Asp project management software

Project Management Software Shakeout : The fact the ASP market is not doing well hasn't helped - Industry Trend or Event

There's a shakeout underway in the project management software industry that's been fed by multiple factors.

First of all, the venture capital market has funded anything that looked like it might ultimately be profitable while the growth of Microsoft Project and other PM software vendors looked like there was room for others to play. VC money showed up in huge bundles as small-time software vendors suddenly became big time software vendors. It's a funny thing about cash, but when you get a lot all at once, it makes everything more expensive.

When my firm negotiated a private funding round with the Caisse de Depot and the Desjardins bank, suddenly the staff felt underpaid. It's not just having the money that counts, when lots of firms get this money all at the same time (as happened during the dot-com craze) resources become scarce. Many of these new PM software firms, having received lots of money, now had to deliver on their business plans. This meant recruiting from the already established competition at a hefty premium.

Even existing PM software firms found money in the private sector. Why? Well to go public of course. With many new firms able to float an IPO, a lot of established firms felt a desire to cash in on a generous market.

Well, those days are behind us now and the final tab is being presented as we speak. With not only public money but also private money no longer available to anyone, a lot of these new PM software firms are evaporating as fast as they appeared. We've received no less than three requests to buy such firms this year and if our little company received them, you can bet lots of other firms have received requests too. But most of these firms are not worth purchasing. I saw one of their income statements with total revenues of about $400,000 and total costs of about $8.5 million. You can only imagine the negative equity number in the balance sheet.

Many of these firms, and the still immature products they've written, will go the way of the Dodo bird.

Even those firms which haven't run out of cash yet are no doubt finding that entering what is a fairly mature market is taking a lot more effort, time and money than they counted on.

For those PM software firms that counted on the rapid ascent of the ASP market to leapfrog them ahead of their competitors, the news of the ASP market not doing well hasn't helped.

Not all of the news is bad. Some of it is just change. There's plenty of evidence to go around. This year saw Niku go public and we all took notice. After all, project management software is in what Gartner termed the PSA (Professional Services Automation) market. Some clever analyst said almost two years ago the PSA market would hit $11 billion within four years and VC funding and IPO prospecti have used the analysis ever since. After all, how much of a share of $11B would one need in order to be delightfully successful?

Even the mature players are undergoing change.

Niku used some of its money to buy the venerable (and perhaps vulnerable) ABT Corp. ABT's Project Manager's Workbench has been around the PM software industry for almost as long as the industry moved to PCs yet, Niku has been strangely silent about its plans for Workbench. In the meantime, there are all kinds of resumes available from ex-ABT personnel. ABT held a dominant position in the supply of PM software for the IT industry and while the product line is still represented by Niku, it has almost disappeared from view as a showcase product.

The long-standing Primavera announced two private investments in its firm. The first by i2 made little waves, the second by Intel (Intel?!) has everyone wondering what changes to Primavera these investments will bring.

One of the industries grandfathers, Artemis went through its own change this year. Artemis started off in the 70's as Metier and has gone through several owners along the way. This fall, it was bought by one of its own distributors. Proha of Finland has managed to go public and then turned around and purchased its own supplier in a cash plus stock deal. The near-simultaneous purchases by Proha of the Italian and French distributors of Artemis have made for an interesting but absolutely different corporate structure.

A few months ago Microsoft purchased eLabor's Enterprise Project to add the technology in its next version of Microsoft Project, due out in late 2001. This resulted in Microsoft scoring millions in sales it would have been otherwise hard-pressed to win.

Chris Vandersluis is president of HMS Software.

chrisv@hmssoftware.ca