After all the recent news of layoffs and disappointing financial results, both in the software and logistics service provider industries, it was refreshing to get some “positive” news this week-i.e., the acquisitions announced by HighJump Software and Descartes Systems Group.
On Wednesday, HighJump announced that it acquired Insight Distribution Software, a provider of enterprise software solutions for the food and beverage distribution industries. Insight has 123 customers, including Anheuser-Busch and Miller Brewing Company. For HighJump, this acquisition extends their direct-to-store delivery (DSD) solution footprint.
Late yesterday afternoon, Descartes announced that it acquired Oceanwide Inc., a software-as-a-service (SaaS) provider of insurance management, freight forwarding, and customs management solutions, primarily for customs brokers and freight forwarders. For Descartes, this acquisition extends its global trade and compliance solution footprint and adds more than 700 participants to its Global Logistics Network.
If you’re an existing or potential client of these software vendors, then the details of these transactions matter to you. Otherwise, you probably don’t care too much about what happens next. And of course, although I referred to these deals as positive news, acquisitions aren’t inherently positive-in fact, many of them end in failure or the promised benefits take much longer than expected. We won’t know how these acquisitions will fare until a year or two from now.
Then why do I view these deals as “positive” and important for most of you? My reason is simple: as an analyst, I get worried when software vendors stop investing in R&D, when innovation slows down or stops in response to financial or economic difficulties. R&D is the heart of a software company: if it stops pumping, the end may be near.
HighJump is a privately-held company, and Descartes won’t announce its fourth quarter and fiscal year results until next month, so I don’t know how well or poorly they’re performing in this economic environment. But the fact that they’re investing (in Descartes case, more than $8.4 million) to extend their solution footprints and value propositions is a good sign. It tells me, at least, that product innovation and investment remains a top priority.
What is the financial health of your software partners? If they’ve announced layoffs, was their R&D staff affected, and if so, in which product areas? Have their product release plans changed or been delayed? These are some of the questions that you should ask yourself and your software partners.
Of course, you also have a direct impact on the financial health of your software partners. Some companies are freezing all spending on IT until the economy improves. I believe this is a mistake. The real question is not whether you should invest in technology or process improvement initiatives in this economic environment, but what should you invest in. Smart companies are investing in low-risk, quick time-to-value initiatives that reduce costs and improve productivity in the near term, as well as provide a scalable platform for future growth. In general, transportation management systems (TMS) fit this criterion, which is why I think TMS vendors will fare better (even if not as well as in 2008) than the rest of the software market this year.
And so ends another week. Enjoy the weekend.
