A Brief Guide to OMS Mergers and Acquisitions

Jan 30, 2012 6:06 PM  By

An order management system is a key component of any direct commerce business, regardless of the number of channels that business relies on.

Virtually all OMS solutions for multichannel merchants will include modules for inventory management, fulfillment and warehouse management, customer management, and promotions management, plus interfaces to ecommerce/mcommerce applications or have these bundled with the OMS as well.

Coordinating this is a tall order. It is not surprising that software vendors in the OMS field either acquire other related vendors to make it easier to manage and support their solutions, or are acquired by other companies who value some or all of what the acquired company can provide.

Probably the closest thing to a merger in this business was when Sigma/Micro, which had developed and supported the “Controller Plus” system for nearly 30 years, acquired the fulfillment division of Stark Brothers in 2010, with the merged businesses now operating very successfully as Fifth Gear (infifthgear.com), which does third-party fulfillment, call center services, ecommerce, and a variety of marketing services for its clients. The Controller solution is now only available to Fifth Gear clients (plus legacy users).

Outright acquisitions are more common. One of the biggest was IBM’s purchase of Sterling Commerce a couple of years ago. Sterling, which excels in the B-to-B world (but also handles B-to-C), gave IBM a major partner in direct commerce at a point when it truly needed a big boost. Sterling has continued on an as innovator, and the acquisition has been a big plus all around.

Two of the largest systems in the OMS world have been the subject of acquisitions. CommercialWare was acquired by Micros/Datavantage nearly 10 years ago. Not only has this boosted CW’s profile in the retail world, but it has led to a significant enhancement of the CW solution itself.

Similarly, Escalate Retail (formerly Ecometry) was first acquired by Golden Gate Capital in the late 1990s, and in the last year by Red Prairie, which is WMS and supply chain global solutions provider.

There is the current trend of ecommerce platforms acquiring OMS solutions and turning them into “one-stop-shops” for etailers or multichannel merchants. iCongo, now owned by hybris, is a good example, although iCongo had already added inventory and fulfillment modules to its own ecommerce platform prior to the acquisition.

What It All Means
Most vendors and systems have benefited from these business moves by becoming better developed and supported. Sometimes, support costs have risen, but the cost issue is not isolated to vendors in the M&A arena, and overall costs have fallen in the OMS world in the past few years, just to be competitive.

The more realistic issue is the course of future development. No matter their relative sizes, if the acquiring company has a mission different from the acquiree, some of the “legacy” users will suffer. But there is no way to predict whether a vendor will be acquired. “Good” systems and “bad,” “old” and “new,” have all been part of the M&A game.

Here are four tips for users of systems whose vendors have been acquired:

1. Start assessing your own risks ASAP! Staying may be fine, but assume nothing. Talk to your original vendor, but also talk to key people in the acquiring company. If you aren’t comfortable with what you’re hearing from the acquirer, or if you can’t get straight answers, that’s obviously a bad sign.

2. Become involved as much as possible with both vendors in the transition period, as the new vendor takes over the old. Involvement with your vendor is always advisable, but this is a perfect opportunity to build a strong relationship with the new vendor to give them input on what’s critical in your system for supporting your business.

3. Use this as an opportunity to re-evaluate your needs from a fresh perspective, including a thorough Needs Analysis. You may discover that your “legacy” system isn’t as strong an asset as everyone claimed it was, but simply what everyone was used to.

4. Reassess system support costs, ROI, and your own budget options. Even if your current system is still cost-effective, some financial issues may look different in light of the new system ownership. Does staying on the legacy platform make “cents” as well as “sense”?

Ernie Schell (ernie@schell.com) is executive director of Marketing Systems Analysis (http://www.schell.com/msa/).