Category Archives: Marketplaces

M&A: Is What’s Good for the Shepherd, Good for the Flock? Part II

In Part I, we noted that the prophet has a different take than the doctor on the recent M&A (merger and acquisition) frenzy that is again gripping the Procurement space and, contrary to the doctor‘s opinion, the prophet believes that, at least in the long term, it brings more clarity than confusion. We then summarized the cons that the doctor sees with the M&A frenzy and the pros that the prophet sees. The points that the prophet made were all valid points and they definitely presented opportunities for the firms in question, but is what’s good for the shepherd good for the flock?

While it’s obvious that any of the advantages brought up by the prophet bring great value to the new organization, do they bring great value to the customer as well? (Let’s face it, while the doctor loves innovative and customer-focussed vendors, he loves innovative and customer-focussed solutions even more.) The Supply Management space will only advance if the organizations doing Supply Management can advance. And to advance, they need the right (transitional) processes, the right technology platforms, and the right talented people to run the function. Does a merger necessarily improve the processes, the platforms, or the people? Let’s take the advantages proffered up by the prophet one by one.

  • Differentiation by way of a broader solution offering
    If you were relying on the vendor for its great sourcing platform, and the merger was between a platform provider and a services provider that allows the new organization to offer a full (outsourced) sourcing solution, how much does this help you if your organization was a leader in sourcing process and capability and doesn’t need any of the new service offerings? Or let’s say a sourcing provider and P2P provider merged but your organization already has a superior P2P platform implemented and integrated with the sourcing platform. Does the merger help you?
  • New Points of Entry
    While it’s great for the newly merged company that they have more opportunities to secure more customers, except for the fact that this may lead to increased financial stability for the provider (which will make your risk management department happy), that doesn’t do anything for you as a customer. The only thing that you care about is whether there are new products, functions, or services that make your operations better.
  • Lower-Cost foot in the door
    With the exception that this lowers the provider’s overhead in the long term and the provider is willing to reinvest this savings in innovation that results in free platform / product upgrades, this doesn’t do anything for you as a customer.
  • Stealth-Transformation
    While this is great from the perspective of an acquiring company that can use the acquiree’s personnel and capabilities to transform itself into a big league competitor under the radar, what does this do for the end customer? Maybe nothing!
  • A Better Executive Team
    If the executive team understands your needs and support requirements better and actively works to improve their service offerings for you, this could be a good thing, but not every new thang will be right for your organization.
  • New Products / Solutions
    If the new products / solutions complement the products / solutions that your organization is using and can be utilized by your organization to increase organization capability and maturity, this will be a good thing, but the new products / solutions might be focussed on a completely different type of customer base and leave you hanging high and dry.

In other words, while all of these benefits are arguably good for the shepherd, there is no guarantee that any of them are good for the existing flock. And even if some of these benefits are good for some of the herd, there’s no guarantee that they will be good for each individual sheep. So, again, the doctor must ask, from a customer perspective, M&A: Confusion or Clarity?

M&A: Is What’s Good for the Shepherd, Good for the Flock? Part I

As the doctor expected, the prophet has a different take on the recent M&A (merger and acquisition) frenzy that is again gripping the Procurement space and, contrary to the doctor‘s opinion, the prophet believes that, at least in the long term, it brings more clarity than confusion. Furthermore, in his posts over on Spend Matters, the prophet makes some great arguments as to why M&A is a good thing, at least from the vendor perspective.

But is what’s good for the shepherd good for the flock?

Let’s look at the cons that the doctor highlighted in his original post that asked if M&A was confusion or clarity.

  • Many acquisitions end up being overvalued
    As the prophet neatly summarized, the doctor has noted that some transactions often remain “in the red” even a couple of years after the transaction has been made. Maybe the value was there, but if it’s not captured, and the private investors and/or VCs start demanding realization, who’s going to pay?
  • Many acquisitions end up significantly overlapping in functionality / offering
    Does a customer need two RFX platforms? Two invoice management platforms? Two reporting engines? Nope! In order to streamline costs and operations, one of these platforms has to be axed, and a large portion of the customer base migrated. If the functions don’t map one to one, who loses?
  • Many acquisitions run on completely different platforms & stacks
    This makes integration a nightmare. Either a lot of work, and money, will need to be invested to make an integrated platform work or one platform will have to be selected as the core go-forward platform, critical functionality developed on it, and a migration strategy, and module, developed for the customer base that will need to be migrated. In the short term, costs will go up (and not down, which is what should happen if there is synergy).

Now let’s look at the pros that the prophet highlighted in his pieces on A Critical Take on M&A in Procurement Technology and M&As in Procurement Technology Work.

