Monthly Archives: December 2017

M&A: And the Mania Continues …

Our last post on the subject was on how The M&A Mania Ain’t Over Yet. In it, we had two words of advice. Don’t Panic! Those two words are more important now than ever now that Jaggaer has bought BravoSolution. Big has bought big to become bigger and fatten the bottom line, most likely dancing to the tune of the private equity firm looking to get a return on its investment by either growing the company big enough to take public (again) or by making a global offering attractive enough to a bigger private equity firm.

And while this could be very good for the private equity firm, is it good for the customers? Let’s think about this. There are three things that make an M&A attractive:

  • More Customers
    Check, and check. The first check for the sizeable customer base that BravoSolution has. The second check for the fact that most of this customer base is in Europe, where Jaggaer is not well established (with the exception of Jaggaer Direct as a result of its Pool4Tool acquisition).
  • Synergy
    Either in customer base (for cross-selling) or in application (for broader platform). Check, but no check. There is a theoretical synergy in customer base (as both organizations sell to Procurement organizations), but there is not only a geographic divide, but a bit of a cultural divide as well (as most customers tend to buy from organizations with similar cultures, and BravoSolution and Jaggaer have, at least historically, considerably different cultures with regards to solution development and delivery.
  • Cost Reduction
    If there is an overlap in personnel, systems, locations, or other cost centers that can be reduced, then there is a great opportunity for cost reduction. Check, Check, and Check! First of all, while Jaggaer needs to be on all continents, and needs multiple offices on big continents (like the USA, EU, etc.), but only so many. There can be office reduction. This would be a big savings. They now have 2 of just about every Purchasing system — one set can be retired (in time). This would be a big savings. And as for personnel — while customer support personnel cannot be reduced (without losing customers, which negates reason one for M&A), tech support and sales and back office personnel can — especially when one set of systems is retired.

Now, we can’t be sure any of the changes hypothesized above will materialize, but unless some do, how will Jaggaer realize the potential benefits of the merger? It’s not time for panic, but it is time for thought. And the formation of a plan, or at least a back-up plan, if you are a current, or potential, Jaggaer or BravoSolution customer and someday it is announced that your solution, local support office, or team is being retired.

Ninety Years Ago Today …

The Ford Motor Company taught us how long a product line built to last should last when it unveiled its Ford Model A as its new automobile NINETEEN (19) years into production of the Ford Model T. Can you believe it! What else lasts nineteen years (besides versions of Unix and Linux, but even then support is sometimes only guaranteed for a decade) in today’s economy?

When you look at fast moving industries like fashion, sometimes you are looking at product lifespans of 19 days! And most companies roll out a brand new mobile phone model every twelve to eighteen months and an upgraded model every six to nine months. You cannot get a laptop or computer warranty for more than three years. And you’re supposed to trade up to a new car as soon as the current model is paid off.

But products can, and should, be built to last. Will we ever remember what the Ford Motor Company taught us?

30 Days Left to Get Your Supply Management Solution Budget In Order …

… unless, of course, you are a government / defense contractor and on the government fiscal year. But we’ll assume you’re not, and move forward.

There isn’t an organization in existence that has a complete Supply Management Solution platform, not even an organization in the Gartner Top 25 or the Hackett Group top 8% even though they are much, much closer than the average organization. Most (average) organizations only have part of the Source-to-Pay spectrum covered, and almost half don’t even have a modern solution at all.

And, as we have indicated previously, this cannot continue. But you can’t afford everything, and big bang implementations usually go up in a big bang. So you need to start by figuring out what you need first, what the average price point is for the solutions most likely to meet your need, and get that in the budget.

And that will require a good ROI argument, which needs to be a believable one. Which means you have to understand the full impact of the acquisition, implementation, and usage cost of a new purchase, as well as the time it will take to reach the ROI the solution will achieve. For example, while an optimization-backed sourcing platform will identify 10%+ savings on the top 30% of spend, delivering at least 3% to the bottom line, if the contracts are three years, it will take 3 years to realize the savings, and not all will materialize without a proper Procurement platform that insures the contract is properly executed.

Plus, when it comes to Sourcing platforms, even if you pay a monthly SaaS subscription, there will still be the integration costs with the current platforms (including ERP), the training costs for the intended users, any customization costs that result, and delayed ROI costs as it will take a few months to get all users on the platform, which means that it will take a few months before significant savings are identified, and a few more months before savings start to materialize.

The savings will materialize, and the ROI over the long term will be considerable, but the best way to get the necessary budget for a Sourcing, Procurement, SRM, or Analytics platform is to be honest about the cost and the time to significant ROI, which will typically be 6 months to 12 months, minimum, not the first 3 to 6 months like some vendors will promise. But there was a time company’s would take the long, 5 to 10 year, view, and if you take the long view, you will save Millions, maybe Billions (if you are a Fortune 100).

And that can be true of any best of breed (conglomerate) Sourcing, Procurement, SRM, or Analytics platform. So, get your well researched, well thought out, arguments.