B2B Dilemma: Build or Buy New Technology?

App developer JDA Software looks to acquisitions to survive encroaching competition.

Like many software developers facing diminished IT budgets, a rapidly consolidated competitive landscape and encroaching competition from the biggest companies on their beat, JDA Software Group Inc. is at an inflection point.

The SCM (supply chain management) software maker is wrestling with the dilemma of whether to build or buy new technology to keep it current with other business-to-business software offerings.

JDA, of Scottsdale, Ariz., has chosen both, with plans to develop new technologies where applicable and to acquire when it can. The company is in the process of closing its biggest acquisition to date—the $100 million purchase of QRS Corp., based in Richmond, Calif.—by October.

"The QRS deal is symptomatic of how were growing. Were constantly working on building our business organically, but the fact is [we see] larger leaps and bounds through acquisition," said Hamish Brewer, president and CEO of JDA. "Our industry as a whole is moving in that direction. The reality is there are a lot of software companies that are not going to make it on their own—we keep track of 22 companies [as possible acquisition targets]."

As the high-profile battle of Oracle Corp. to buy PeopleSoft Inc. has grabbed the spotlight for the past year, midsize software vendors such as JDA have also turned to acquisitions.

SSA Global Technologies Inc., for example, this month announced it had acquired for an undisclosed sum the SCM software maker Marcam—its sixth acquisition in two years. Chicago-based SSA, a provider of ERP (enterprise resource planning) software and services for more than a dozen vertical markets, said it plans incremental systems modernization of the Newton, Mass., companys business software, which is geared for process manufacturers. SSAs software has grown in depth of functionality through a variety of acquisitions over the past couple of years.

Brewer said the industrywide spending spree will lead in a few years to there being fewer companies in the supply chain automation area, each with a broader footprint.

/zimages/4/28571.gifFor more on B2B, read "A Healing Salve for Any B2B Woes."

"Our strategy is to ensure that we are one of those [survivors]," said Brewer.

JDAs enterprise software is designed to optimize the demand chain of retail organizations and their suppliers. The company operates in three segments: retail enterprise software, in-store systems and collaboration software. QRS, which also targets the retail vertical, provides catalog data synchronization and data integration.

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