Hands Across the ERP

The recent purchase of a Microsoft reseller by a company from Iceland must have raised a few eyebrows in the accounting software channel.

The land of fire and ice isn't known yet as the Silicon Glacier. But maybe we'll be hearing more from Iceland-based Kogun hf because its purchase of Santa Monica, Calif.-based SCS is surely only a beginning. There's not much to gain by the acquisition of a company that had revenue of $7.4 million in 2004 if that's the only thing Kogun plans for the United States.

What Kogun has done isn't new. The international move has gone both ways. In the last couple of years: ePartners, Altara, and more recently Queue Associates of New York, have opened London offices. Tectura leaped into multiple international regions through acquisitions.

On the other side, Columbus IT Partner, a Danish Microsoft reseller that has been the U.S. for years has been trying to unify its holdings. IDS Scheer, a German organization, was trying to start an MBS practice out of its Atlanta office, while the Revere Group, a Chicago organization that had started buyer MBS resellers, was itself picked up by NTT Data, which has a Japanese parent.

There is one thing all these deals have in common. They all involve Microsoft resellers. That's not because the Microsoft resellers are necessarily more aggressive than their Sage counterparts. It is largely because Sage sells software primarily on a country-by-country basis whereas Microsoft's products, particularly Navision and Axapta, cross borders. The exception on the Sage side is Accpac ERP where there are reselling companies doing business in the U.S. and the U.K. and, in particular, in the U.S. and Latin America.

Of course, companies need one more element to go international--money. The financial people are a lot more willing to put up money for a Microsoft channel company than somebody affiliated with another vendor.

The final element driving the Microsoft business is the vertical push. There doesn't seem to much room for a lot of giant VAR/system integrators like Tectura unless they have narrowly focused attacks. If you think about it, there's not much of a market for selling core financial modules internationally--unless a company just happens to like creating a lot of overhead.

This is an important game. It's not one everybody can play; not even those that are already on the board. The winners and losers are likely to be determined very quickly.