Updates from March, 2010

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  Looking at the Learning Management Systems Market to Uncover the Direction of Current BPM Trends

  kurt 2:32 pm on January 30, 2010 | 0 Permalink | Reply
  Tags: BPM (22), business process management software (8), learning management systems, LMS software, trends

  

  BPM and LMS Software Markets Follow Mergers and Acquisitions Trend

  After hearing about the recent acquisition of Lombardi Software by IBM, I was reminded of another industry, the learning management system (LMS) industry. The BPM and LMS software markets are both highly fragmented markets with numerous vendors. Do the recent BPM acquisitions mirror activity in the LMS software market? Can we look at learning management system trends and uncover some BPM trends?

  Consolidation among major LMS software vendors began five years ago. One of the most significant mergers occurred in 2005 when Click2Learn and Docent merged to become SumTotal Systems, becoming the largest learning management system company in the market. The following year another vendor, Saba, acquired some of its LMS software competitors. Blackboard, the largest learning management system company in the education market, acquired the second largest company in the same market. Most recently, in 2009 Blackboard acquired ANGEL Learning. The merger and acquisition activity continues in both the LMS software market, as well as related markets (learning content management systems). At the same time consolidation has occurred among companies that exclusively develop and market LMS software, larger software vendors and consulting firms have acquired smaller companies or added learning management system functionality to their own enterprise software.

  Even with the high level of consolidation, which is expected to continue, enterprises and educational institutions still have a bewildering number of LMS software options to evaluate. According to Trimeritus eLearning Solutions Inc., at 250 corporate learning management systems exist in the market, excluding education and open source LMS software. One explanation is that the pace of consolidation can’t keep up with a growing market and a constant incoming stream of small independent vendors feeding established companies.

  In the BPM market, we have two recent examples of both a larger enterprise software company adding a BPM to its wide range of software offerings (IBM acquiring Lombardi) and a BPM company acquiring an competitor (Progress Software Corporation acquiring Savvion). If the learning management system market is an indicator of a current BPM trend, you can expect that consolidations will continue but the number of vendor options won’t.

   

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  The Unanticipated Business Process Management Consequences of Corporate Procurement and Incentive Payment Card Programs

  kurt 9:13 pm on January 16, 2010 | 0 Permalink | Reply
  Tags: BPM (22), business process management (5), incentive card program, procurement card program

  Businesses that need to reduce costs by streamlining processes can replace paperwork with credit or debit card programs. Two examples of processes impacted by these card programs include procurement purchases and incentive payments.

  Corporate Credit and Bank Card Programs

  Procurement card programs simplify purchasing and accounts payable processes and reduce the paper trail of invoices that these processes traditionally create. These programs are intended for small purchases (less than $500), which typically make up the bulk of procurement transactions. With a credit card these small dollar purchases are summarized on the monthly statement, which eliminates the need to issue multiple invoices to a single vendor for several payments. Overall, the use of a procurement card can reduce internal cost per transaction by an estimated 35 to 40 percent (Loftis). In addition to cost savings, buyers can also get their goods or services much quicker by bypassing the typical purchasing and receiving processes.

  An incentive card program issues employees with prepaid debit cards that are reloadable. Each time the employee earns an incentive payment, it is credited to their debit card, which they can use to make personal purchases. The program replaces paper-based check payments with electronic payments on a debit card. Not only do the electronic payments reduce costs by eliminating paper checks, they also eliminate the processing costs of generating and mailing the checks.

  The Unanticipated Business Process Management Consequences

  However, while both the procurement and incentive card programs can increase efficiency and simplify processes, they may create a need for additional process management elsewhere.

  For example, for tax and cost management reasons, a business that has implemented a procurement card program must now be able to manage all of the charges being made to credit cards held by many different card holders. Depending on the size and resources of the business, it may need an auditing process to review paper statements (a smaller business) or to review data feeds from the bank that issues the card to the business’s financial systems.

  Incentive payment card programs face their own process issue. To be successful an incentive program employees must connect their behavior to the rewards. In a paper check-based system, the employee receives a tangible reward for a specific accomplishment. When payments are automatically and invisibly loaded on a debit card, the employees may not connect reward to behavior.

