Why Would Icahn Care About an ERP Company?

by: Dennis Byron

I returned from vacation to find that Carl Ichan wants to talk with the founding Lawson (NASDAQ:LWSN) family and to Lawson CEO Harry Debes about "enhancing the shareholder value" of the 30-plus-year-old ERP company. Doesn't that usually translate into somebody bites the dust? At MOTO he got the CEO fired. At BEA, he got the company sold out from under the CEO/founder in a bid that arguably undervalued BEA shares. LWSN is trading around $8 and Ichan would probably be happy to get it up to $10 and cash out. But that is most likely not what Lawson's founders had in mind when they brought in Harry and acquired Intentia and Healthvision in order to hopefully reach critical mass.

The Start Tribune has a pretty complete analysis of the news aspect of this "news." But the story got me thinking about why any investor even cares about ERP.

When Microsoft (NASDAQ:MSFT) acquired Great Plains and Navision almost 10 years ago, Intuit (NASDAQ:INTU) rolled out its then latest Quickbooks, and those 35 separate companies became Infor (their names are faithfully enshrined in this ERP hall of Fame post), the ERP market reached full saturation. The greenfields were all plowed under; the low hanging fruit had been picked. Add your favorite trite phrase here for indicating that the only ERP sales possiblities after about 2002 involved decoupling a company from its then current ERP supplier. That is harder than the annual-subscription-maintenance-fee attackers would lead you to believe. That is what makes it so hard for Lawson to get any synergy out of the Intentia and Healthvision acquisitions. (NOTE: While at IDC, I personally stopped analyzing the ERP market in detail in 2003 and went back to my middleware roots because of this maturation of the market.)

But apparently some investors in addition to Ichan still do care. I had to google the term ERP for the first time in many years to write this post and found that Deltek (NASDAQ:PROJ) has recently made an offer for Maconomy. And that BusinessWeek recently and inexplicably ran a long article defining ERP (which I feel the need to say stands for "enterprise resource planning" although treating ERP as an acronym makes as much sense as treating IBM as an acronym).

One of the problems you are going to have if you want to invest in any of the real or rumored ERP takeover deals now floating as a result of Ichan is that you have to understand what ERP is. ERP is a value proposition, not a technology or a product.

The four leading software suppliers (IBM, Microsoft (MSFT), Oracle (NASDAQ:ORCL), and SAP--in alphabetical order and counting IBM in the market via its partner surrogates) plus Intuit -- the leading software supplier of ERP to small and medium enterprises -- already offer that value proposition. All five companies are increasingly treating the ERP value proposition as a sidelight to broader enterprise software offerings or as a selling point for cloud computing value propositions.

In addition, the value proposition is extrememly industry centric and the five leaders all understand that dynamic, effectively limiting the seams that other ERP suppliers can fit into. That leaves Infor and a few others to live off those much maligned annual-subscription-maintenance fees the way the company formerly known as the former Computer Associates did with other types of software during the 1990s.

There is nowhere to grow.

Disclosure: None.