  • Differentiation by way of a broader solution offering
    than the companies could offer on their own, which creates
  • New Points of Entry
    into the market than a point-based solution can provide with a
  • Lower-Cost foot in the door
    since, even if the technology headcount can not be synergized, at least the salesforce can be (and sell more per unit). In addition, the combined company can effect a
  • Stealth-Transformation
    that allows the combined organization to offer more than each could on its own, because 1+1=3, and all of a sudden the new organization can graduate from the minors to the big leagues, with the support of
  • A Better Executive Team
    that is formed by bubbling up the cream of the crop for each position in a manner that allows each executive (who often had to wear multiple hats in the individual smaller organizations) to focus in on their key strengths which will help the company identify
  • New Products / Solutions
    that could be developed and brought to market by the combined organization that neither organization could consider on its own.

And these are all real opportunities that can be realized by the firms in question in a merger or acquisition that truly has the right synergy, but is what’s good for the shepherd good for the flock? Stay tuned for Part II!

Navigating & Keeping Up with Digital Agency Landscape: Part I


In this three-part series of articles, Kathleen Jordan, Associate Director at Source One Management Services will take a look at the complex digital agency landscape and provide insights on the process of agency sourcing: considerations when sourcing, vast digital agency options, and the need for bridging the gap between marketing and procurement departments. Kathleen Jordan is a strategic sourcing subject matter expert with a wide range of experience in the marketing category who works closely with marketing professionals and helps alleviate challenges encountered when overseeing agency relationships.

Defining Your Requirements

The marketplace for marketing services is anything but easy to navigate. It is complex, and crowded with a wide range of agency options available to fulfill any marketing support requirement. Niche and full-service players exist, some agencies operate independently, and remaining ones are owned by a holding company. Sister agencies compete against one another or may team up to offer a comprehensive service offering. Mergers and acquisition are relatively frequent and can consequently lead to conflicts of interest. Overall, there are a number of considerations when you are seeking out an agency to support a new marketing channel or upcoming product launch. And these considerations should be known even if there is no forthcoming agency search or new marketing tactic on the horizon to support. Marketing professionals and their sourcing colleagues must always be aware of the current state of the marketplace for marketing services to remain competitive and innovative, especially when it comes to the digital space.

Digital Marketing continues to evolve due in part to the various technologies that apply to digital tactics. Advanced technology and digital marketing as a whole have reshaped the way consumers interact with brands, and digital agencies have emerged to support the various digital channels and technologies that exist. It is vital for marketing professionals and their sourcing counterparts to recognize this and determine what type of expertise they wish to obtain to supplement their internal marketing team and fulfill a specific scope of work. Digital Marketing Depot’s whitepaper titled Digital Advertising Agencies 2014: A Buyer’s Guide (download required) serves as a great resource for marketing professionals, defining various types of digital agencies and how and when they should be engaged. Overall, the report provides an accurate snapshot of the current digital landscape and guidelines on how to effectively work with digital agencies across the various service types.

The initial starting point is validating the need to conduct a digital search. Consider:

  • Is the marketer unsatisfied with their current digital shop and looking to transition?
    Review and consider the performance of the current agency. Common reasons for dissatisfaction include: missing deadlines, under-delivering, and poor communication, especially when several agencies work together on a project.
  • Is a new digital channel under consideration that would lead to an increase in scope, impacting the current retainer model?
    When looking to implement a new digital tactic, consider the potential for scope creep. This can occur when a project is poorly defined and can end up consuming allocated budgets.
  • Is there an upcoming product launch in which the consumer base has a strong digital presence?
    Review the campaign you plan to implement. Are the tactics you plan to use offered at your current agency? Is it something a specialty agency would be better suited handling?

Once the objectives are clearly outlined and the scope details are ironed out, the agency selection criteria should be established. This criteria will dictate the search in its entirety and should tie directly to the scope requirements. For example, if the scope is strictly website development, a social media monitoring agency is not nearly the right fit.

With these activities complete, you can move on to agency selection. We’ll explore this topic in-depth in Part II of this three-part series.

Thanks Kathleen!

What Would the Acquisition of SalesForce Mean to the Procurement Market?

Who Cares?

While the doctor and the maverick see eye-to-eye on a lot of issues, and that’s why they have been collaborating on the new Spend Matters CPO site because there are important messages that are just not being communicated by the new press at large, the doctor believes that the impact this acquisition will have on the Procurement market, as summarized in yesterday’s post by the maverick, is not as important as the maverick seems to believe it is.

