Yesterday, Mark Hillman sent me over his take on the D&B / Open Ratings deal which AMR is now offering as a free read as the top story on their homepage. While the overall deal size is small ($8 million in cash plus a rumored earn-out component), it says a tremendous amount that AMR has placed the brief as the top story on their site. Perhaps the market implications of Mark's lucid analysis are a signal why: "In recent years, many strategic sourcing initiatives have slashed supply costs, but increased the brittleness of supply networks. The combination of D&B and Open Ratings brings together two complementary data and analytics sources that should help customers better manage supplier risk. The predictive analytics component of Open Ratings is an addition to D&B's core financial and credit risk data." If you want to understand the power of the combined capabilities, check out AMR's recent brief (subscription required) on how an A&D provider who "had at least two major supplier failures per year, costing $5M per event" was able to cut "supplier failures almost to zero" by taking a proactive supply risk management approach.
I believe -- as does Mark -- that this is a critical deal in the overall Spend Management market. We both agree that "making the combined D&B / Open Ratings portfolio of risk management products available to the market through the global reach of D&B's go-to-market organization is an exciting prospect not directly matched in the market." Why? While small, Open Ratings had built a truly defensible position as the dominant software and information-based provider of supply risk management solutions. And as Mark points out, there are a number of reasons why supply risk is increasing as a top concern in today’s sourcing and procurement environment. That's why the deal represents a smart move for D&B, which is hoping to grow its supply management business to a significant component of revenues to complement its credit and other business lines.
According to Mark's analysis, the "roadmap for the combined products includes enhanced reporting and usability. D&B will broaden the combined system to handle other supplier issues like diversity, balance of trade, credit risk, and more." But as I talked about a couple of weeks ago on Spend Matters, there's a risk element to the deal because of D&B's ho-hum track record to date with their supply management investments and evangelism. Mark echoes a similar sentiment in his brief, nothing that D&B must "very carefully capitalize upon the thought leadership position that Open Ratings has developed. If it loses that edge, it risks diminishing the value of the product."
Earlier in the week, I had a chance to speak to D&B and Open Ratings as well, and I'll post some additional commentary later this afternoon, hopefully without repeating what either Mark or I have had to say so far. Check back soon!