When My Vendor Gets Acquired

I recently facilitated a panel discussion on what to do when your vendor is acquired by another vendor.   The panel consisted of a practitioner, a consultant, and a vendor.  It was a very interesting discussion, but one of the most interesting discussions were on the various reasons why a vendor may purchase another vendor.

The first reason is to control competition.  This occurs when vendors feel that competing vendor systems are similar in functionality and there could be limited need for similar offerings.  Usually the vendor does not purchase this product to eliminate the other system, but the usual process of assimilating an acquisition may be a bit faster than in other types of acquisitions.  Oftentimes, various features from the acquired project are incorporated into the next release.  Most vendors will not “kill” a product, but will have one offering which begins to become the stronger of the two.  While the vendor will usually support both systems, at some time the vendor may announce that they will be discontinuing support; however, this is usually done with ample time to move your system and data over to the newer version.

The second is to add functionality.  A vendor may see a competitor of having some features and functionality that is not currently offered in their product, so they acquire the software with the intention of incorporating features and functionality that is missing from their  current offering.  Many vendors will begin to incorporate the features immediately, but usually the addition of the features may take up to 6 months.  The vendor may continue to support both versions of the software, but usually there is a push to move all users to one platform which simplifies the support of the software.

Finally, the third reason to acquire a vendor product is to move into new delivery areas.  We saw this recently with SAP purchasing SuccessFactors.  Both projects will continue to be offered, but the acquisition of SuccessFactors also brings to SAP the access into cloud computing and SaaS delivery, which SAP was just beginning to began to expand into.  At this time both products should continue to be developed, oftentimes, with this type of acquisition the long-term outlook of the product could change as the relationship matures.  This type of acquisition must be continually monitored to see if there will be product changes in the future.

The one thing everyone on which the panel agreed was that the best thing is not to panic when your vendor is purchased.  There is normally no material change to your system or the delivery for at least 6 to 9 months.  The best thing you can do if you vendor is acquired, is to begin to plan.  You may want to reassess how you are using the software to see if it is still meeting you needs.  Should you be coming to the end of your contract, you may want to evaluate other products to assure yourself that the one you are using is still the best fit.  To accomplish this after your vendor has been acquired may be a bit more work than the typical HCM technology staff had bandwidth, and you may want to look to outside resources to assist in your efforts.  Planning for the merger of your vendor into another should always be a risk on your risk mitigation plan.

John Hinojos

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