Category Archives: Market Intelligence

Bigger. Badder. Baffling.

As per our previous posts, the merger and acquisition cycle is peaking. Coupa went on a spending spree and bought Spend 360 and Trade Extensions. Jaggaer merged with Pool4Tool. OpenText is acquiring Covisint Corporation. And Descarte Systems acquired PCSTrac Business. And we just know more announcements are coming.

Everyone is getting bigger and badder, at the expense of BoB (whose days appear numbered), and it’s getting a bit baffling. Some of the acquisitions make a lot of sense (at least on paper) with companies trying to flesh out suites, but some like Open Text’s acquisition of Covisint (which is very vertically focussed on automotive) are stretching a bit. But what’s most baffling with the rapid pace of acquisitions are how the companies are going to manage integrations (of platform and strategy) and solution footprint.

When you get big, things can get costly … quick, especially if there are multiple platforms involved. This isn’t good for you from a market perspective (as the size of the customer base that can afford your baseline solutions will shrink), and it isn’t good from an operations perspective. There’s a reason that Oracle expected to save a Billion in operating costs by acquiring Sun, and a lot of it came down to platform. Sun Microsystems was very efficient in its software infrastructure, running almost 1,000 different systems whereas Oracle, which ate its own “one instance dog-food”, ran one Oracle instance. By migrating all of Sun’s systems into one, it saves hundreds of million a year (at least 250 to 300 by some counts, more by others). If a company has six different platforms to maintain, that’s six different hardware infrastructure costs, six different software infrastructure costs, six different dedicated support team costs, six different implementation expert team (who will implement and train third parties) costs, and so on. These costs add up. Rapidly.

And they escalate the platform costs that the companies need to charge to customers, which shrinks the perspective customer base. And if the mid-market gets squeezed out, everybody hurts as the greatest number of companies without decent Supply Management solutions (and the bulk of the 40% who don’t have solutions) are in the mid-market. So while acquisition makes sense to fill a hole, not working on ways to integrate, or at least harmonize, the solution (so that there is no duplicate development across products or unnecessary, and costly, integration efforts) can be costly. So, in some sense, the speed at which some companies are moving is a bit baffling, as good integration takes good analysis, planning, and development — all of which takes time. Given that some acquisitions are being completed in two months, and that the amount of information that can be extracted in due diligence is limited, there’s no way the average company can begin integration out of the gate. In many cases, the acquiring company (that are experts in a different technology and business process) won’t even know where to start.

In other words, while some companies might be on the right track, they are just beginning a very long journey and have thousands of miles to go before they reach their destinations. Adding acquisitions adds miles to the track — miles that have to be travelled. The question now is not do they have the vision, but how will they get there. And that can be a baffling question for anyone to answer (especially without third party expertise and guidance). But not necessarily unresolvable …

In the interim, Spend Matters has been putting together decent guides on questions to ask your providers if they were involved in one of the covered acquisitions. Check them out. And answer the questions for yourself before committing.

Platform? Bah Humbug!

Earlier this week, the medic pointed out that Jaggaer is taking the contrarian approach (in “Jaggaers merger Pool4Tool taking contrarian role around integration”) and almost scoffing at the idea of an integrated, unified, code base and instead pointing out that its customers want problem fixes and business solutions, and integration isn’t a concern.

And to an extent, they have a point. Not everything has to be on one cohesive code-base with one cohesive UI if some parts of the solution are only used by a few individuals or designed for a different department or the usage is disparate from the rest of the platform and/or rare. For example, you’re not typically doing opportunity spend analysis in the middle of a sourcing project (although you may want to do pricing trend and outlier analysis on submitted bids after initial RFP responses before starting an optimization). And the people doing day to day tactical buying are not doing serious advanced direct sourcing projects and so on.

That being said, if you are a sourcing pro, you are likely building direct material RFPs, analyzing responses, running optimization events, negotiating contracts, accessing and updating supplier information, managing supplier relationships, and tracking milestones. The last thing you are going to want to do is log in and out of 5 different systems on a daily basis (Spend Analysis, RFX, Optimization, SXM, CLM) — especially if they all have different UIs and UX.

Sometimes you need integration and consistency, and sometimes you don’t. But one time you really need it is when your users are not very technical and have a lot of work to do, especially of the tactical variety. Coupa would never have gotten where it is if each function was a different module with a different UI. It’s design to make end-to-end work easy for its average user is how it won. And if it can do that with sourcing (and find a way to integrate its recent acquisitions and extend them with the few pieces of missing functionality) and give sourcing pros the same experience, it will win there too. However, this is one place where Jaggaer, with a lot more experience in strategic sourcing and sourcing support, could pull ahead. If Jaggaer could seamlessly integrate Spend Radar, CombineNet, AECSoft, Upside Software and Pool4Tool into one coherent platform it would have 3 capabilities that the Spend 360 / Trade Extensions union lacks: advanced Contract Management, Advanced Supplier Performance Management, and, most importantly, advanced BoM management from the RFX down to the VMI. On paper, its one of the most impressive suite of capabilities on the market for manufacturing, pharmaceutical, aerospace, electronics, and other direct-heavy industries, but, in the end, it will be the usability that decides the ultimate winner.

