Monday 25th January, 2021
Software supplier takeovers are nothing new. In the legal sector, they have been happening for years and although they levelled off for a period, they have ramped up in volume recently, as documented in legal news headlines. Because of this, there are fewer independent software suppliers in the marketplace now than ever. But what exactly is the implication for you, as an end software user, if your supplier is not independent and has been subject to acquisition or consolidation?
Having repeatedly witnessed and lived through what happens in these situations both behind the scenes and on the front line, Deborah Witkiss at Insight Legal strongly advises against apathy, invites you to benefit from her extensive experience and explains in layman’s terms the recurring pattern of M&A activity so that, if it happens, you can enter the fray with your eyes wide open, know how it will affect you, understand your options and make the right decisions for your business.
There are five trends of the takeover process, these being:
1. False ‘no change’ promises
It is in your supplier’s interests to pacify you in the early stages. They will make convincing pledges that nothing will change, it is business as usual, and the best and safest thing you can do is remain just where you are. It is even possible you may be told that this is the only option available to you.
None of this is true. Changes are inevitable. Going forwards, there will be stark contrasts from the past. What you know in the present is not what you know in the future. The choicest course of action could be to bid farewell to your supplier and extend a hearty welcome to someone new.
2. Relationships will dwindle
Amongst the aforementioned promises are continuation of backup service delivery. While you will still receive account management and technical support, the people delivering these services to you are unlikely to be the individuals you have forged professional relationships with. Ultimately, it is the people you buy into when first making your software purchase. No longer having access to these self-same people places a big question mark over the software itself.
The reason for these personnel changes being when two (or any number of) companies amalgamate, streamlining exercises will be carried out. Rather than maintaining multiple teams performing the same roles for different systems, there will be a string of redundancies resulting in fewer staff and unfamiliar faces.
The impact is the necessity to foster new relationships and deterioration of quality of support provision overall. You could be moved onto call centre-type support. Worryingly, it might be that you know more about your software than the employees managing your account and assisting with your technical queries.
3. Software will become stagnant or given end-of-life notice
Picking up on the point made in #2, will the original software development team be preserved or will they become victims of internal reorganisation too? Losing these key staff means that individuals who are simply not conversant in your software will be responsible for its development instead or, worse still, development could be reduced or even halted completely, with your product ‘sunsetted’ or switched to ‘sustained engineering’.
This is a sure-fire recipe for disaster. Your software will either (1) become stagnant because development priorities are focused elsewhere or (2) made end-of-life in order to migrate users to the acquiring supplier’s application. This disintegration of ongoing development efforts happens surprisingly quickly.
Stagnation is a major worry as constant regulatory and legal reforms will not be catered for with functionality enhancements or additions. When you consider some of the reforms introduced over the last few years alone – such as Making Tax Digital requirements for VAT, revised SRA Accounts Rules, anti-money laundering and data protection legislation – you can begin to appreciate the gravitas of slowed-down or halted development. There are also security threats posed by under-developed software because no bug fixes means that cybersecurity is weakened. As such, your exposure to risk of compliance breaches and cyberattacks is dramatically heightened. You’re stuck with a product that is going nowhere fast.
Expiration is equally troubling as these arrangements are enforced without consultation and reasonable timescale. By applying urgency, your supplier is ensuring you do not have sufficient leniency to go to market, undertake research on other potential suppliers and their software offerings, and allow for implementation before your contract comes to an abrupt end. Suddenly, migration seems the only way forward with all of its consequent escalating fees.
4. Making money is the topmost motive
Let’s be crude here. Acquisitive suppliers are ambitious for growth. Their concentration is fixated entirely on turnover figures. They have investors or equity backers to satisfy and acquisition costs to recoup. Business strategy is driven wholly by finances. Numbers are the sole objective. There is a distinct lack of customer-centric values. As the end user of this type of finance-obsessed supplier, you are as far removed from strategic undertakings as it is possible to be.
Egotistical businesses do not care about what is fitting for you. Increasing prices, reducing costs, pushing you towards a software upgrade you have not asked for, doing everything in their power to make more money and supporting you in a lacklustre way are the unavoidable consequences of this narcissistic quest for revenue.
Conversely to these negative trends, we conclude on a positive note:
5. You DO have options
Do not let any supplier block your ability to make well-thought-out judgements about your next steps in the business world. Reputable suppliers will never try to push you into hurried agreements which you will later come to regret.
Staying with your supplier is not the only option so do not assume this to be the case. Neither is it necessarily the best option, for all of the reasons outlined above, despite what your persuasive supplier will try to seduce you into believing.
Investigate fully on your own terms and in your own time. Only then can you make an informed choice about whether to sit tight or leave of your own free will. Independently owned suppliers will pride themselves on being your trusted advisers. Seek suppliers who are genuinely concerned about you and place the greatest importance on customer care. By doing so, you and your business are in good hands.
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