The recently announced merger of B2B software and services providers GXS and Inovis is, more than likely, a portent of more such consolidation to come.
“I’d put money on more B2B acquisitions in the very near future,” said Dennis Gaughan, a vice president at AMR Research. “There are several factors pushing in that direction.”
One of those factors, Gaughan said, is that customers increasingly want to combine their internal and external integration initiatives, and they want vendors with the scale and product scope to enable that.
Another factor is that large enterprise software providers, such as Oracle and SAP, are poised to become more active players in the market, putting pressure on small, independent B2B integration players to get larger and more global. Already, SAP has inserted its toe in the market with its 2008 investment in Crossgate, a provider of EDI managed services. And, Gaughan said, Oracle is expected to follow suit with a B2B acquisition of its own.
The GXS-Inovis combination will boost the scale and geographic coverage of both companies, enabling customers to do business with more customers and partners without the need to sign contracts with multiple B2B networks, said Steve Keifer, vice president for industry and product marketing at GXS. Indeed, the GXS-Inovis combination creates a company with 45,000 customers. That compares with 30,000 customers claimed by Sterling Commerce, a primary competitor.
For the record, Richard Douglass, Sterling global industry executive for manufacturing and logistics, said the GXS-Inovis merger is “not a huge shift in the market.” The two companies’ product lines overlap considerably, and neither has the range of supply chain applications offered by Sterling, he claimed.
GXS’ biggest post-merger challenge, Gaughan said, will be to rationalize the GXS and Inovis product lines while reassuring customers. Though each company brings unique strengths to the union — GXS’ reach into Europe and Asia and Inovis’ strength in retail — there is a lot of overlap in their product lines. Both companies operate large EDI networks and offer data exchange and synchronization products as well as B2B outsourcing services. Those offerings will be rationalized. But GXS officials said they haven’t decided, for example, which company’s EDN network will survive.
In the meantime, experts say, more B2B mergers are likely. Indeed, before the ink could dry on the GXS-Inovis deal, enterprise integration software provider TIBCO Software Inc. acquired healthcare EDI automation vendor Foresight Corp., and enterprise integration vendor Liaison Technologies bought B2B integration vendor Advanced Data Exchange.
Additional potential takeover targets, Gaughan said, include B2B network provider Axway, enterprise integration software provider and Information Builders spin-off iWay Software, and B2B gateway provider Seeburger AG.
The expected ongoing B2B acquisition wave should help customers, particularly if it results in vendors that can combine B2B and enterprise integration skills and products, Gaughan said.