Daily Archives: April 6, 2018

M&A Has Been Mad. Platforms Will Disappear. But There Will Be More Than One. But Who?

We’ve been writing a lot about M&A lately, including, but not limited to, our pieces on:

because M&A is still going strong. (And, as per our recent post on The Hidden Value of SI Association, SI is acutely aware of this because this is how it loses its customers. SI works with these companies, helps them become known and successful [through a focus not on buzz but actual education, process improvement, and appropriate roadmaps], they get noticed by cash-rich firms, who then buy them, and in many cases, strip out the management teams and/or consultants.)

We’ve also noted that not only will some platforms have to disappear (to make the mergers successful) but that (in our recent piece on One Vendor Won’t Rule Them All … And One Ring Won’t Bind Them), due to the wide range of needs that organizations need and the different process that are used around the globe in organizations headquartered in different regions and run by different cultures.

But that being said, now that Sourcing and Procurement technology is starting to become more mainstream — and the majority of organizations are looking for analytics, procurement automation, and supplier program management — those organizations that are looking for their first platform (as well as the early adopters of first generation platforms that are now almost a decade behind) are trying to figure out who they should look at and, more importantly, what product lines they should look at (now that some organizations have as many as three different product lines for Procurement under one organizational roof).

This is hard to predict, especially since the Fortune 500 is in more flux than it’s ever been. It used to be if you were on the list, you were on the list for years (if not decades) and changes were subtle. Now a company can make it one year and as a result of one major disruption or media fiasco, be in bankruptcy the next year (and disappear from the list). And while most of the companies in our space are not on the Fortune 500, these companies are now being bought by the big enterprise software giants, including SAP (with a market cap over 100B), that are.

And the instability in enterprise software companies amplifies they smaller they are, and when the biggest stand-alone public company in our space has a valuation of a mere 2.5B and the largest private company in our space would likely get a valuation in the same range, you can see where we are when the average large company has revenues that you have to round up to 100M and the average BoB vendor rounds to the 10M range.

But the platforms provided by some companies, due to the immense value they offer, will survive, even if under a different name, as part of a different platform, under a different company, held by a different holding co, whose name may change three times over the next decade. And who will they be?

Simply put, they will be those platforms that are the hardest to replicate and offer the deepest capabilities that are key to value identification, like optimization, advanced predictive and prescriptive analytics, cognitive process automation, semantic risk identification and monitoring etc — whether the platform is a standalone best of breed platform in a financially stable 10M company or part of a suite of a larger 100M company or just one module in a suite in stable of suites in a 1B enterprise. So don’t try to guess which vendor will survive, instead focus on what platform will survive — and chances are you will be setting your organization up for success.