'Acquire market share and develop customer share'

When Mike Greenough, president,
chairman, and chief executive officer of the $700 mn SSA Global, took over SSA in 2000, the company was in a bad shape. Three years down the line, SSA Global has emerged as one the key players in the enterprise application space. His strategy of “acquiring market share and developing customer share” has seen a more-than-350% increase in revenue for the same period. In the past three years, SSA Global has acquired about eight companies, including ERP vendor Baan for a $135 mn deal.

Mike Greenough is being frank and unpretentious when he, with his accounting background and his predilection for using them to decide on his next acquizition, says that he finds numbers very fascinating. And amongst numbers when considering acquizition, it is the customer base that he looks at before other details. In an exclusive interview with Yograj Varma of Dataquest at the SSA Global Client Forum 2004 in Philadelphia, Greenough talks about strategy, Baan and competition. Excerpts:

Baan, then Invesys Baan, and now SSA Global. How have customers taken to the constant change in ownership of Baan?

Given the uncertainties associated with Baan for the past few years, there were issues with customers and we did lose out on a few customers. However, post SSA Global’s takeover of Baan, customers are again viewing Baan/SSA more positively. SSA is a company with interest in traditional ERP and therefore Baan fitted in perfectly. What we are saying to customers is that SSA will bring in the commitment and support that has been lacking for the past few years. Customers will realize that what they had with Baan, they have in much greater measure today. While in the long term we may or may not retain the name Baan as we want to consolidate on a single global brand, we are telling our customers that the SSA buyout in permanent and there are no more uncertainties about the direction Baan is headed in.

SSA has grown largely through mergers and acquisitions. How has it evolved over the past three years?

The numbers and scale are obviously bigger. The group I have now is mature and is pretty formidable and can take on the big guys. I think the attendance at this event says it all. Three years ago, we had about 250-300 people. There were over a thousand people attending the same. Three years ago, partners and press had a wait-and-watch attitude. Today they know we are a strong company—financially and product-wise.

Can you elaborate on the “never sunset” policy?

With the “never sunset” policy, we are giving our customers insurance and the assurance that they can use our products on the mission critical applications. We are not going to force customers into upgrades but will continue to support every single product that they buy from us, however old. Consider the analogy of buying a car. If you have an old vehicle and you want to put on the navigation system on the windshield and you put a big fan in the corner, you still get cooled and you have the geo-positioning system but it will not be as ergonomically efficient as a new vehicle. We believe that all customers will want to move up the chain, and with the never-sunset policy, we are giving out the message that we will there for them and are waiting until they are ready to move up. Also, for SSA, this is a good business opportunity and we use sophisticated analysis to make sure we are not losing money by doing this. If you look at the data, it is quite a good and profitable business for us.

SMB seems to be the flavor of the season. With all your competition gunning for this space, how are you holding out?

To begin with we have a strong 13,000-customer base and SSA has been successfully cross selling to these customers. In terms of threat from the likes of Microsoft, SAP and Oracle, I think the issue is new customers and customer experience. Given that there are over 75,000 prospects in this segment, the market is huge. Nevertheless, if you have a customer base and you set the bar in terms of product quality and great support, you have won the battle. On winning new customers, I think we will continue to acquire market. It is like real estate. It is very difficult for SSA to move from the current 13,000 to 30,000 by adding new customers. Even if we were to add, say 500 new customers, it will take over seven years of hard-selling. No company can wait that long. So I have to acquire new customers before the competition does. I think the trick is to have a large piece of the SMB market and then wait for the snowballing effect to take place. Customers will bring in new customers. So my strategy is simply to retain old customers and try to buy, say another 10,000 customers, and hey, the game is over—I own the mid-market.

Do you have a similar strategy for emerging markets?

Yes. SSA will follow a similar kind of strategy. In terms of winning customers, I don’t think I can compete with the likes of Microsoft, SAP and Oracle. That is a rich man’s battle. We can’t afford to do that. Microsoft can, so can SAP. They have billions of dollars in the bank for marketing and winning new customers. We are not going to win in the marketshare battle with Microsoft or SAP. Let them fight. Rather I will like to make my presence in the mid-market. And the strategy will be to acquire companies. So you buy up a smaller player who has already penetrated the market and ride on that. By the time other players start addressing this market, we will be way ahead of them. Also, the other component of our strategy is to focus on a few verticals and make money out of that.

Is it possible to continue to have a double-digit growth by focusing on just one or two verticals?

Yes, if you take a combination of organic and inorganic pathways, it could be high. On an organic basis, growth would come from license fees. We have 13,000 customers and the average size of our customers is $100 mn. They spend about 2% on IT. That is $26 bn spent per annum. While enterprise application may be a small chunk, this is still huge for us. We have to find what the niches are where we can cross-sell. My task is to find those niches and match the opportunity with the right products.

Are you looking at Linux?

Yes. We have about 40 installations of Linux. It could become a driver, but this hasn’t happened yet. So far, not many of our customers have been demanding Linux. We have not seen open source or open database yet, but it is certainly going to be very much in your face in two to three years of time. But in our strategic view of the world, Linux is just plain Linux.