When do acquisitions make a company too big?

There seems to be a belief in some quarters that when it comes to IT companies, the larger the better; for example, Acquire Me! Oracle’s and SAP’s Next Likely Targets which quotes:

"A move by Big Blue, say on a midmarket ERP partner like Lawson or Infor, could presage further consolidation in that arena by Oracle and SAP." (The 451 Group report – Where Might Old Foes Oracle and SAP Each Look Next to Stave Off Apps Hunger Pangs?)

However, from a customer (and a partner) point-of-view, dealing with some larger ERP vendors means going through the bureaucracy to get even small things done. Also, large software vendors seem to go for a centralised control model. It might be old news, but at a conference in 2008, I was told by a senior local representative that Oracle’s process for confirming quotes for SA companies could only be done by Head Office in the US, this required a wait of several weeks before a quote could be approved.

Waiting that long for a quote might be OK in some countries, but South African business people are not typically enamoured by long decision cycles.

Why are ERP consultants needed?

In a blog on the ITtoolbox site, Steve Phillips comments that companies are moving away from using external ERP consultants in favour of using in-house expertise – Why ERP Software Consultants Cannot Save The Day.

His view is:

The ownership philosophy is about controlling your project destiny and built on some fundamental principles. … 1) It is possible to take internal responsibility for project management. 2) It is possible to develop and/or acquire internal software expertise to the point outside application consultants are rarely needed. 3) It is possible to become much more educated and less reliant on the false sense of security an army of consultants can bring. 4) It is possible to realize ERP benefits by developing better software and business process solutions with fewer outside consultants. 5) It is possible for internal personnel to do up to 70% of what many pay consultants to do.

Except for item 4, in my experience, I haven’t found any companies that can do what he suggests. I suspect it is a function of certain factors – a primary one being the size of the organisation. But I also believe that business maturity, and the availability of knowledge and experience play a significant part.

In the South African market, most businesses fall into the small-to-medium (SMB) category. Employees in SMB companies tend to take on more than one role (debtors and creditors, pre-sales technical and sales, production planning and management) which leaves them little time to focus on issues which are not directly relevant to the job they must do. So finding time to acquire software expertise is difficult or requires after-hours learning. In time, and if a person stays in the same job, they might become “more educated and less reliant.” However, given their time constraints, it is highly unlikely that people will have the time or knowledge “to do up to 70%” of what a consultant will do.

Also skills and expertise are in short supply in this country, so someone who develop technical skills may easily find themselves moving out of their business job and into a technical or consulting role. Similarly, project management requires experience and time to spend on it, which senior staff in SMBs (e.g., finance managers and directors) rarely have. Companies will tend to have a less senior person overseeing the project, but all the details and work that goes into project management has to be done by someone with the background and time allocation to do it – in other words, a consultant.

In the South African context, therefore, most average companies (not large ones over 1000 people) do not have the people, skills or time to take on an ERP implementation themselves. The cost of bringing in consultants outweighs the risks of failure in trying to do the project in-house.

Unproductive April 2009

April 2009 was definitely the month in which South Africans did not get much work done. In every week this month there has been a public holiday – all but one planned well in advance; the unplanned holiday was the election day on 22nd. That means we have not had a 5-day working week for 4 weeks. The last week is the shortest, with only 3 working days.

april2009cal

Not this time, Heartlines

Dear Garth, Brian, Caroline and the rest of the Heartlines group: when you broadcast the films of the ’8 weeks – 8 values – one national conversation’ program in 2006 on SABC TV, I was truly touched and inspired. I considered it excellent TV broadcasting. So when I heard this year about the new 6-part series Hopeville, I was really looking forward to watching the programs.

Unfortunately, having now seen the first 2 programs, I will not be watching the series anymore. Even though I have been watching it with a group from friends from church, and we have been following the workbook, I found the story so unremittingly bleak, and rather slow, that I can’t bear to watch it anymore – it’s just too depressing for me.

I’m not sure what my disappointment about the Hopeville series says about me, but I hope that the people who do watch it will find it valuable. (I’m sure my friends will keep me up-to-date).

Diving with sharks

I was recently on holiday on the east coast of South Africa on the Indian Ocean, near a town called Scottburgh. Thanks to my marine biologist brother-in-law, I was able to go diving with one of the top divers in that area – Mark Addison.

The dive area is known as Aliwal Shoals, and is one of the world’s top spots for shark diving.

During one of our dives, Mark took this photo of us diving with black tip sharks (I’m in the foreground):

Will the US be ready for elections

A story on our local news media mentioned that some states are not ready for the elections next week. It amazes me that a country like the US – which has an FCC, FDA, etc – does not have a federal election commission like SA’s Independent Electoral Commission.

Responses to Venture Chronicles

Jeff Nolan is a blogger who I have followed for some time, with interest and enjoyment. But he has made a couple of comments recently to which I want to respond.

Firstly, he comments about affirmative action, and specifically a South African story, without any background as to why affirmative action (AA) exists. Understand that I am a white, male South African, and therefore one of the members of SA society for whom AA is a painful and thorny issue. Nevertheless, I understand that there is a reason for it, given the particular history that South Africa has been through. When Jeff says the problem with AA is that people get jobs that they “don’t necessarily deserve or earn”, he omits the fact that black South Africans were not permitted to even try to deserve or earn numerous jobs during apartheid. The debate is underway in SA about how and when AA and EE should go, but it is a very sensitive social and political issue, and deserves a rigorous debate, not just a few lines on a blog. 

Jeff’s second comment is about new laws in California to enforce hands-free use of cellphones while driving. While he may believe the laws are unenforceable, what those laws do is make people aware that driving while talking on a phone or texting is dangerous driving. That I think is a good thing.

Microsoft Dynamics, the SA experience

According to Josh Greenbaum, Microsoft Dynamics has decided to re-focus to the small- and medium-business market, leaving the enterprise (ie, large US, European and Asian companies) mainly to SAP and Oracle. Well, that’s one lesson I could have helped Microsoft with five years ago.

The South African experience of Dynamics has not been spectacular, with Dynamics being a poorly recognised brand; mainly in my opinion due to foreign mis-understanding about the local ERP market.

Now the inside story from Dynamics SA is that they did less than 80 deals in the previous financial year, with nearly 50 percent of that in the CRM business. Therefore less than 50 customer adds happened for the three Dynamics ERP products (GP, NAV, AX) in SA. As a result, for the first time the Dynamics budget for SA has been reduced.

BTW, Microsoft SA is not the only office having troubles; according to Mini-Microsoft, Microsoft India seems to be going through something similar.

Stink at Governor’s salary

Tito Mboweni was a trade unionist who became governor of the South African Reserve Bank several years ago. Consensus is that he has been doing a good job … until now.

He has been urging businesses and trade unions to moderate salary increases to below the rate of inflation, no more than 10 percent. But the latest annual report of the Bank shows he got a 28 percent salary increase, not only that but his annual salary is now over three million Rands, that’s three times more than President Thabo Mbeki.

Whoever in the Reserve Bank thought this news would not be controversial? And it goes to show that no one is immune to the lures of market greed.

In a related story, directors’ salaries in general have been above inflation, creating another big stink amongst trade unions. Be prepared for big fights between labour and business when it comes to salary negotiations in coming months.