Supply Chain Shaman

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The Risk of Venture Capital Takeover of Supply Chain Software Providers–Anaplan A New Victim

A dark cloud is laying heavy over the supply chain management technology market. The risk of the cloud is seldom discussed, but it is omnipresent. The dark cloud is the venture capital exploitation of manufacturers. How so, you might ask? It is the buying of software companies to profit from maintenance or service revenues paid by manufacturers and retailers to their established software partners.

Venture capitalists invest in the software industry to make money for their shareholders (financial markets). As a result, the commitments to business leaders–customers of the software company– become cannon fodder. The standard operating procedure in a buyout is to downsize staff–often, senior developers and business leaders leave with lucrative salary packages–and cut software development. As a software analyst, I have worked with many venture capitalists in my twenty-two years. My impression? I have never met a venture capital company that understands the supply chain management software market. Their offices are lavish, the egos large, and the talk is rich, but the results are devastating to business leaders using the software.

The recent victim is Anaplan, Inc. (NYSE: PLAN). On March 20, Anaplan announced a definitive agreement with Thoma Bravo for $66.00 per share in an all-cash transaction valued at approximately $10.7 billion. The offer represents a premium of roughly 46% to the volume-weighted average price of Anaplan stock for the five days ending March 18, 2022. Upon completing the transaction, Anaplan will become a privately-held company.

Anaplan, a software-as-a-service company touting the connected enterprise planning as a marketing message, once had promise in the supply chain management market. Over the last five years, the Company struggled to build solutions deep enough to help business leaders solve today’s problems. The problem was the depth of the internal Anaplan teams to understand today’s business requirements. Yes, the solutions connected, but they were unequal to the challenge of driving better answers for business leaders with rising variability. The best deployments were in large companies with multiple applications needing a visibility layer across planning systems to facilitate collaboration. The ease of deployment with prominent consultants was also a plus.

Thoma Bravo’s stamp of company take-over and progressive reduction of value for business leaders using software is apparent in their prior track record of purchases of GHX, Elemica, Exostar, JDA, and QAD. My take? Make no mistake that driving value for shareholders in the financial markets does not drive better solutions for business leaders seeking technology to improve decision-making.

My advice? If considering purchasing Anaplan, pursue other options. If a current Anaplan client, consider alternatives, but if switching is too costly, build internal resources to ensure business continuity. Reduce the dependency on Anaplan. The Thoma Bravo announcement is a clear signal that things will change quickly for software users and not in a good way.

Venture capital investments in the software market are an ongoing risk factor for business leaders. To mitigate the risk, buy from well-funded companies, especially private companies. Following this logic, John Galt, Kinaxis, Logility, and OMP are low-risk purchases, while E2open and JDA pose more future threats to the business.

Yes, my coffee was as strong as my passion for business leaders this morning. As an independent analyst following the supply chain technology market for many years, I hate the ups and downs of venture capitalists diminishing the value of potential software. My drive is to help technology leaders help business teams drive greater value for their stakeholders.

I welcome your thoughts.

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