The EHS Software Arms Race Continutes with Intelex and Enviance Acquisitions [Monday Musings]

The rapid pace of M&A activity and consolidation in the EHS software space is not letting up. So far this year, we have written about UL's purchase of cr360, Enablon’s acquisition by Wolters Kluwer, the private equity investment in Medgate, and the acquisition of IHS’ Operational Excellence and risk management business by Genstar Capital, among others.

As if all that weren’t enough for the market to digest, in the past couple of weeks Enviance and Intelex have announced significant acquisitions. The LNS Research team had the opportunity to be briefed by senior executives of Enviance and Intelex to learn more about what drove the transactions and what the plans are to leverage the new assets.  These moves are instructive about trends in the market.

Both were driven by the objective of expanding the product set towards a complete EHS application platform, and answered the “build vs. buy?” question with the latter. Also, both were strategic moves facilitated by the availability of capital from investors.

Intelex Acquisition of Ecocion: Highly Focused Product Strategy

With the acquisition of 60-person environmental management software vendor Ecocion, Intelex quickly filled out its environmental offering, specifically with a sophisticated calculation engine, and associated content such as emissions factors and formulas. In Intelex's view, there are three capability pillars needed to enable EHS information management: workflow, a calculation engine, and reporting. Ecocion’s robust calculation engine, along with extensive libraries of emission factors and industry calculation formulas rounds out the offering across these pillars. Ecocion’s Sofware as a Service (SaaS) model, fast time-to-value, and high customer satisfaction all played a key role in the decision.

Intelex stressed the high degree of due diligence conducted to ensure smooth integration of both organization and product. Preliminary product integration roadmaps were drawn up as part of the process so work could continue immediately after the deal was closed. Detailed plans for integrating Ecocion's people into Intelex were rolled out on day one, along with plans to verticalize the solution.

We think the thoroughness of the upfront evaluation and planning process will help Intelex achieve a successful integration. Replicating Ecocion’s success in the oil and gas sector into adjacent verticals such as manufacturing, utilities, and chemical, as well as plans to further penetrate the mid-market, are sound strategies to leverage the newly acquired, specialized assets. Few of the comprehensive EHS platform vendors will be able to match the strength of this SaaS-based environmental solution.

Enviance Acquisition of Actio: Major Footprint Expansion

Most major EHS software vendors offer capabilities for compliance and risk management in operations. Offerings typically include applications for incident management, management of change, risk assessment, audits and inspections, and environmental and assets in and around manufacturing facilities and other workplaces.

With its acquisition of Actio, Enviance joins a small group of EHS software providers that covers not only operational risk and compliance, but also the realm of product safety and stewardship spanning the supply chain.  The 30-person software solutions company, with 200+ customers, adds a wide swath of functionality that is complementary to Enviance’s portfolio, including solutions for chemical management, SDS management and authoring, product compliance, and material disclosure. From an architecture standpoint, Actio’s SaaS model was a key factor in the buy decision, being overall compatible with Enviance’s current deployment and licensing models.

Although Actio is a relatively small organization among EHS and sustainability software vendors, this is a strategic addition that significantly expands Enviance’s functional footprint, and overnight positions it among the broadest portfolios in the space, that will be attractive for organizations looking to consolidate providers.

Market Consolidation: There’s Always a Bigger Fish

These transactions illustrate our view that as the EHS software space continues to mature, we see it following a path of continued consolidation analogous to that experienced in other enterprise software domains, with ERP being a prime example.  In the early days of ERP software, there was a highly fragmented vendor landscape with dozens of vendors large and small, and custom-developed ERP solutions were common. Oracle and SAP quickly became the top market share leaders, with a small group of more specialized players finding their niches too. Today SAP and Oracle remain the top dogs in ERP, co-existing with smaller players such as Infor, Microsoft, Epicor, etc.

In the EHS management platform space, over the past couple of years a handful of companies have emerged to join a new, selective club: the EHS software vendors that have access to significantly more resources by virtue of acquisition or private equity investments. As the market evolves, it’s likely that two or three of these will come to dominate the EHS software market, a la Oracle and SAP.

The planning and execution of smart go-to-market and product strategies, funded by fresh injections of resources, will largely dictate who the winners are. We see the recent acquisitions by Intelex and Enviance as part of the trend towards execution of increasingly sophisticated strategies, including M&A, that will determine the outcome. One success factor we will be watching closely is how the acquired organizations are appropriately integrated, in terms of people, product, and go-to-market. This doesn’t mean that all products should be necessarily integrated into one platform. But it does mean that it should be done where needed to provide one coherent solution, keeping in mind lessons learned from previous attempts to roll-up this market.

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