The Enterprise Software Synergy Effect, Part II: How Acquisitions Fail To Realize Their Potential

In last week’s post I began a tirade on why the book I want to publish when it’s time to retire, Josh’s Extremely Thin Book of Successful Acquisitions, would really be a very thin book. The subplot? It’s about vendors not being able to leverage the synergies in their portfolios to make acquisitions synergistic. The problem – embodied in my favorite aphorism “all the great ideas in marketing go to the field to die” – is that upselling and cross-selling newly acquired assets is hard, and it’s not all the vendor’s fault.

 

A big part of the problem upselling and cross-selling acquired software alongside existing assets is about getting the right decision-makers in the room when the pitch is made: Many prospective customers are too siloed or lack the vision necessary to buy into these visions of digital transformation, especially the business network vision. It’s hard to find that vp of business networks. And the CFO and CHRO aren’t always aligned in the right way to buy into, literally, a strategic, synergistic, vision of 1+1=3 in their own organizations.

Customers are also often internally siloed by vendor: the SAP crowd inside the typical heterogeneous customer (which is the majority of upper midmarket and large enterprises: single vendor account control is a myth) doesn’t necessarily hang with the Oracle crowd, the ones running older Baan manufacturing systems don’t talk to the people using Microsoft Dynamics, Salesforce admins don’t necessarily talk to the procurement people, and on and on.

So alignment and pitching to the right people is as essential as it is elusive. But this isn’t a chicken and egg paradox, each side waiting for its yin to yang. The vendor is both chicken and egg, and before those things can change, the vendor’s vision needs to be marketed, shouted from the rooftops, and otherwise evangelized. Companies in the global economy need to start thinking about business networks, and companies looking to transform need to think strategically about new ways to manage their workforce. These seeds desperately need planting, and if vendors don’t plant the seeds, nothing will grow.

My beef is that pretty all serial M&A vendors fall short in planting these seeds, despite the fertile soil at their disposal. That fertile soil starts with the keynote stage, a place where synergistic visions should hammered on at every opportunity.

By the way, just because in part I singled out SAP in part I doesn’t mean this is just an SAP problem: Microsoft has been guilty of the synergy problem in the past. To their credit, the recent Ignite/Envision conference featured some decent synergistic messaging in Satya Nadella’s keynote about what LinkedIn can do for CRM and HR functions and how the Dynamics “suite” (which, other than Dynamics’s CRM functionality, came to Microsoft via acquisitions) can power process-driven, modular composite apps.

Oracle suffers mightily from the synergy problem – the lack of integration of NetSuite is the latest case in point – and IBM and HP have basically made the synergy problem a core competence. Only Infor seems to be relatively immune – their recent acquisition of GT Nexus and the synergy of having a global logistics network tied to Infor’s B2B strategy was front and center at their user event in July. Of course, CEO Charles Phillips’ tenure at Oracle – and his involvement in the Fusion fiasco – has had a lot to do with Phillips’ determination to do integrated, synergistic software the right way. Nevertheless, Infor has to turn a well-articulated strategy into real revenue – despite the fact that elements of the company’s cloud strategy are still works in progress . The execution side of Infor’s synergistic strategy is something I’ll be watching out for closely in the coming year.

This is the problem with the synergy effect: its looks good on paper, and in presentations to analysts. But if the vendor’s reflexes aren’t tuned to delivering a message about how 1+1=3 or more, then the acquisition may plug a revenue hole, but it won’t be able to realize anywhere near its potential.

This means it’s time to evoke another one of my favorite aphorisms: the biggest mistake enterprise software vendors make is that they try to sell software the way they build it, not the way the customer consumes it. The synergy problem is a version of this: in the effort to maintain the acquired brand and its customers and sales organization, acquiring companies tend to go overboard in maintaining silos instead of stressing synergies. The problem becomes baked into a company’s strategic messaging, such that during big annual customer events like SAP SAPPHIRE, or Oracle OpenWorld, the frenzy generated by each internal product or strategy stakeholder fighting tooth and nail to get their two slides into the CEO’s presentation practically guarantees that the keynotes – and therefore the primary messages – become siloed.

By pitching a product strategy that was the result of a team of rivals duking it out for keynote real estate, any hope that a real story about how to consume all the different parts of the product portfolio in a comprehensive, synergistic way gets lost in the loud music and overly enthusiastic “I’m so excited to be here” exclamations from the stage.

Without enough seeds, and enough air cover at the top about synergy, field execution becomes not just a bottleneck, but another example of the all great ideas in marketing go the field to die problem. Even if incentive programs are set up right, how can sales execs sell to a broader audience if there isn’t one, and their bosses aren’t trying hard enough to cultivate one? And even if the air cover is there, many of these individuals know how to sell either to IT or the line of business, but not both. The result is a million war stories about the one that got away, lost because a competitor could tell a more compelling but limited story or because the losing party’s more compelling story doesn’t have the audience of influencers it needs to make the sale.

It’s tempting to say that if the problem may be too entrenched to resolve, which may be why it remains unresolved within so many companies. But I’m an optimist: I think these messages can and should be told at every opportunity. How difficult can it be? Apparently very. Sometimes I wonder if the other career-ending book I  should write is Josh’s Extremely Thin Book of Successful Keynotes, but I’m willing to wait a few years on that one. It can’t be that hard, can it?

 

 

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