IDC Comments on the NavisionDamgaard Merger: Will the Power of Two Be Enough to Go Global?

COPENHAGEN — DECEMBER 5, 2000 — The Danish enterprise applications market lost a competitor recently when mid-market software vendors Navision Software and Damgaard merged. The global market, on the other hand, clearly gained a potential new mid-market vendor powerhouse. According to IDC, both companies' strong suit lies in back-office applications such as finance and manufacturing solutions for midsized companies. However, there are subtle differences between customer base and technology, and as always with any merger, the need to trim certain areas is causing concern among customers. Competitors in the United States such as Great Plains and even some large worldwide ERP vendors who have been trying to enter the mid-market this year found a new blip on their radar screen.

 

"With the merger of the two companies, adopting one technology platform will be both necessary and advantageous. At this time, the platform of choice will be Navision's next-generation architecture based on Microsoft.net Internet technology. However, as Damgaard had already been developing similar technology, a combination of the two seems likely," said Bill Clough, a research analyst with IDC's European Software research group.

When two companies merge, customers are always concerned about being left behind. However, both sides of the deal resolutely promise that customers can expect continued support from the new organization and more importantly from the partner solution centers that customize and implement the systems for customers. "Typical of the software industry as a whole, enterprise application vendors are migrating their solutions, if not already there, to a more open architecture allowing for easier integration and add-on component design," Clough said.

With the combined value of the two companies providing significantly more working capital, IDC believes moving forward quickly with new market development in the United States is certainly on the horizon. The problem remains that there are deeply entrenched vendors in this space, which claim a large share of the market for higher-end solutions. These companies have been making slow inroads into the mid-market and have significantly greater capital for grabbing mind share, establishing direct sales and consulting channels and research and development. The combined company, NavisionDamgaard, will need to focus on their expertise in the lower end of the mid-market and key vertical segments to solidify their position. Furthermore, IDC believes moving into less saturated markets in Europe and Asia or even floating on NASDAQ would give the company a bit more room to grow.

"Management and shareholders alike should do very well with this deal, not only financially but strategically by combining two successful mid-market vendors," Clough said. "However, current and new customers within their traditional market, Scandinavia, may experience growing pains to the new technology platform, especially if long delays occur. NavisionDamgaard will not currently commit to a release date better than 12 to 36 months. In our opinion, NavisionDamgaard's best bet is to move quickly, which is not typical in IT, and expand markets where the opportunity is best."

Navision Damgaard Merger: A New Mid-Market Powerhouse (IDC #LC09G) describes the merger of the two Danish software developers. These two mid-market companies bring together several strong characteristics that have the potential to boost the combined company on the international market. Despite the long rivalry between the two companies, a strong fit is likely to result from this recent merger. However, the usual unknowns in mergers as well as possible difficulties with technology and market strategy could eventually pull the deal to the ground. This flash is available to purchase from your local IDC office.

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