  To ensure that incentives reinforce solid performance, a business needs a reporting process that shows employees why they received incentive payments on their debit card. By seeing their incentive payment history, they can identify what performance goals they met and can focus on meeting future goals.

  Of course, these unanticipated business process management consequences should not discourage a business from considering a corporate procurement or incentive payment program. On balance the business process management trade-offs associated with implementing a program may still outweigh the costs and inefficiencies of the traditional processes.

   
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  BPM Software Vendor Buying Spree continues with Savvion being acquired by Progress Software Corporation

  brian 10:50 pm on January 11, 2010 | 0 Permalink | Reply
  Tags: BPM (22), BPM acquistions, Progress Software, Savvion, Savvion compared to Lombardi, Workflow (9)

  The BPM land grab continues.   For those that follow me on EbizQ and other sites, you might remember that I was probably the first in the BPM and Workflow Industry to predict that the IBM acquisition of Lombardi would set off a small BPM Software and Workflow Software Vendor buying frenzy in 2010 as other large software vendors look to stake claims in the deservedly hyped BPM/Workflow space (See my original prediction here).

  Of course, I drink my own coolade, I just didn’t think it was this highly concentrated.   It is an understatement to say that both VCs and Industry Execs have a herd mentality.  Of course they do.  This is for obvious reasons - some good and some bad.  There is a feeling of safety in numbers and there is a general belief of the wisdom of the herd in venture investing.  Furthermore, most VCs worry about the market health first, executive team second, and then the strength of a particular product suite third.  In other words, if the market is good, VCs will continue making bets on it and not necessarily all in the same company.

  So, what does this second major BPM company acquisition announcement in less than 30 days mean?  Well, let’s look at the numbers.  In the case of this acquisition, we’ve got a publicly announced price tag - $49 million.  There isn’t a BPM CEO on the planet tonight that isn’t trying to calculate multiples based on Savvion’s revenues and profit margins.  Every industry needs benchmarks to know how to value companies in that particular industry.  Now we’ve got two cases (albeit Lombardi’s is still unknown) and two sets of possible metrics.

  I’m sure in the next couple of days we will get some good clarity on Savvion’s exact numbers.  However, in the announcement by Progress Software, they claim that Savvion had 350 customers (and 24 Fortune 100 customers).

  According to a write up by Timothy Prickett Morgan, he calculated Savvion revenues at around $18 million, i.e. 2.7x annual revenues, based on a revision in sales forecasts by Progress Software.   Tony Baer seems to suggest the acquisition was a 1.5x multiple in his column.  Other writers suggest that Savvion was growing very slowly during recent years and either in or near red numbers.

  Funny, if we look at a product brief by Upside Research published in 2007, it claims that Savvion had $25 million in Revenues and 25 Fortune 100 customers in 2005.  What - something does not add up?  Was Savvion just taking the piss out of Upside and its readers back then? Or did Savvion undergo a serious erosion in their business model?  I have to assume it is mostly the former (which will raise some eyebrows and require Upside Research to do some fast explaining).

  So, here is my initial conclusion and comparison of the back to back acquisitions.  IBM acquired a strong and growing market Leader probably paying 5-8x revenues.  Saavion was probably a more desperate sale of a company that despite a booming market was starting to stumble and lose its way.  The business was probably being shopped to strategic buyers who realized that Savvion would nicely fill out their customer strategy and allow them to participate more fully in a very extended and still not very “neat and contained” market.  So, Savvion probably felt that they were getting a nice bounce thanks to the market and a renewed chance as a company inside a larger entity instead of one that would be going it alone in a quickly changing landscape.  Some cash and some stock options in the new company probably looked like the best way to keep moving forward.

  This brings me to my next blog (coming in the next few days!) regarding how BPM acquisitions will continue but may have less to do with BPM and more to do with complex customer acquisition strategies and more holistic product ecosystems.  But, I’ll get some sleep and leave that one for later this week.