Big Mergers In EHS Software Don’t Make Sense For Customers
Ten years ago few vendors – if any – offered software applications which covered the full range of environment, health and safety functionality. This reflected two market facts. Firstly, the most standard buying concept was best of breed. Industrial hygienists wanted to invest in specialist software from Medgate (now rebranded as Cority). Sustainability leaders focused on cr360 (since acquired by UL), thinkstep and Enablon (now owned by Wolters Kluwer). Environmental directors in the energy sector chose between the IHS environmental compliance software (now part of Sphera Solutions) and Enviance. Safety managers put DNV GL, Gensuite, ProcessMAP and SAI Global in their purchase shortlists. Managers who handled EHS and quality issues typically compared EtQ and Intelex. Organizations with chemical compliance issues turned to MSDSOnline (rebranded as VelocityEHS), SAP and Verisk3E. Secondly, developing integrated EHS(Q) platforms was too costly for vendors with 50 to 150 employees. Only IHS and SAP could claim to have a broad EHS and chemical management footprint in 2008.
Over the 2008 to 2017 period the EHS software industry has seen dramatic changes. Cloud software deployed for the whole enterprise has taken over as the primary deployment approach. Software is rarely implemented on premise for large facilities or for a single country. Verdantix survey data indicate that 80% of customers have a vision to buy a single, integrated EHS software platform for global rollout. Reflecting the aggregation of EHS responsibilities under global heads of EHS, software vendors embarked on an expansion of their EHS process coverage. The likes of Enablon, EtQ, Gensuite, IsoMetrix and ProcessMAP undertook this product strategy by adding modules to their existing architecture. This preserved their integrated product architecture. Other vendors such as Cority, Intelex, Sphera Solutions and VelocityEHS raised money from private equity and acquired software vendors to expand their EHS footprint or add technology capability. Depending on their product strategy, these modules have been more or less integrated into the core platform. The result? In 2018 customers have a choice of between 5 and 10 comparable EHS platforms – depending on their specific requirements.
Should customers expect large EHS software vendors to merge? We don’t think so. The disadvantages outweigh the primary advantage: greater scale. A merger of two large EHS vendors would necessitate the creation of a single platform to compete effectively with the remaining integrated EHS software platforms. Generating synergies would require either an expensive and slow re-architecting or the retirement of one of the platforms. In either scenario, some customers would depart for a more stable vendor. Given the five most comprehensive EHS software platforms have broadly similar capabilities, a merger wouldn’t fill in any strategic gaps. It still makes sense for the larger vendors to buy unique, specialist applications such as the VelocityEHS acquisition of Humantech. Verdantix wouldn’t recommend selecting EHS software simply based on the scale of the vendor. Big mergers in EHS software may happen, but we don’t see them as a winning strategy.