The web has been awash with chit chat on the bid by Agresso for CODA last week. Will it go ahead - the view seems to be yes, but at the end of the day who knows? What impact will this have on the Accounting Software Market and of course on CODA customers?

The last few years has seen a fair amount of consolidation in the Industry. Sage continues to buy up companies. Infor has made a number of acquisitions including Systems Union with the Sun Accounts and Pegasus products. Iris has acquired CS Group etc etc.

As a result a number of vendors now own several completely different Accounting Software products. Microsoft and Oracle being two examples. What are the options facing these vendors?

1. Make money out of the well established and usually profitable user bases. This is typically achieved by cutting back on R&D and staff/support costs, increasing prices and trying to sell add on products/services to the installed base. Impact on users is usually not that positive. Less new product comes out, prices can go up and service can deteriorate. Suppliers that take this approach rely on customers to be slow to switch to another vendor – as it is so much hassle and expense.

2. Try and grow each product in the stable in its own right. This is typically achieved by trying to find a niche for each application and drive new business through separate sales/marketing teams. Sage, for example, achieves product differentiation by having different applications on sale in different countries. There is limited evidence of the success of this strategy in terms of generating real growth for a particular product for a vendor. Vendors struggle to create a compelling marketing message on each of their products and can cause confusion if they offer several different products for sale. I would suggest Microsoft is an example of this. Having vendors with different products on sale in different countries carries the risk that global players will take out their market share over time – by having one product sold/used globally. Larger clients benefit from having one application in use globally. All organisations should gain from the economies of scale a vendor enjoys from developing/selling/supporting one product globally.

3. Integrate all products into a new/combined application – or move users to one of the products. Microsoft has/is trying to bring the previously named Solomon, Navision and Great Plains together. Oracle is making similar efforts with Oracle Financials, Peoplesoft and JD Edwards. Combining products creates a huge challenge as different product operate in different ways – e.g. with their GL coding structure. This is limited evidence that this approach will succeed.

The alternative of trying to get a customer to switch from one product to another is fraught with difficulty. The conversion route can be tortuous and costly – and often leads to customers looking at solutions from other vendors. Pegasus in the 1990ies tried this approach, buying up several user bases and trying to convert them to their mainstream products. They had limited success with this.

So what strategy will Agresso adopt with Coda? Cash cow seems very tempting for the CODA/Dream core ledger clients. CODA does have some tasty BI tools that they could merge into Agresso of course – which could help the Agresso client base.