Are BoB’s Days Numbered?

Today Jaggaer, formerly SciQuest, announced their merger with Pool4Tool, the world leader in direct (materials) sourcing (procurement) with the most extensive direct procurement suite and one of the largest manufacturer client bases in the Supply Management world. Hot on the heels of Coupa’s recent acquisitions of Spend 360 and Trade Extensions, Jaggaer appears to have rekindled the old SciQuest motto of buy it, don’t build it (as they acquired AECsoft for Supplier Information Management, Upside Software for Contract Management, Spend Radar for Spend Analysis, and CombineNet for advanced sourcing and decision optimization) as they haven’t really built anything new since they built their basic e-Procurement solution (originally for the Government and Education Sectors) last decade. Add the BravoSolution acquisition of Puridiom, the acquisitions of b-pack and Iasta by Selectica in the creation of Determine, and we are now in the situation where 6 of the top 9 Source-to-Pay providers got where they were through (multiple) acquisitions. [The big 9 Source-to-Pay providers that were invited to SpendMatters upcoming Strategic Sourcing Solution Maps are SAP Ariba, BravoSolution, Coupa (Trade Extensions), Determine, GEP, iValua, Jaggaer (Pool4Tool), Synertrade, and Zycus. All but Ivalua, Synertrade, and Zycus have acquired major BoB players as part of their growth.]

The BoB pool is shrinking rapidly. [Only 6 BoB providers were deemed critical enough for the first round of the SpendMatters Sourcing Solution Maps: Bonfire, EC Sourcing, Keelvar, Market Dojo, ScanMarket, and ScoutRFP. ScanMarket is already being used by Basware as their Sourcing portal and will likely be acquired in days to come, ScoutRFP is backed by VCs looking for a big exit, and Keelvar is the last BoB optimization-backed sourcing platform on the market. This list could shrink by half within a year.] This begs the obvious question, are BoB’s days numbered?

Let’s start by asking why are BoB providers being gobbled up like thanksgiving turkeys in meat-loving America? The answer lies in the fact that many older executives still believe that you can’t go wrong buying IBM, which, today, translates into you can’t go wrong buying from the biggest company in the space. So now all the big companies are trying to get bigger so that not only can they be the biggest game on the block, but also be big enough to not be crossed off the list as too risky. It won’t be long before any big procurement company wanting to be a big source-to-pay company merges or acquires the above (and any of the best-of-breed sourcing wanting to be a best-of-breed source-to-pay does the same).

It won’t be long before only a handful of BoB providers among the ones listed (and among the BoB invited to the initial SpendMatters e-Procurement Solution Maps) remain. But does this mean it’s the end for BoB?

Not necessarily. While larger mid-size and large enterprises will continue their quest for one-stop-shop solutions, mid-size enterprises will not be able to afford the increasingly large price-tags that these end-to-end suites (with all their bells and whistles) come with. As a result, while the current class of BoB providers will continue to shrink over the next year or so (as the M&A cycle peaks again), a new slate of best of breed providers will crop up to serve the mid-market, which is still a bit of a blue ocean as 40% of these companies still don’t have a solution at all!

So while it looks like BoBs days are numbered, BoB will rise again. (And then, a few years later, the M&A cycle will begin anew.)

Will Coupa Inspire Sourcing?

In our last post we asked whether or not Coupa inspired at Inspire, referencing our post from last week that asked if they would inspire and indicated where inspiration might come from, and determined that, for an average Procurement professional, Coupa most definitely inspired. But it’s Sourcing and Procurement. Did Coupa inspire Sourcing?

The short answer is no (but it’s not the full answer). Sourcing wasn’t really addressed beyond the statement that with the acquisition of Trade Extensions, most likely being (re)named Coupa Sourcing Optimization, Coupa now has the ability to do complex events, as complex as an organization requires. And while this is true, it’s not very inspiring to an organization that might not even know why they truly need advanced sourcing.

But then again, as of now, Coupa does not really understand advanced sourcing. Up until now, for a Coupa customer, sourcing has been very simple RFXs and basic auctions, age old sourcing technology that any strategic buyer would not find very interesting. But, fortunately for us, Coupa readily admits this. And, as of now, have not decided when, or even if, they are going to integrate Trade Extensions or Spend 360 into their core platform. (Their expectation is they will integrate what makes sense at the right time, but recognize that these were Power User Applications acquired primarily to support current, and future, power users.)

