Not waiting for a response on its sweetened offer to acquire Onyx Software Inc., CDC Software Inc. late last week agreed to buy another customer relationship management (CRM) software vendor to advance its growth-by-acquisition desires. In agreeing to buy c360, CDC of Atlanta gains a purveyor of CRM software development tools and plug-in applications for the fast-growing Microsoft Dynamics CRM space. The deal, whose value was not revealed, is expected to close later this week, noted Eric Musser, CDCs' chief technical officer, who is overseeing the company's quickly accelerating merger-and-acquisition strategy. Musser said CDC will not disclose how much it pays for acquired companies that are valued at less than $20 million. Already, CDC has assembled a wide portfolio of enterprise applications software for CPG, food and beverage, and pharmaceuticals manufacturers and distributors that it is beginning to mold into a viable alternative to the extended ERP establishment. Within the past year the company acquired on-demand SCM software vendor JRG Software Inc. (San Mateo, CA) and Horizon Companies Inc., an Edison, NJ consulting firm. CDC's North American enterprise applications acquisition spree began in 2003 when it purchased CRM vendor Pivotal Corp. (Vancouver, BC) and SCM player Industri-Matematik International Corp. (Atlanta). Industry watchers, however, took notice of CDC in August 2004 when it bought Ross Systems, an established purveyor of enterprise software for process manufacturers. CDC's momentum took a slight hit earlier this year when its $50 million offer to buy Onyx Software Inc. was rejected by the CRM vendor's board, which said it saw minimal synergies with CDC and questioned the performance of the latter's software industry assets. Last month, CDC upped its bid to $80 million for Onyx, which has since retained investment banker Piper Jaffray & Co. to help sort through its strategic options. Musser said the acquisition of c360 did not mean that CDC was no longer interested in completing the Onyx deal. "We've got a fair deal on the table ... and would like to continue to move the discussions forward," he said. "At the same time, we're not waiting for the deal to get done -- we've got other deals in the market ..." In fact, Musser said CDC's acquisition pipeline is filled with a variety of potential targets -- not just within CRM, but touching on supply chain software and the plant-centric segment of process manufacturing. Without revealing details, Musser said the company is looking to leverage software development and business process outsourcing assets gained through previous acquisitions to extend its enterprise software and service offerings. "In the next couple of months, you'll see us doing more customer staff augmentation," he said, noting that future acquisitions could move the company squarely into the software as a service (SaaS) domain -- building on experience gained with JRG's hosted offering. Companies that are looking to shift expenditures from capital to operational budgets see SaaS's "pay by the drink" model as being more flexible in terms of cash outlay and geared toward the need to achieve quicker returns on investment, Musser pointed out. Still, acquiring point packages -- whether sold in license or hosted-service forms -- could have limited appeal, particularly among the majority of companies that are looking for a single vendor to be accountable for building and maintaining integrated suites that facilitate tight sharing of applications data, which are more adaptable to business process change. Although some of CDC's acquired companies operate as separate business units, many are now sharing CDC product development, management, and planning functions -- like Ross and JRG, Musser pointed out. "By having one product development team, one accounting department, and one go-to-market organization, we are gaining all the traditional synergies," he said, noting that this is enabling CDC to spend more on product development and sales, and "deliver some bottom-dollar profits to investors." The model appears to be working. In 2005, its parent company, CDC Corp. of Hong Kong, reported that CDC Software generated adjusted earnings of $11.7 million on revenues of $201.8 million -- a 33.8% increase from calendar 2004. The Americas region contributed nearly half of the business unit's revenues. In calendar 2006, the company expects adjusted earnings to reach between $27.3 million and $28.1 million, and revenues to rise to between $225 million and $230 million. While CDC's $200 million acquisition war chest is helping to fuel some of its growth, the company is also generating cash -- and new customers -- from its existing businesses. "Today, half of our license revenue is from the installed base -- the other is half is from net new customers," he said, adding that the company averages one new customer per day. Leslie Ament, an analyst at AberdeenGroup in Boston, said the company's push to acquire CRM software that can be integrated with back-office ERP suites should resonate with customers and prospects. "Whether [CDC is] acquiring the right companies or not, the strategy makes sense," she said. A recent study conducted by Ament of 650 chief marketing officers found that only 45% of organizations with standalone CRM or salesforce automation software were able to achieve a greater than 15% performance improvement in a key metric -- customer retention rate. "The norm for companies with front- to back-office integration is 60%," she noted. This explains, to some degree, why CDC is so hot to acquire Onyx, she pointed out. Onyx, for example, has both business process work flow and analytics (from Cognos) tightly integrated into its CRM offering, "which for a company like CDC -- with all that supply chain expertise -- makes a lot of sense." While it waits for a response from Onyx's board, CDC can begin the task of integrating c360's functional and organizational capabilities into its growing company. (c360's entire management team, three members of which have roots at Onyx, is staying on board.) Based in Atlanta, c360 sells exclusively through a network of over 450 authorized partners, and claims to have more than 1,000 customers worldwide. Manufacturing industry customers include: A.W. Hastings, Custom Tailored Manufacturing, Crane Aerospace Electronics, Iredale Mineral Cosmetics, and US Labs. In addition to gaining entry into the hot Microsoft Dynamics CRM space, CDC hopes c360's distribution channel will enable it to move downstream and sell other acquired products to smaller businesses as well as divisions of larger companies. While this means CDC will now be extending its competition with 800-pound suite vendors on one side and smaller point applications vendors on the other, Musser said he isn't concerned. He said the company has "knocked down" some big deals on both fronts. And as its growth-through-acquisition strategy builds brand affinity with customers in targeted vertical segments, CDC is attempting to differentiate its strategy from other enterprise applications consolidators, such as Infor, Oracle Corp., and SSA Global, that tend to focus more on synergies driven primarily by cost cutting and maintenance revenue streams. CDC, which stands for "customer driven company," is hoping to strengthen its relationship with customers acquired along the way by selling them related products. "We are spending time focusing on how to take care of customers," Musser said. "We're not just looking to get in the door and leave -- the economics of our model are built on this."