December 28, 2004

What will you do when your software vendor is bought or merges

When the software vendor you have relied on for years is bought or merges with someone else, what will you do? What can you do?

You might want to continue using the software you love and have used for years but find that the "new" company is forcing you to use their software. Oracle just purchased Peoplesoft and the mergers/buying will only continue.

CIO Insight advises that you

Stay calm.

To navigate a changing landscape, customers must think ahead to possible upheavals in the marketplace when they negotiate contracts with vendors, and as they design the underlying architecture for their enterprise systems. And when changes do catch them by surprise, they need to focus on their own operational plans, and not just react to the headlines. "The first rule is not to do anything in knee-jerk fashion?that's how you hurt yourself," says Jamie Lewis, chief executive of the Burton Group, a consulting firm that advises large companies on infrastructure technologies.

Be Prepared

The best time to prepare for a possible change in the ownership of your software vendor is before you buy the product. "If you plan ahead and anticipate contingencies, you are not dealing with disaster," says Guardian Life's Callahan. He likes the attractive terms he got from PeopleSoft, and he believes he's getting the best software for his purposes. "We were incented to make the deal, and we do believe that PeopleSoft has been preeminent in the insurance industry for good reason." But Callahan didn't leave the future to chance. Instead, he negotiated terms that he feels will protect Guardian no matter what happens to PeopleSoft. "We have terms and conditions in our contracts to deal with acquisitions," he says confidently. "The world changes, but obligations continue."

Design Ahead

Preparing for an uncertain future means making sure you can integrate new software and services into your existing enterprise architecture. "You need a system designed strategically to handle vendor and product turnover," says Lewis. "It's not easy, and it requires some investment." Technology-dependent financial services companies, he says, sometimes write their own abstraction layers so they are independent from products underneath. "With integration middleware, you can, to some degree, make changes without causing massive ripples across the system. The degree to which you can achieve modularity makes change easier."

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