Software Vendor Consolidation by Axia Consultants

What to do if another vendor acquires your software vendor

Company acquisitions, takeovers, consolidations and failures happen in every business sector, including the business software sector. And, with the present economic climate, combined with a shift to cloud based technology – this may well happen more frequently in future, especially for those vendors with dated technology. So what do you, as the customer of a software vendor, do about it? How can you minimise the potential disruption to your organisation, or indeed even take advantage of it?

Safeguards you can put in place now:

1. Obtain software Escrow with a third party, such that should the software vendor go bust, you will have access to the source code. This is always assuming your organisation has the technical resources to manage and program the code.

2. Get to know other software customers. Join the software user-group, attend networking events and build up contacts with other customers. There is safety in numbers and should there ever be problems, you can act jointly – always more effective than on your own!

3. Prepare a ‘strategic plan’ of what to do in case such an event occurs. You may never need to refer to it, but it is better to prepare it when you are cool and collected, rather than in crisis mode! Ideally, you should have a strategic plan and back up for all services that your organisation buys in - to be prepared for any unforeseen events.

4. If you have yet to purchase new or replacement software, you could ask potential vendors whether they are likely to be taken over or merge with another vendor. But, they may not know and even if they did, may not tell. Business consolidations and takeovers can happen quickly. However, they may be able to give you some reassurance or information of how they intend to look after their customers and any likely process, should it happen.

What to do at the time, if your software vendor is taken over:

1. Keep up-to-date with the situation. It may be a confusing and uncertain time, with things changing quickly. Get as much information as possible out of your existing software vendor and the acquiring organisation. Consider formal and informal means. Liaise with other customers. Look out for any communication (emails, letters, press releases etc) from the new organisation.

2. Investigate the acquiring vendor. What is their reputation and track record regarding previously acquired vendors and software? Have they forced customers to ‘migrate’ to their software, or have they invested in the acquired vendor? How have other customers faired when they took over their vendors? What is the acquiring vendor’s strategy this time? How will product support be affected? Are there any signs that the software you use will be discontinued in the future?

3. If you have purchased your software through a reseller and your reseller is acquired, the situation is slightly different. Whilst it may take some effort, you could potentially switch to another reseller for your product support.

4. Review the status of your software system. Does it run more or less OK, on a day-to-day basis? Are you up-to-date with software upgrades? Or do you need any urgent bug fixes? And if so, can you still get them (possibly even from other software customers)?

5. Review your use of the software. Does it fulfil a critical function or more of a minor role? How well does it do the job you need it to do? Or have you outgrown the software? Or been unhappy with it or the support?

6. Review the software itself. Technologically, how up-to-date is it? Has there been a continuing stream of new enhancements / upgrades, or has it become stale and dated?

7. Review your contract and service level agreement with your existing software vendor. Are there any helpful clauses or escalation procedures you can use? How might your contract or SLA be affected by the new ownership?

8. Review your existing vendor. Have their revenues and staff numbers been growing or shrinking? Have they had major reorganisations recently? Have they been gaining or losing customers? Since the takeover announcement, are staff being retained or are they leaving?

Pull answers to the above together and you will get a reasonable picture of what is happening. You may need to act swiftly, or it may simply be a case of ‘watch and wait’. Things may improve if you have been unhappy with your present software, vendor support etc. Alternatively, this event may be the ‘catalyst’ you need to replace your software! If it is, look at our selection information and templates to assist requirements gathering / RFP preparation.

Either way, if you have considered the points above and have a ‘strategic plan’ – you will be in a much stronger position to minimise disruption and possibly to take advantage of it, should such an event occur.