Markets, M-11-4154
R. Yanosky, M. Harris, M. Zastrocky
Research Note 3 July 2000
Jenzabar Deal Reshapes Small-to-Midsize-College IT Market
The merger of Jenzabar.com, CARS, CMDS, Campus America and Quodata into
Jenzabar Inc. consolidates the small-to-midsize-college systems market and creates
a major new competitor with a "new economy" focus.
Core Topic
Industry Applications: Administrative
Computing for Higher-Education Institutions
Key lssue
How will administrative systems and software evolve and which vendors will prosper in
the next five years?
Strategic Planning Assumption
Institutions using products represented in the Jenzabar Inc. merger should plan for
significant migration or upgrade projects by 2003 (0.8 probability).
Note 1
Product Evolution
JI's central concern will be to streamline, update and integrate its product line while
preserving its large customer base. For the time being, the company will support all
existing platforms. However, to compete effectively, J1 will have to consolidate R&D
and reduce support costs. We expect JI to evolve as follows:
 Within six to 12 months, the company will schedule the phaseout of older legacy
product lines such as the TEAMS AS/400 suites and older versions of Quodata (0.8
probability).
 Within 24 months, JI will migrate to a two-tier ERP product line: a Unix-based
system built around the CARS product, and a Windows NT suite consolidating
elements of the CMDS and Quodata lines (0.8 probability).
 Because Campus America enters with the weakest market position and the oldest
architecture, POISE users will face the most significant migration issues (0.7
probability).
Like the institutions they serve, small-to-midsize-college enterprise resource planning
(ERP) vendors have tended to be highly independent and accustomed to lean budgets.
The announcement on 15 June 2000 that portal provider Jenzabar.com would merge with
CARS, Campus America, Computer Management and Development Services (CMDS)
and Quodata immediately brought a new order to this familiar scene (see Note 1). The
merger brings together a "family of companies" known as Jenzabar Inc. (JI) that serves
about 1,000 institutions in North America. The company is backed by a group of
significant financial patrons that includes NewMedia Investors, an investment vehicle for
partners of Bain & Company and Bain Capital; Pegasus Investors; Omnicom's Pario
Ventures; Zero Stage Capital; and FleetBoston Financial.
With a combined claimed annual revenue of about $80 million, JI will be a far stronger
competitor than any of the merger participants had been previously. We consider the
major implications of the deal for current and potential customers.
Cultural Change: The JI merger demonstrates the increasing interdependence of "old
economy" IT and "new economy" Internet companies - but the new economy is clearly in
charge. Though the ERP vendors bring most of the customers and all of the profits, JI's
chairman will be Bain's Robert Maginn; Jenzabar's CEO Ling Chai will be CEO of the
new company. The presidents and other executives of the ERP partners will also assume
active operational leadership roles; they will have the employees of Jenzabar.corn
reporting to them along with the staffs of the ERP companies. These presidents will
provide the active leadership of the merged companies and bring more than 100 years of
education industry experience to JI.
Internally, JI will have to reconcile differing corporate and generational cultures. That
task will be complicated by the different hardware, software and functional
characteristics of JI's various product lines. Externally, JI will be more focused on growth
than its forerunners, especially at the upper end of its target market, where it will compete
more directly with Datatel and SCT. Customers should expect to deal with a more
entrepreneurial company that has an eye on the initial-publicoffering market. JI will
probably have a less familial feel than its predecessors, and will emphasize innovation
rather than continuity and "hand-holding" among its long-term customers.
E-Learning Integration: Jenzabar.com had recently been repositioning itself as an elearning company. Acknowledging that customers are already using other systems, JI will
support competing learning products through open-standard application programming
interfaces but will provide full integration only to its own products. Though the merger
will reduce fragmentation in the small-to-midsize-institution distributed-learning
marketplace, we continue to believe that no vendor has the market power to enforce a de
facto industry standard for learning integration.
Implications for New Buyers: JI will have every incentive to support the most attractive
features of existing products, and its ability to take the best features from similar products
and bring forth a stronger, single product could be a boon for small colleges. Still, merger
decisions currently being made may affect items of interest to particular institutions.
Where possible, potential customers should delay making a decision for six months,
while the company sorts out organizational and product issues.
Bottom Line: By consolidating the small-to-midsize-college systems market, JI will
offer customers greater power at the cost of reduced vendor choice. Customers should
expect to migrate toward a streamlined, heavily Web-centered product line by 2003.
Potential customers should delay system purchase decisions for six months while JI's
strategy takes shape.
GartnerGroup
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