One feature of hypermature markets is a lack of innovation . The dominant incumbents have carved up market share with little movement among vendors, allowing them to sit back and collect what is effectively a stream of annuity payments.
But…all good things come to an end eventually. This happens in two stages:
- Lack of innovation leads to pricing pressure. Without innovation, existing products become commoditized as feature parity is achieved. Vendors then compete on price to win and retain business.
- Recognizing the shrinking margins, vendors consolidate – either folding their products into other companies’ product suites or through combining firms and reducing the number of competitors.
The market for Statutory Financial Reporting fits this description. This is a twenty-year old, heavily-regulated market which requires a strict licensing process to participate. As expected, the legacy offerings are dated and homogeneous.
And, predictably, spurred on by a new entrant, this market is the consolidation stage. In the past 2+ years, in fact, the top three vendors have all sold:
- 2017: Sapiens purchases Stone River
- 2019: Sovos acquires Eagle Technology Management
- 2020: Sovos acquires Booke Seminars
So, that’s the story for the vendors. But what about the customers?
Often, the news here is not great.
Consolidation leads to pain.
Transitions are ugly as acquiring companies look for efficiencies which are often predicated around discontinuing redundant products, reducing headcount, slashing overhead, and eliminating duplicative product offerings. This seldom goes smoothly: simply put, the promise that the consistency of customer experience will be unaffected often falls short.
Best practices for customers at this juncture: rather than assume that transitions will occur seamlessly, this should be treated through the lens of an altogether new purchase, including evaluating alternative solutions.
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