This is good news. The main reason every acquisition of a (strategic sourcing decision) optimization company has failed to date is, as pointed out in a previous post, because the acquirer believed they understood the technology, could integrate, and take it further (and immediately preceded to do just that). But, as we pointed out in a previous post, the ultimate procurement application is the exact antithesis of the ultimate sourcing application. For starters, one is no UI and the other is a UI so complex current desktop systems cannot support it yet.

Based on the history of acquisitions of advanced technology in our space, the only chance of success is to allow both of these acquisitions to more or less continue business as usual, independent of Coupa’s primary business, until such time as all parties collectively, and in conjunction with their collective user base, decide what integration makes sense, when, and how. (And, fortunately for us, this is exactly what Coupa plans to do.) Moreover, in most companies, the people that do the complex sourcing are not only a small user base but are not the people who do procurement and requisitioning. As a result, effective integration right now only consists of pushing transactional data to Spend360 for opportunity analysis, kicking off a sourcing event in Trade Extensions, and then pushing a selected award into Coupa for contract creation and tracking.

As long as Coupa takes advantage of the new Trade Extensions 6 capabilities to define workflows and UX that are easy to use and consistent with what a Coupa power user might define, then they can create a transition for their more advanced organizations into true sourcing, and, more importantly, the Trade Extensions 6 platform can offer a path for those customers that need a more modern Procurement application. And letting each unit do what it does best will insure that, for the first time in the history of acquisitions of advanced sourcing technologies, all parties will actually thrive.

In other words, by saying and doing essentially nothing at this point with respect to their recent advanced sourcing acquisitions, Coupa is actually doing the best they could actually do because it’s going to take them a while to figure out what they got, what they can do, and how all of these units will work together. As far as the doctor knows, they haven’t even hired a translator yet who speaks advanced optimization, machine learning, econometrics (and risk), and truly simplistic Procurement and can teach all parties a common language. So, even though they’ve historically advanced as fast as possible in Procurement, the fastest way for them to advance beyond is to actually slam on the breaks and start again in first gear. If they do this and maintain this philosophy, at a future Inspire, they will finally inspire sourcing in a way that their Source-to-Pay brethren have not.

Did Coupa Inspire?

Last week we asked if Coupa would inspire at Inspire, especially given that most big companies, especially in the Procurement arena, have not given us much to be inspired about as of late. In fact, most announcements in the Procurement Arena have consisted of new UIs, name changes, and acquisitions — none of which does anything for the end user who needs to do a job day-in-and-day-out and spends much of it fighting with an outdated processes implemented by an even more outdated technology causing them to go prematurely bald as they rip out their follicles one by one.

We said that in this day and age you don’t get inspired unless the technology brings value and a technology doesn’t bring value unless it offers something more than the same-old same-old which could include an inclusive design (that also provides functionality needed by suppliers to serve buyers), a multi-functional application (that supports the organizational stakeholders that Procurement must serve), or a better user experience (which is not just a fancy-smancy UI).

So, to this end, did Coupa Inspire?

Inclusive Design?

Definitely. In this release they’ve made it easier for suppliers and service providers to acknowledge POs, flip to invoices, enter timesheets upon services completion, and respond to buyers. The suppliers can determine whether or not they want dynamic discounting, and what terms they will accept (and not need to opt in to or opt out from buyer offers one-by-one). They can maintain their catalogs and use the collaboration tools. With Coupa’s new release, it’s a more inclusive design.

Multi-Functional Application?

With InvoicePay integration, AP can now pay suppliers in 31 countries and know they are being fully compliant with local regulations. Their inventory functionality makes it easy for office managers responsible for indirect inventory. Their single data store gives Finance visibility into all spend under management. And their new risk scoring functionality gives buyers visibility into potential risky transactions that are being directed at potentially risky suppliers. It certainly is becoming multi-functional.

User Experience?

Coupa has figured out the most important feature of a Procurement UI, and that is, simply put, no UI. Procurement is a tactical function that is focussed entirely on servicing a need in the most efficient and effective manner possible. A user shouldn’t see any more than they need to see, do any more than they need to do, and, most importantly if they don’t need to see or do anything, they shouldn’t need to see or do anything at all. If all that is required is an approval for a requisition that completely satisfies all the requirements, and the approval is only required because the total amount exceeds an amount where all requisitions must be approved, then if the approver is aware the approval request is coming, is aware of what it’s for, and has given verbal approval already, then all she should need to do is press a button in the approval request email or send a yes response to an SMS — no application entry needed. In Coupa, she can do that, and a number of other processes have been simplified as well.

So, did Coupa inspire?

For an average Procurement professional, most definitely yes!

But what about a sophisticated sourcing professional, who has to do demand consolidation, new supplier identification and strategic supplier management, complex negotiation, and sophisticated contract creation? Well, that all depends on their read of what Coupa’s acquisitions mean … come back tomorrow.