It seems we’ve come full circle, at least as far as Kenandy is concerned. I was attending Salesforce’s DreamForce conference back in 2011 when the company was founded by the well-known (at least in ERP circles) Sandra Kurtzig, someone who, it is fair to say, invented the idea of ERP, having created one of the first software-based ERP suites around 40 years ago. Since then I’ve kept watch on the company, and showcased one of their more interesting customer case-studies recently.

Kenandy was doing a good job of reinventing the way manufacturing software works and, in the process, battling with vendors such as Plex, Epicor, SAP, Oracle and more. Another vendor that it was in the fight cage with was Rootstock, itself a cloud ERP vendor that, after getting its start a decade or so ago on top of NetSuite’s platform, made the shift to also building out on top of Salesforce’s stack.

So it is particularly interesting to hear the news that Kenandy has been acquired. Not by one of those legacy vendors that need to fast-track their cloud strategy, but rather by Rootstock itself. Understandably bullish about the deal, Rootstock’s CEO Pat Garrehy had this to say of the merger:

By combining the talent, skills and intellectual property of both companies, Rootstock will achieve greater economies of scale to compete with the likes of Oracle-NetSuite, Microsoft and SAP, while giving us the ability to create more cutting-edge capabilities for Kenandy and Rootstock customers. Both Rootstock and Kenandy are known for taking a customer-centric approach to ERP, and this furthers Rootstock’s recent focus on advancing personalized manufacturing with capabilities that deliver a more individualized customer experience across all customer touch points in an organization

Interesting in that comment is that Garrehy has his sights fixed squarely on the big players and seems to be dismissing the smaller and even less cloud-aware vendors outright. Anyway, back to the deal. In isolation, the value proposition that an ERP solution built on top of Salesforce brings is obvious. As Rootstock point out, alongside the cloud ERP, customers get high fidelity connections to the Salesforce Sales Cloud, Salesforce Service Cloud and the underlying Salesforce Platform technologies, such as Salesforce IoT and Einstein Analytics. It’s all about connections and the Salesforce ecosystem delivers them in spades.

But, of course, Rootstock already ostensibly had this with its own solution being built on top of Salesforce – doesn’t this deal just mean it’s competing with itself? Not so according to Garrehy:

This acquisition creates a bigger, stronger entity focused on building cloud ERP applications for those who choose the Salesforce Platform as their underlying technology. When it comes to cloud ERP implementations, customer success is often determined by how you implement, not just what you implement. Our combined company is dedicated to making the transition from legacy ERP easier for our customers. We welcome Kenandy customers into the Rootstock fold

And with Rootstock reaching 400 customers in 12 countries, as well as Kenandy’s customer list, that seems to be a plausible strategy. But the question still remains about the competitive nature of these two companies. In a conversation with Brian Sommer, Garrehy clearly indicated that there was little competition between the two companies. As such, the strategy for the foreseeable future is that:

Kenandy will operate as a unit of the combined firm. They’re currently assessing the product functionality (current and planned) with each product line. Where possible, they will supplement functionality in each product line to quickly make one more competitive. This is an interesting point as Pat was quite insistent that the two firms rarely competed directly with each other. In Rootstock’s case, they often saw firms like Epicor, Plex, SAP, QAD and others.

In terms of Rootstock’s priorities for the next little while, Garrehy told Sommer that they will:

  • Clarify which product lines will serve specific markets, demographics, and verticals.
  • Use that segmentation to refine/update the product roadmaps for the two product lines
  • Concurrently review and update the company’s macro-brand and the brands for the two product lines. Now that Rootstock is larger, is still an ERP on a modern cloud platform, and of more consequence to Salesforce, its branding and messaging will need more than a refresh.
  • Get better economies of scale with its marketing spend and activities. Instead of both firms have duplicate booths and marketing staffs at Salesforce events and manufacturing shows, they can re-focus some of that spend and energy into other marketing activities.

MyPOV

Personally, I would have loved to have seen Kenandy go big as an independent vendor – hell, it would have been cool to see them IPO and become the second vendor (after Veeva) to IPO built on top of Salesforce. But in the absence of staying independent, my odds-on bet would have been for one of the legacy vendors – Flex or Epicor for example, to take them out. Kenandy is, in my view, exactly what they need to drag them at least part way into this century. Alas, it was not to be and these vendors are too busy wringing every last penny out of their existing customer base to do what they need to ensure their future. Of course, they’ll continue to cloudwash their products but they’re not really delivering true cloud yet.

As Sommer pointed out – this is great for Salesforce who have an even stronger platform-based ERP story to tell – the combined Rootstock and Kenandy, as well as the independent FinancialForce, delivers a compelling cloud ERP story for Salesforce. To be honest, I’ve long wondered about Salesforce acquiring itself a big ERP story – they are, of course, strategic investors in both Rootstock and FinancialForce as well as taking part in an investment Kenandy. But investing is different from acquiring and I can certainly imagine a future where all three of these Salesforce-based ERP vendors are, in fact, owned by the mothership.

This is a positive deal, net/net and in his analysis, Sommer casts a positive note assuring Kenandy customers that, unlike more hostile takeovers, where customers are often the casualties, this is not the case in this deal and everyone is committed to the real growth of both brands here. On the one hand, I’m sad to see Kenandy not go the distance on its own, but on the other, it is good for the ecosystem.

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

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