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SMART MANAGEMENT Q&A with Kevin Roach
Technology, the industry and the Apax acquisition of Activant and Epicor
A
s I mentioned in last month’s column, I think technology will play a greater role in a
wholesaler’s success than ever before. While the technology path has, histor- ically, been methodical and plodding, I think it will change more rapidly than ever in the coming years. There is a saying attributed to Sir Arthur Edding- ton: “Not only is the universe stranger than we imagine, it is stranger than we can imagine.” To paraphrase that quote: The future use of technology in this industry may be more important than we imagine and may be more im- portant than we can imagine. I think the rate of change will be so significant, that we cannot envision
where we will be in five years. An even more important point to consider is that wholesalers no longer control the pace of change in our industry. The end users have access to more technology and information (some good and some bad) and are starting to demand that we step up the pace to serve their needs. Technology needs to be at the top of our list going forward, because cus- tomers are telling their wholesalers to “Lead, Follow or Get out of the way.” As I talked about technology last
month, I mentioned that Apax Part- ners has announced their intent to purchase Activant Solutions Inc. and Epicor Software Corporation in a deal estimated to be around $2B. Ac- tivant owns several of the most widely-used ERP software packages in our industry. I asked Kevin Roach, executive vice president of Activant’s Wholesale Distribution Group, if we could discuss his view of the industry, technology in the industry and the de- tails of the Apax deal, and he kindly
agreed. Schmitt: As we are talking, the
Apax deal has not been completed, so I know you are limited in what you can discuss, but we would be inter-
ested in what you can tell us. Roach: I am restricted in what I
Kevin Roach, executive vice
president, Activant Wholesale Distribution Group
can say, but I can discuss what has been made public. We expect to close this quarter. We need to get some ap- provals, and to tender an offer for the
outstanding shares of Epicor, which is a public company. The process is going fine, so we anticipate the deal closing soon. We have announced that the new combined company will operate under the Epicor name since
they have a global footprint. Schmitt: How do you see the com- bination of the companies impacting
the various stakeholders? Roach: I think the deal will be ex-
citing for customers, shareholders and employees. While there is some overlap, the combined companies are very complementary and will estab-
BY RICH SCHMITT Management specialist
lows users to recover their business data within one hour from a PC any- where in the world. That includes every transaction that had posted
prior to the failure. Schmitt: Do you think the distri-
bution market for software is satu- rated? Have most wholesalers picked
as toys...We think it is going to change the way business systems work and how we support and collaborate with our customers.”
“The future is the convergence of these ‘systems of record’ with ‘systems of engagement’ like Facebook, Twitter and the million other social sites that business people currently view
lish great vertical position and inter-
national presence. Schmitt: I know this will evolve, but can you describe what each of the
companies does currently? Roach:Activant provides software
for small and medium retailers. Acti- vant also provides solutions for all sizes of distributors, ranging from tiny, with three to four users, to huge, with 6,000 to 7,000 users. Our distri- bution customers range in size from $5M in sales to over $15B in sales. We cover the entire spectrum in dis- tribution. We also provide services that diversify our portfolio. While Epicor has some distribution,
their focus has been in manufacturing and retail. Their retail customers in- clude high-end retailers like J. C. Pen- ney. Plus, they operate globally, and have translated their offering into 30 languages. So the new company will span the entire supply chain from man- ufacturing to distribution to retailing
and servicing of products. Schmitt: You mentioned services,
what areas are you in? Roach:We provide benchmarking services based on decades of data to create important business metrics like DSO (Days Sales Outstanding), in- ventory turns, lines per invoice, etc. We can show clients how they com- pare with the best in the industry. We consult for our products, of course, but we also offer business consulting for customers who do not use our software. In addition to consulting, we provide website creation, support and hosting, including B2B Seller, our web store product. Finally, there’s the Activant Backup Solution that al-
their ERP software and locked them-
selves in for the next 20 years? Roach:Not at all, there are 300,000
distributors in the U.S. and 80% of them have no system, a homegrown system, or are using Excel or some- thing similar to run their business. Ac- tivant is the leader in many verticals, yet as the leader, we may only have a share of 10% to 20%. There is a lot of
opportunity out there. Schmitt: Activant has acquired
many packages over the past several years. What are the plans going for-
ward? Roach: We’ll focus development
on three products: Eclipse, P21 and Prelude. Eclipse is an enterprise class ERP for electrical, plumbing and HVAC wholesalers that currently runs as many as 7,000 users on a sin- gle system. P21 works for small to medium wholesalers in most verticals for users up to 2,000 users. Prelude has some unique capabilities for serv- ices, rental businesses and large com-
panies with over 6,000 users. Schmitt:What about what some of the other products you have ac-
quired? Roach: We’ll provide support for
the other products for as long as our customers want to use them. Of course, we want to offer them a migra- tion path so when the time is right they can move onto one of our three main products. In some cases, it may be- come impossible to support a legacy product. When that occurs, we will work from, a commercial and techni- cal standpoint, to help those customers onto the right mainstream product. (Turn to Technology... page 52.)
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•THE WHOLESALER® — JUNE 2011
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