CAI Software LLC has announced the acquisition of Integrated management Solutions (IMS). IMS is the company behind Food Connex, a software company whose product, Food Connex is targeted at distributors and processors in the food industry.
James H. McCooey, President and Chief Executive Officer for CAI said: “With over 75 years of combined management experience in the food distribution industry and more than two decades of software development, Integrated Management Solutions is a trusted business partner for its national customers. The acquisition of the proven Food Connex software complements and strengthens our existing suite of business solutions, and broadens our footprint in the protein and seafood distribution vertical by providing a solution for smaller scale businesses.”
What are they buying
Food Connex is delivered as either a cloud-based or on-premises solution. Built on the Progress database it has integrations to Intuit Quickbooks for accounting. It is targeted at the SME market and has customers across a wide spectrum of the food industry. This includes companies such as Vincent Giordano Corporation a premium beef deli products processor and distributor who have used the software for more than 20 years.
The solution provides functionality for food distributors and processor including:
- sales order processing,
- inventory and
- financial management
- bill of material recipes
- production labeling utilities
The acquisition continues CAI’s growth strategy. Food Connex complements ProVisions, and ERP targeted at the food processing and distribution market. It also follows the acquisition of MultiProcess Computer LLC, an international provider of enterprise document archiving and retrieval solutions.
Paul Hernandez-Cuebas, Executive Vice President for Integrated Management Solutions said, “The entire Food Connex team is genuinely excited to join CAI’s growing family of companies. CAI is a well-respected and established company in the food processing and distribution vertical. Together we have the ability to apply additional resources to develop enhanced solutions for our customers and continue to provide the same high-quality support that they’ve long enjoyed. We are absolutely thrilled at the opportunities this transaction represents for both our customers and employees.”
Food Connex – Why now?
As the larger cloud SaaS companies such as NetSuite and Sage Intacct start to build out their portfolio of microvertical solutions there is increased pressure on smaller vendors such as Food Connex.
CAI are not small but they also do not have a single large ERP application, yet. CAI has several ERP solutions within its portfolio, supporting several verticals. (See comment below) So what is CAI hoping to gain. McCooey added: “We are excited about this partnership and look forward to working with the talented team at Integrated Management Solutions to bring forth the next generation of Food Connex, and to continue to deliver state-of-the-art solutions that drive innovation, cost reduction and improved efficiency for our customers.”
It is with the three factors of cost reduction, innovation and improved efficiency that a larger software vendor can start to show these benefits by being part of its larger organisation. In coming under the CAI banner, Food Connex will benefit from operational savings through combining back office departments. Also, more horizontal products such as MultiProcess add functionality that they would not have the resources to develop.
This may mean job losses as people leave the small company not wishing to be part of the new organisation or through lay offs. (See comment below) IMS Software LLC will continue to operate its sales and development facility and offices in Pennsylvania. It is the areas not mentioned that are likely most affected. These will probably include finance and HR. Though interestingly it is a another benefit of joining the larger organisation that it might have better HR processes. If CAI has a corporate wide HR solution it can offer employees a better career path across the wider organisation.
The underlying profit base for smaller vendors of cloud software is increasingly put under pressure from the larger vendors. Customers expect regular updates and they do not have the time or resources to innovate as well as maintain the software based on changes in compliance etc. Will CAI amalgamate solutions and start to compete effectively in the cloud replacement market? Or will it merely keep these companies growing, increasing profitability in the short term through consolidation and slowly improve the product relying on customer advocacy and slow growth. The good news for Food Connex and the customer base is that Hernandez-Cuebas will continue in his role at the company.
What does this mean
Further consolidation in the ERP market is inevitable. Even start-ups such as Kenandy, recently acquired by Rootstock, are vulnerable if they have not grown fast enough. For CAI it needs to manage the trick of growth not just through acquisition but also organically through new customers. To do so it needs to bring together its product lines with a strategy that shares development effort. This is an journey that both Infor and Epicor are underway on. For CAI the risk is that it will end up with a portfolio of legacy products. Legacy products that can barely sustain their existing revenues. The transaction closed on 19th January and terms were not disclosed.
See comment below for responses from CAI Software LLC