While the acquisition of SalesForce is an important topic, it’s no more important than the acquisition of any non-Procurement technology vendor. (While some SRM vendors use the platform, one has to remember that it is, at its core, a CRM platform). It’s (primarily) upstream, while Procurement is primarily downstream. While the processes should connect, they are still distinct and, unless you are in the middle of a negotiation, there’s no reason to even think about it as a Procurement issue.

The real issue is what does the acquisition of SalesForce mean to the technology market, and the market at large?

And while the doctor knows that he’s not just stirring the pot but the entire honeycomb on this subject, it’s a subject that needs to be addressed. So what does it really mean?

Simply put, too big to succeed!

One of the biggest problems with the technology market is that the misconception that bigger is better, and too big to fail, is a reality. The whole point of big was to benefit from economies of scale. But economies of scale have a limit. A single factory with a single production line can only produce so much going 24 hours a day. To go beyond that, you have to add another production line, or even another factory. If you do so, and you only reach half of the capacity, you don’t have the same economy of scale on the overage.  The biggest economy of scale was when you were at full capacity on the one line.

In other words, if you expand faster than demand, you waste time, money, and resources. This situation is bad, but the situation that occurs in an acquisition is much worse. Not only do you have more capacity, but you have a huge debt load as a result of the acquisition. So you are paying more to produce, and then you are paying even more to service the debt that you took on to produce more than you needed to.

But even this situation isn’t as bad as the situation where you are talking about technology companies that don’t produce physical goods, don’t have demand that typically rises with population increase or market growth, and have valuations that are many multiples of annual revenue — not profit, revenue. And we all know that the misconception that the product has already been built and the residual cost of sale is minimal is incorrect. Software has to be maintained, debugged, and constantly improved in order to be saleable to the mass market. That is costly. Whereas a product has a single production cost, possibly a single repair cost under warranty, and possibly a single reclamation or disposal cost, that’s it. The cost for each product is essentially one-time, whereas the cost of software is continual and adds up everyday it is in use.

As a result, you have software that typically:

  • cost millions to build
  • costs millions to maintain

and now you want to

  • add millions to the cost just so you can change ownership and assign a different name

It doesn’t make a lot of sense. Especially when you are talking about the acquisition of an 800 lb gorilla which already has a (relatively) complete solution. In this situation the acquirer is essentially admitting that either

  • its solutions are totally inadequate and it wasted millions of its customers dollars on its solutions (versus realizing that it has some good solutions, is missing a few key elements, and just needs to acquire a few point solutions from smaller vendors to fill the holes) or
  • it has no inherent capability to enter the space (and maybe it shouldn’t be entering the space to begin with).

And the acquiree is essentially admitting that

  • it cannot maintain (rapid) growth on its own anymore (which may not be bad if it’s the dominant player and has a very large recurring revenue and could continue to increase profitability with improved efficiency) or
  • it’s shareholders are greedy and impatient and don’t care what’s best for their customers and just want a quick payout.

Neither situation is good for either party. Nor does it make sense for any of the de facto tech giants who would likely acquire SalesForce to do so. None of the six AMIGOS (Amazon, Microsoft, IBM, Google, Oracle, and SAP) should acquire SalesForce. Here’s why.

  • Amazon
    They are an online e-commerce giant, with inherent ability to be a commodity supplier to large enterprises. They are not a software provider and beyond insuring quality, and receipt of goods, would not benefit from CRM. Sure the Force.com platform would allow them to offer even more apps, but they can already offer Android apps and sell online software, so it’s not a huge leap in capability.
  • Microsoft
    They already have huge back office suites that they have made huge investments in, including investments to port these suites to the cloud. Plus, their focus, and strength*, is back-office apps. They’d be taking a huge-write off on existing technology and would have to rewrite a lot for a whole new platform. They already run on Windows and Mac, that power the vast majority of office desktops, so why do they need the Force.com?
  • IBM
    IBM already has platforms for just about everything, including Alliance for CRM, have heavily invested in Watson, and need to keep building on the workflow and integration platforms they spearheaded in the early naughts.
  • Google
    the doctor will admit that it almost makes sense for Google, but Google’s market, and expertise, is apps, and it is still learning how to make money off of enterprise apps. It’s not ready for SalesForce, would have to let it run as a completely separate division, and take a huge hit to its balance sheet to pull of the acquisition. And while it’s the one company that could probably pull of a successful integration in a reasonable timeline without bleeding blood red everywhere, it would likely be quite a divergence from its other projects.
  • Oracle
    Oracle has too many CRM platforms as it is (with Siebel, PeopleSoft, CRM on Demand, and integration to about a dozen other platforms) and needs to continue to integrate and build on what it has. What makes Oracle strong, and great, is that it has always believed in eating it’s own dog food (while Microsoft ran off of third party databases even after SQL Server was released and has demoed Windows software releases on MacBooks on more than one occasion), but even Oracle can only integrate its acquisitions so fast. It’s still catching up on acquisitions past (and it took about 3 years to integrate the majority of Sun applications into its “single instance view”), so just imagine the effort to do a true end-to-end integration of SalesForce. Plus, it’s still a database / ERP company and with SAP so aggressively pursuing its marketshare in the US, with IBM and Microsoft still aggressively pursuing its global market, and with some companies (still) proclaiming that non-relational or in-memory databases can be faster and better for the average application, it has to focus on winning that fight.
  • SAP
    SAP is an ERP company with a very heavy focus on SRM, as evidenced by the huge amount of money it has dropped on Procurement, T&E, and Supply Management vendors over the past few years. This is where it has to focus to not only break-even on its acquisitions, but generate future value. And it still has a lot of integration to do. A lot.

