By Larry Dignan  |  Posted 2005-12-05 Print this article Print

Consolidation was the big trend among software vendors this year, throwing off development road maps and leaving customers with little choice but to go along with the new owners. Even so, there are ways to keep your options open.

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Virgin's retail stores primarily stock music CDs, which the company can return after 90 days with a penalty. Beginning next year, Virgin will stock more fashion items, which require different operating assumptions.

For instance, fashion requires Virgin to buy clothing inventory up front and track markdowns over time to move it.

Fort's current supply chain and merchandising system, provided by JDA Software Group Inc., wasn't designed to handle clothing inventory, and he said he wants to consolidate applications to simplify maintenance.

Fort hasn't begun evaluating software, but is working through the functions he'll need: the ability to track more items, manage markdowns and plan for merchandising categories.

"Our business team knows what we'll need to do," he said. "It's just a matter of which software is more appropriate. When it comes to vendors, you have to date them."

So far, Fort, who conducted SAP implementations during his previous stints as a consultant and executive at Nestle Group and Polygram, said he has talked to SAP about its plans and is waiting to hear about Oracle's outlook.

Make sure your vendor will be around to support you.

The dating process starts with some number crunching, according to Mark Badia, chief technology officer of NASCO (National Account Service Co.), an Atlanta-based health insurance claim processor. You should know your suppliers' balance sheets, market position and product plans as well as they do, Badia said.

"Even if the company is more mature, there are risks," he said. "You need to make sure they have the cash reserves and the market position to last." Fort added that executives should ponder the cultural fit between the vendor and customers. After all, if something goes wrong, you'll be dealing with the vendor extensively.

Check out the software companies' road map.

John Webster, the PeopleSoft program manager at Dakota State University, said he was initially worried about Oracle's acquisition of PeopleSoft, given the bluster from both sides of the deal.

Since then, he said, he has become more comfortable with Oracle because most of his old PeopleSoft contacts have remained. Nevertheless, he is still waiting to see what Project Fusion turns out to be.

The current plan is to bridge PeopleSoft, JD Edwards and Oracle applications by 2008, Oracle's Andersen said. According to Webster, there's no way to know if a road map will last, but one thing to look for is intermediate-term vision. Does the software vendor have an idea of where its products will go for three or four years? Webster said that in three years, anything you buy today will likely be replaced in four or five years.

Always have an exit strategy.

Badia said the consolidation in the industry increasingly limits a company's options, but the only way to retain your flexibility is to have a backup plan. What are the alternative vendors out there? Are there maintenance options if a vendor cuts off support? For smaller vendors, Badia gets access to the software's source code in the event of bankruptcy or another company-killing event.

Badia also bears in mind that "If it's a strong product, it will be bought out," he said. However, Webster said there's no need to rush for the exits. Oracle has assured PeopleSoft customers that they can add modules for years without making a switch to something new. Webster's strategy for his PeopleSoft applications is to see what Oracle cooks up.

Although it's unlikely that a software vendor would acquire another company only to chase new customers away, according to Fort, you need to have one eye on the exit. "You have to look out there and get skeptical," he said. "Step back and ask whether the company is out for the customer's benefit or its own."

Business Editor
Larry formerly served as the East Coast news editor and Finance Editor at CNET News.com. Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.

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