Analysis (and Some Speculation) on the Datatel and SunGard Higher Education Merger

I'm surprised that I haven't seen much in the way of analysis of the proposed merger between Datatel and Sungard Higher Education (or SunGard HE as it is affectionately known). Certainly the news coming from the two companies has been scant and limited to that of a general statement, but since this really is one of the biggest stories in higher education technology, one yearns for more. So, as a former product manager of Datatel's Student System, I will attempt to consolidate some of the analysis that I have seen and add some speculation of my own about how the product lines may evolve.

First, let's clear up one of the common misunderstandings that I have seen on various comment threads on LinkedIn and elsewhere. Despite the fact that John Speer, current CEO of Datatel, will lead the new combined company, this is not Datatel acquiring SunGard HE. Hellman & Friedman, a venture capital firm that already owns Datatel, is buying SunGard HE with plans to meld the two companies into one. As such, I would tend to consider the transaction a merger of equals. Hellman & Friedman clearly have a greater understanding of the higher ed. marketplace through the eyes of Datatel management – having owned them for the past several years – while SunGard HE brings the greater client base and broader product and service portfolio. In the end, I believe that we'll see a blend of products and services from the two companies that it truly will be a fusion of the best talent from each that rises to the top.

But it is a long way from here to there. The first 18 months will be the consolidation phase. There is much duplication between the two companies that will have to be dealt with. While the two companies do essentially the exact same thing, I don't think we'll see much in the way of product or service consolidation from the outset. Early on we will see layoffs in areas such as accounting, human resources, corporate IT, sales, and marketing. I suspect that software and services will largely be untouched. If layoffs are to be had in these areas it will be more about productivity and utilization then it will be about product consolidation.

Now, let's speculate about product and service direction.

If you are running Banner or Colleague, don't worry; neither of these systems is going away any time soon. In fact, I would expect the combined company to double-down and provide even greater focus to each of the platforms. Datatel has been increasingly looking to base its solutions on Microsoft technologies, while Banner is essentially married to the Oracle platform. Look for the company to further position Colleague around the Microsoft database and application eco-system as the technology will largely be the differentiator between the two ERPs.

New ERP sales in higher education are drying up. They have been for the past several years, with near 100% saturation of the target market. As a result, the company will need to eat into the client bases of the other remaining ERP companies. Look for Banner to be positioned against Oracle PeopleSoft customers, while Colleague will be aimed aggressively at the Jenzabar client base.

So what about PowerCampus? SunGard HE acquired this Microsoft based solution from ABT several years ago. After some initial investment in the student system early on, this application never seemed to gain enough traction in the industry. In the medium term, I would expect some kind of "upgrade" package presented to PowerCampus clients, designed to get them to move to Colleague.

From an overall product perspective, my guess is that new functionality will increasingly come from partner companies and software development efforts will largely be directed toward integration technologies. It's likely the two companies will pool resources together to build common APIs and data transport technologies to help partner and 3rd party companies tie into each of the ERPs without having to do twice the work.

Business Intelligence has been a big focus for both companies in the last few years. The myriad of tool options between the two is dizzying. Expect for further consolidation around the Business Objects platform for Colleague clients and Cognos for Banner. The real action is in the data models, however. Each has a fairly well formed set of operational data models. I would not expect too much in the way of new models, as it is likely that the two will want to standardize on a single data warehousing model that works for either system.

So, what do you think? Poke some holes in my analysis above. Speculate some yourself in the comments. I'd love to hear more from some customers themselves.