the doctor‘s sure not everyone will agree with him, especially since people seem to get a little blind when such big numbers start flying around, but someone has to start putting this in perspective.

And now to put up the tarps in expectation of the reactionary mud-slinging from third parties not inclined to think deeply about the issue.

* And yes, the doctor cringes when he says this because most of their software, in his view, while standard, is sub-par — but they are the de facto solution and their Office apps, when you cut through the clutter (and the ribbon), work very well.

How an Online Marketplace Can Improve Equipment Rental Procurement Part II

Today’s guest post is from Robin Salter, CMO of KWIPPED.

In Part I, we noted that even though there are currently a few online marketplaces that support the construction/heavy-equipment industry, there are no true online marketplaces for equipment rental even though it is estimated to be a $38 Billion to $50 Billion market, of which construction equipment represents less than half of all rentals. In today’s post we will address the potential benefits of an online marketplace for equipment rental, but first we will discuss traditional equipment rental sourcing as a foundation.

Traditional equipment rental sourcing

When there’s a job to be done that requires equipment rental, the first step is sourcing the equipment. Most organizations have a policy that requires multiple rental quotes from multiple suppliers in order to establish a basis for comparison and leverage the cost reduction power of competition. The traditional equipment rental sourcing process looks something like this:

  1. Research potential suppliers
    (that carry your required equipment) through association directories, online searches, referrals and other channels.
  2. Contact the suppliers and do further background checks
    to ensure the suppliers are legitimate and reliable.
  3. Submit quote requests to each supplier
    that met your preliminary criteria. There will likely be some back and forth communication with each supplier to clarify rental details.
  4. Research additional suppliers
    after discovering that certain suppliers don’t have the required equipment available at the required time or don’t carry all of the equipment that the organization needs to rent.

How does an online marketplace benefit equipment rental sourcing?

Added efficiency

Procurement staff (or whoever is in charge of sourcing the equipment) could visit a single website. Select the equipment needed with a few clicks. Provide the details and dates just once and then allow the marketplace platform to do the work. Your single quote request would be automatically and immediately delivered to all of the marketplace suppliers that meet your rental criteria. Any additional details that you may need to communicate can be sent through the system once and distributed to all of the participating suppliers simultaneously.

The system manages the research and communications for you and then delivers multiple, side-by-side quotes for easy comparison. If you need to rent equipment immediately and don’t require quotes, a quality rental marketplace would offer the ability to select and rent specific equipment directly from uploaded supplier inventory. Tasks that traditionally takes hours, days and even weeks could be accomplished in minutes in an online marketplace environment.

Growth opportunities

An online equipment rental marketplace would provide such efficient access to all kinds of equipment that businesses could easily take on projects that they may have previously turned down due to a lack of equipment. In fact, a marketplace filled with categorized equipment could empower a business to proactively discover new ways to expand their services and their customer bases, simply by renting equipment they don’t currently own. Scrolling through various equipment categories could generate creative ideas about new service offerings and allow businesses to test them out without a large capital investment or strain on cashflow.

Quality Assurance

When the completion of a job is totally dependent on having the right rental equipment, it’s important to rent from suppliers you can trust to deliver quality equipment, and on time. A good online equipment rental marketplace will have processes in place to ensure the quality of their suppliers so you don’t have to waste time doing background checks and investigations. Suppliers are not only typically certified by the marketplace itself, but most online marketplaces will also include a rating system that allows renters to review and rate suppliers based on their experiences.

Cost control

Because marketplaces aggregate lots of rental activity, they usually have access to lots of data about how much specific equipment rentals should cost. A good marketplace will create a truly competitive environment, which is always good for the renter. Some marketplaces will even offer transparency so renters can easily see the going rates based on real-time rental transactions.

The time has come for a comprehensive equipment rental marketplace.

Thanks, Robin.