The second name not mentioned, of course, is Klaiss - the (presumably outgoing) Compiere CEO. I think it would be fair to say that his tenure at Compiere was not an overwhelming success. On his watch, the company further alienated their dwindling open source community, including many of their reseller partners, by driving new product development in a more closed direction and not making source code available for new modules.

NEA put a great deal of money into Compiere, and since the value of the deal wasn't disclosed, we can only speculate about their return on that investment. But it's clear from talking to people who have become xTuple customers and partners over the past few years that they burned through a lot of money, and didn't have a great deal to show for it:

• huge overseas development projects for new binary-only commercial products
• salaries for a ballooning management team
• multiple office relocations, presumably to be ever-nearer to the various centers of gravity in the California VC/software industrial complex
• and, oh yes, just 130 customers. And that number's even lower than it sounds.
  

Lots of people will be asking what this means for open source, software business models, and of course, one of the core tenets of this humble Graveyard: that with all the crazy, finance-fueled M&A activity in the ERP software space, open source is a powerful defense for companies concerned about the longevity of their ERP investment.

I would humbly submit that the fate of Compiere (please don't even ask me to comment on Consona's plans for the product - see also the Infor SOA offering and Nixon's secret plan to win the war) stands as an object lesson in support of that theory.

Compiere failed as a company because it turned its back on open source - on its community of free users, and partners and customers who wanted to be full participants in the ongoing development and maintenance of the software. It's just especially ironic that the bullet was fired by someone like Consona.

More thoughts soon.

Update: Interesting questions from Frank Scavo at the Enterprise System Spectator...

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"You call that ERP? In MY day..."

A couple of interesting links to pass along:

Houston Neal at Software Advice has put together a nice graphical overview of the events of the past 40ish years in the ERP world. See also a more detailed wiki history, maintained by xTuple's own Wally Tonra.

Always interesting to look back, especially to realize (if the tombstones here don't make the case clearly enough) how many giants of the business just simply don't exist any more.

Along those lines, a quick note: People often ask if all the graveyard imagery is supposed to mean that the products or companies are really dead, or just sleepy. Like soap opera villains, ERP systems never really die - but they can only come back so many times before it gets silly.

So it's a fair point to say, "such and such a vendor has thousands of installs and is still selling the product." Maybe so - but if that product/company has been bought and sold a bunch of times, and it's one of many disparate offerings under a single corporate umbrella, the emptor should certainly caveat.

Can't wait for that Infor IPO? Snack on some Chinese...

So Managing Automation reports that CDC Software, the long-rumored spinoff from the former China Dot Com, is ready to test the public markets.

They're apparently targeting a fairly indiscriminate breed of investor, however; get this:

"CDC Corp., through CDC Software International, would wield 98.1% of the voting interests and an 83.4% equity interest in the company after the offering."

Dang! Those are what we call in the business, management-friendly terms.

I'd be willing to carve off an overvalued chunk of xTuple for something in that neighborhood; please contact me with your sealed bids.

Infor puts Softbrands shareholders out of their misery

To which, the collective world of ERP pundits said, huh?

Softbrands, holders of the Fourth Shift manufacturing product who pinned their entire future business plan on plugging into SAP (and maybe one day being bought by them), decided to sell out to Infor and its Daddy Warbucks Golden Gate Capital, for $0.90 a share, or about $80 million. Well, $41.2 million anyway - the rest goes to paying off debt and preferred shareholders. It's still a nice premium over the $0.47 closing price last Thursday before the deal was announced, as SoftBrands CEO Randy Tofteland helpfully noted: "This transaction allows SoftBrands stockholders to realize significant value from their investment in our company over recent trading levels."

He then continued, "In addition, we increase value to customers through expanded products and services from the alliance with Infor."

Yeah, right. Longtime readers of this blog know what that means.

The 451 Group's China Martens (subscription only) ran down the interesting history of Softbrands, some of which was new to even your humble Graveyard blogger:

SoftBrands has a somewhat complicated history. Fourth Shift Corp was founded in 1984 and was acquired for $40m in cash in 2001 by AremisSoft, a public company that had already bought some hospitality software vendors. AremisSoft started to crumble amid class-action lawsuits and allegations of fraud later that year. SoftBrands came into being at the end of 2001 as a wholly owned AremisSoft subsidiary housing the manufacturing and hospitality products. AremisSoft filed for Chapter 11 bankruptcy protection in March 2002 and SoftBrands emerged as an independent entity after the reorganization. It raised $20m in external funding before going public in 2005. SoftBrands also made a number of purchases including Medallion, Infra Business Solutions and Hotel Information Systems.

The one thing everyone seems to agree on is that Fourth Shift's special arrangement with SAP is unlikely to survive the new Infor owners. Seeing as how they stopped selling the non-SAP flavor Fourth Shift completely some time ago, it's hard to see how Infor is going to do anything with the Fourth Shift product but dig a hole and throw it in.