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Acquisition Consolidates Two Market Leaders In The Project Based Solutions Market

Deltek announced ^[2] on June 3rd that they would acquire Maconomy for  $72.7M ($3.39/share (DKK 20.50)).  Maconomy is a leading project based solutions (PBS) software company with ~35.6M in revenues (2009 ^[3]) based in Copenhagen, Denmark.  Deltek is a 265.8M revenue (2009) ^[3] PBS software vendor based in Herndon, VA.   This acquisition is significant because the combined companies:

• Improve geographic coverage. Maconomy employs over 220 employees with 600+ customers in 58 countries.  eltek reaches 12,000 customers around the world across its portfolio of product lines that includes Costpoint, GCS Premier, Vision, and its Enterprise Project Management suite. Deltek also offers govWin, an online network dedicated to solving common business problems for government contractors.
  
  Point of View (POV): Maconomy’s customers mostly originate from EMEA.  Less than 12% of Maconomy’s revenues come from the US.  Maconomy built good partnerships in Eastern Europe. South Africa, Canada, and India.  Meanwhile, Deltek has a strong base of business in the US public sector and was beginning to move towards greater international expansion.

• Address a range of PBS vertical industries. Maconomy’s products focus on professional service organizations with about 46% of its revenues coming from consulting and 26% of its revenues coming from marcomm.  Deltek dominates the architecture and engineering space along with government contracting.  The company has shown success in key verticals such as construction services, public sector, and transportation services.
  
  POV: Deltek can boast that 80% of the Engineering News Record 2009 Top 500 Design Firms are customers.  Maconomy’s products X1 and PeoplePlanner demonstrate a strong professional services focus.  Together, they have an opportunity to expand into research organizations, legal services, and audit/tax firms.

The Bottom Line For Buyers (Customers) – Maconomy’s Assets Go Beyond Customer Base

Deltek’s primarily acquiring Maconomy for its success in the EMEA market and for its strong professional services focus.  However, Maconomy’s solution set, technology architecture, and design flair will prove to be key assets for Deltek.  The X1 and People Planner products deliver cutting edge user experience and business intelligence that demonstrate key characteristics of next gen apps ^[4] (see Figure 1).  The technology direction and leadership could give Deltek a foundation for future development platforms and at least a stronger Java based platform.

As with all mergers and acquisitions, customers should stay vigilant about retaining key service and support staff, providing input into product direction, and maintaining favorable software licensing and contract terms.  Maconomy and Deltek customers should use this opportunity to seek clarity on future product direction, interoperability of acquired assets, and long term SaaS/Cloud strategy.  Overall the merger makes sense and could be a sign of more acquisitions by Deltek to come.

Figure 1.  Maconomy’s Products Demonstrate Many Elements of Next Gen Apps

Source: Maconomy

The Bottom Line For Sellers (Vendors) – Ignore The $10B Project Based Solutions Market At Your Own Risk
Software Insider forecasts that the Project Based Solutions (PBS) will grow from today’s $6B addressable market to $10B by 2015.  IFS’ acquisition of MultiPlus Solutions ^[5] in August 2009, NetSuite’s acquisition of QuickArrow ^[6] in July 2009, Oracle’s acquisition of Primavera ^[7] in October 2008, and NetSuite’s acquisition of OpenAir ^[8] in June 2008  highlight an emerging trend in PBS consolidation.  Strong growth by PBS companies such as IFS, key vertical focus by SAP’s Business by Design product, and the macro shift from products to services all indicate a burgeoning market opportunity.  Key micro-verticals in this market include accounting services, advertising and public relations, architecture and engineering, construction, design, financial services, general consulting services, high tech software and hardware, IT services, legal services, life sciences and healthcare, marketing communications, market research services, media and entertainment, non-profit, professional staffing services. public sector, real estate and facilities, research an higher education, retail and hospitality, transportation services, and utilities.

As companies start to organize their work around projects, sellers can expect significant demand for integrated business processes that support project accounting, compliance, resource allocation, task management, and billing.  These solutions can not be reverse engineered and will require software vendors to begin the design point around projects in order to succeed.

Your POV.

Are you a Maconomy customer?  Do you see the synergy with Deltek ?  If you are Deltek customer, will you look at Maconomy’s solution?  Does this merger make any sense to you?  Do you advocate a purpose built solution for project based businesses. You can post or send on to rwang0 at gmail dot com or r at softwaresinsider dot org and we’ll keep your anonymity.

Please let us know if you need help with your apps strategy efforts.  Here’s how we can help:

• Evaluating project based solutions (PBS) options
• Assessing apps strategies (e.g. single instance, two-tier ERP, upgrade, custom dev, packaged deployments”
• Designing a perfect order process and system
• Evaluating SaaS/Cloud integration strategies
• Assisting with legacy ERP migration
• Planning upgrades and migration
• Performing vendor selection
• Providing contract negotiations and software licensing support

Related resources and links

• 20100603 Washington Business Journal – Tucker Echols “Deltek Offers $73M for Maconomy” ^[9]
• 20100603 Michael Fauscette – “Deltek announces intention to buy Maconomy” ^[10]
• 20090817 Software Insider – R “Ray” Wang “News Analysis: MultiPlus Solutions Acquisition Expands IFS’ Investment In Project Based Solutions” ^[5]
• 20090721 Software Insider – R “Ray” Wang “News Analysis: NetSuite Acquires QuickArrow To Expand PBS Presence” ^[6]
• 20081008 Software Insider – R “Ray” Wang “Initial News Analysis: Oracle Buys Primavera” ^[11]
• 20080602 Software insider – R “Ray” Wang “News Analysis: NetSuite’s Acquisition of OpenAir Signals Importance of Services and Project Based Businesses” ^[8]
• 20070507 Software Insider – R “Ray” Wang “IPO Watch: Deltek Files S-1″ ^[12]

Disclosure

Although we work closely with many mega software vendors, we want you to trust us more.  Deltek and Maconomy are not currently retainer clients of Altimeter Group and also not clients of Insider Associates, LLC.  For the full disclosure policy please refer here ^[13].

Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved