Trans-Atlantic Puppy Love: Procuri and cc-hubwoo

Chances are that some of you have already read about Procuri's and cc-hubwoo's new partnership announcement. To recap the headline, cc-hubwoo will become a European reseller of Procuri's solution in France and Germany specifically, while Procuri will resell cc-hubwoo's solutions in North America. To quote the press release: "Under the partnership, cc-hubwoo will resell Procuri’s market-leading On Demand supply management solutions, bringing comprehensive supply management solutions to cc-hubwoo's global community of buyers and suppliers, the Enterprise Supply Network. The worldwide reseller agreement, exclusive in France and Germany, will expand and complement Procuri's existing marketing and sales efforts. Additionally, cc-hubwoo will leverage Procuri's market presence in North America to further drive adoption of its e-procurement and supplier enablement offerings. Sold under the brand "cc-hubwoo powered by Procuri", the solutions are immediately available."

In my view, this relationship will help Procuri to further penetrate the European market -- a geography which already accounts for 25% of their sales -- while giving them an option to push another eProcurement solution in North America (Procuri already has a partnership with Sciquest in this regard). On the sourcing front, I believe the deal sounds like a smart move for both parties, especially given the challenges non-European software providers often face when selling into continental companies, especially France and Germany, where locals like to buy from locals, so to speak. If the deal is rich enough to capture the interest of cc-hubwoo and lucrative enough for their reps on the ground in France and Germany, I have no doubt that Procuri will be able to pick up dozens of new accounts from it over the next 12 months. And in North America, the deal provides a signal that to the market that Procuri is at least thinking about addressing the need for a broader Spend Management suite.

But the partnership still leaves open a number of questions in my book. For one, why would Procuri not partner with the obvious North American choice for On-Demand eProcurement: Ketera? Ketera is strong where Procuri is weak and vice versa, and both push the On Demand theme in a major way. I can say with near 100% certainty that both vendors have had serious partnership discussions in the past, but so far, nothing appears to have come out of it. In addition, if Procuri actually does attempt to resell cc-hubwoo's eProcurement capabilities, they would become a reseller of a reseller, which strikes me as a bit odd and unnecessary (you can read more about this below). In addition, if I were a customer, I would push back hard to have a more direct relationship with the actual developer of the code so that my input would be heard (which is one reason why Procuri's regular customer satisfaction is high -- they allow users to make suggestions as they use the application everyday).

Enough on Procuri. Let's turn to the other side of the deal. For those who don't know cc-hubwoo well, the vendor has developed a solid supplier network which rivals providers like Perfect and Exostar from a transaction and supplier count perspective, but is smaller than the Ariba supplier network, which still leads the market in size. In addition, cc-hubwoo has licensed SRM technology from SAP to deliver complete eProcurement capabilities to the market. In our discussion about the deal, Procuri pointed out that "cc-hubwoo supports procurement execution activities for both indirect and direct materials -- specifically with its order management capabilities." They believe this is a strong distinction that differentiates cc-hubwoo from the pack, "making it a stronger and more holistic fit for our customer needs, many of whom use our solutions for direct materials sourcing." Despite cc-hubwoo's procurement execution capabilities, until the deal was announced, sourcing and supply management remained a hole in their offering. And it's one that Procuri should fill quite well. Still cc-hubwoo lacks at least some components of EIPP (electronic invoice, payment, presentment) software and services when it comes to the entire post-transaction component of eProcurement and supplier management.

Before the announcement, I had the chance to have a quick chat with Tim Minahan, Procuri's SVP of Marketing, about the implications of the deal. He suggested that from a partnership perspective, cc-hubwoo provides a "good balance with very little overlap" and "solid hooks into SAP". In addition, Tim mentioned to me the synergies of the supplier cc-hubwoo's supplier network with Procuri’s customer base. But personally, I have serious doubts about the applicability of sourcing and supply management supplier information to the information contained in an eProcurement based network. For example, from a sourcing perspective -- especially on the direct materials side -- one is interested in such information as quality certifications, production processes, available capacity, types of equipment, and overall competitiveness in past sourcing events. This information is rarely contained in an eProcurement supplier network. And from an eProcurement perspective, one is interested in entirely different capabilities and information such as real-time catalog information and pricing as well as supplier content management, punch-out, and connectivity capabilities. My comment here is not a knock on cc-hubwoo and Procuri as much as it is a statement that anyone who hears the word "synergy" when it comes to different types of supplier networks and supplier databases would be well served to dig below the surface based on their specific information and connectivity needs.

But getting back to the deal at hand ... overall, this is certainly not a Barney "I love you, you love me" sort of statement to the market. Rather, it's probably a better sort of puppy love -- where both parties will get something out of it, even if they never end up tying the knot. Indeed, I'd bet my own cash that both Procuri and cc-hubwoo will benefit substantially, especially on the European reseller side where this is a no brainer. But when it comes to North America and eProcurement, I'd argue that Procuri is not done figuring out its long term strategy and direction. Perhaps this will be the first of a number of strategic moves we will see as the Procuri continues to build and round out its suite of offerings and tackles eProcurement either indirectly or head on. One also wonders if this might prompt another round of calls from Insight Venture Partners to KPCB -- or the other way around -- to see about an On Demand Spend Management and Supply Management alliance among their portfolio companies. Regardless, even if nothing comes of it, I'm looking forward to seeing how aggressive Procuri becomes in playing a consolidator role in the overall market.

Jason Busch

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