Does It Matter Who Owns SunGard SCT?

Andy Cooley

SUNGARD SCT VP
Marketing, Andy Cooley:
"We'll be able to operate
more cohesively."

Or, what d'es the SCT buyout mean for customers in higher education?

JUST AS HIGHER EDUCATION customers were getting used to the idea that the SCT Corporation (www.sct.com) had been acquired by software and services behemoth SunGard (www.sungard.com) in February 2004, word came in late March of this year that SunGard itself had agreed to be acquired by a group of private investors. The deal is expected to be completed in the third quarter, and the obvious question is: What is this likely to mean for institutions that depend heavily on products like SCT Banner, SCT PowerCampus, the SCT Plus suite, the SCT Luminis portal and development platform, BSR Advance, Bi-Tech financial and administrative software, Collegis management and implementation services, and a host of auxiliary products and services that have now ended up under one roof after a series of acquisitions and mergers?

Even if your institution d'es not currently use any of these products, this buyout should give you something to think about. Recently, there has been a steady flow of news about corporate realignments and changes in ownership to remind us how quickly things can change. Within the past year, for instance, Oracle (www.oracle.com) completed its uninvited takeover of PeopleSoft, and the Datatel (www.datatel.com) management team purchased their company from its founders with the help of investment firms Thoma Cressey Equity Partners (TCEP) and Trident Capital. And customers are still adjusting to the 2000 merger of Jenzabar (www.jenzabar.com) with four independent and privately held providers of higher ed administrative systems.

In a financial world in which takeovers are often motivated by the desire to achieve economies through radical restructuring or cost-cutting, or where buyers purchase a company because they see the opportunity to quickly sell off assets, customers often have reason to be nervous. And higher ed customers have an added reason to worry: Running a university or college is not just another vertical market; successful software vendors have taken years to tune their offerings to the special needs and operating culture of the campus. Understandably, there is always the concern that new owners may not understand the importance of doing business in the native language of academe.

Looking at the most recent case, all signs thus far indicate that taking SunGard private will not mean major, immediate changes for higher education customers. In public statements and SEC filings, the investment consortium organized by Silver Lake Partners (www.silverlake.com) has clearly stated its intent to continue with business as usual, to focus on long-term growth, and not to sell off the pieces of the SunGard kingdom for a quick profit.

“We don’t have any plans for any spin-offs or any other near- or medium-term liquidity steps,” Glenn Hutchins, cofounder and managing member of Silver Lake Partners, stated in a televised interview (CBS MarketWatch, March 28,2005). Hutchins stressed that Silver Lake’s perspective as a private equity firm may be longer than that of many in the stock market, and that he thinks SunGard offers the opportunity “to build the business both internally through investments in new products and externally through acquisitions.”

This would be consistent with Silver Lake’s own description of its investment strategies and with its track record. The firm claims it is different from generalist private equity firms because it has a specific industry focus on technology. On the other hand, it also insists it is different from tech-specific venture capital firms by virtue of the large-dollar size of its investments, and its ability to partner with management and to add value to the companies in its portfolio. Its current investments include Ameritrade (www.ameritrade.com), the online brokerage firm; Business Objects (www.businessobjects.com), which sells the reporting tool Crystal Reports; and a 35 percent share of the common stock of Gartner Inc. (www.gartner.com), the information technology research and analysis company that counts many institutions of higher education among its customers. In order to find out how the merger looks from inside SunGard SCT, and from those who understand the special needs of higher education and how those needs might be affected by a larger corporate and investment involvement, we spoke with Andy Cooley, senior vice president of Marketing at SunGard SCT.

The Silver Lake people see tremendous synergies between institutional missions and the strengths of SunGard.

Campus Technology: How is the acquisition of SunGard by a consortium of investors likely to change SunGard SCT and its products?

Andy Cooley: Everything seems to be pointing to a very good evolution for the company. We have to be sensitive about what we can share right now under SEC regulations, but from the employee call and the customer call and the information we have seen so far, I think the investors are clearly seeing this acquisition as a growth opportunity. Silver Lake has distinguished itself as a private equity firm that takes companies and builds them into market leaders in specific sectors. It invests in companies because it views them as hallmark companies in their fields, like Ameritrade and Business Objects. SunGard is the biggest tech company that you never heard of. I think the investors understand its potential.

Do you expect the buyout to affect the way SunGard is organized and managed?

I think SunGard will be able to deliver a more unified and positive experience for the customer. Customers are now coming to SunGard for a range of solutions in higher education, and they end up buying myriad products from that group—but they’re all different products. SunGard will now be able to operate as a more cohesive whole and pull those assets together. The accounting associated with doing that is more complicated for a public company. Certainly, it will be easier now to make some changes in the way SunGard operates.

Public statements about the acquisition have stressed the goal of long-term growth. What kind of growth can we expect to see in the higher education side of SunGard?

Recently, there has been an evolution and transformation of SCT strategy, even before the acquisition by SunGard. SCT has been offering more and more products outside the strictly administrative systems area. All of these pieces and parts work together as a cohesive whole for the entire campus. I’m referring to Luminis, content management, the data integration suite, information access, business intelligence, and a whole host of products. This is tied to a similar evolution in higher education itself. Presidents are setting and measuring KPIs [Key Performance Indicators] as institutions are striving to distinguish themselves from one another. Along comes Silver Lake, and the Silver Lake people see tremendous synergies [between those institutional missions] and all the business strengths of SunGard.

With all this growth, is there a danger that SunGard will lose sight of what makes the higher ed market unique?

Mike Chamberlain [president and CEO of SunGard SCT] has been in charge for close to 20 years. That’s a common tenure in the company; there’s been a lot of continuity. Just expect more of the good things you have been expecting from these companies. At the same time, look for the company to continue to expand. The investors do not want Sun- Gard to slow in investing in new companies, and it may now be easier for SunGard to invest. Their strategy has been: If that’s a good product, we’ll buy the company. At the same time, we will continue to develop new products within the company. Chris Conde [president and CEO of SunGard] and Glenn Hutchins [a cofounder and managing member of Silver Lake Partners] have said there is no reason to change the business. This is not a turnaround, but instead, a chance to accelerate; to do more of what we do well.

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