Earlier in the week, I wrote the first installment of a two-part blog on consolidation in the Spend Management market. Today, it is my honor to present the main course menu items for the feast. For our diners today, we offer an assortment of options based on personal recommendations.
First, to Salesforce.com, who is just stepping into the room, might we suggest that you look to the Spend Management market to dine out tonight, using your Amex Black card with a credit limit of nearly $3 billion in equity and $300 million in cash. Given your near 60 times forwarding looking EPS multiple, virtually any deal could be made accretive, going down in a single gulp as fast as you can say "On Demand". Both Procuri and Ketera would seem like logical choices, given their On Demand model and material revenue.
Next, to SAP and Oracle -- yes, you two trouble-makers kicking each other under the table in the corner chairs -- we offer a bidding war for Rearden Commerce. Both of you talk the talk about SOA and improving your customer's business processes, but you've not begun to understand the power of Spend Management to transform procurement until you've tried Rearden yourself. Granted, the interface is the opposite experience of R/3, but we all know both of you want to move more towards consumer-based UI-type interfaces for your applications. And for appealing to CIOs, there's no better morsel than Rearden to tell the Fusion or NetWeaver SOA story (even though this is exactly the wrong message for a business audience).
And for Ariba, let us suggest a two-fold main course. First, we recommend putting on some weight with the old staple "meat and potatoes" by buying revenue and customer lists where appropriate and rolling these vendors' customers onto your solutions. These dishes might take the form of category-based software plays (e.g., Fieldglass) or specialized services firms such as Tenzing Consulting or Denali. And second, we challenge you to consider the adventurous specials of the day. These dishes might take the form of solutions that enable procurement to further influence spend decisions in the design process (where a majority of cost is already locked-in for direct materials). Or they might help further drive compliance and savings on the back-end of the Spend Management process. We'd recommend you steer clear of supply chain planning and collaboration applications, as too many of these have been molding in the meat locker far too long and could cause heartburn or worse.
Last, might we suggest to Procuri to consider an On-Demand roll-up play similar to the first Ariba option above, buying smaller vendors for customer lists and revenue, and rolling them onto your own platform. With the right M&A leadership and integration bench strength, this type of strategy could supplement your organic growth.