Another Merger in the ECM Marketplace – What Clients Need To Do To Protect Themselves

With the recent announcement that Lexmark has acquired Kofax for $1 billion, we have seen yet another major merger/acquisition in the enterprise content management (ECM) marketplace. This is a trend that has become quite prevalent over the last few years, as exemplified by Gimmal’s recent acquisition of Prodagio Software, Perceptive Software’s purchase of ReadSoft last year, and Lexmark’s 2012 acquisition of Brainware, to name just a few. As a client of an ECM company that has been acquired, what potential risks does a merger represent?

• Lack of upgrades or enhancements to your software - Many acquired companies stop investing in their software’s capabilities until the new owners decide if the product is part of their long-term strategy. This can impact not only new releases and enhancements, but also investments in maintenance.
• Elimination of your software product - Acquisitions sometimes involve duplicate product lines, a situation that will not last and may require you to change products.
• Changes in your account service team - Acquisitions not only impact technology, but also the firm’s sales and client support strategies. While these services may still be offered, there may be changes in the people providing them, causing you to incur retraining and associated costs.
• Lack of focus on your needs - Mergers are big deals and many times this leads to software companies focusing inward on all the issues and turmoil associated with the merger. This lack of focus can sometimes spill over into poorer response times and less attentive service, sometimes lasting for years.  

So, what should you do if you find yourself in this difficult position? 

“Your primary responsibilities are to understand the terms of your contract agreement and your powers due to change in control from a merger/acquisition,” advises Kristin Parshay, controller at Merchants Fleet Management in Manchester, NH. “Once you understand your contractual rights and obligations, you also need to understand how your current vendor integrates with your process today. Are you only using the technology for workflow/approval, or are you using the services of an electronic mailroom in addition to the enabling technology? 

“When you are comfortable with your contractual obligations and reliance on the products/services of the outside vendor; you can have a direct discussion with your vendor representative to understand the acquisition strategy and how it will affect your current service offerings.”

We expect to see more ECM mergers/acquisitions now that the shortcomings of on-premises software have become more widely known and ECM companies attempt to take full advantage by offering more robust solutions. Currently, the clients of many AP automation providers have to piecemeal a complete solution together through several different vendors, which is far from an ideal scenario.

“We find the AP automation industry to be highly fragmented leading to inefficiencies and lack of scale by any single provider,” says George Linville, market advisor for PayStream Advisors. “We have been calling for increased consolidation and expect to see more in the months and years ahead as on-premises licensed solutions increasingly fall out of favor.”

Concludes Parshay: “ECM has become a critical supporting process/technology for organizations. A total end-to-end solution is ideal to meet the needs of these organizations. Many ECM companies have built only pieces of the total solution – for example, they may only have the digital mailroom, or the workflow/routing – and look to an acquisition to round out the total end-to-end solution.”

Questions about ECM and accounts payable automation?  Contact us at info@DataServ.com -- we can help you understand your choices and make a more intelligent decision. Learn more here.