Spend Management Consolidation: How Much, How Quickly?

European Leaders blog recently featured their take on recent consolidation activity in Spend Management. Pointing out the recent Bravo / Verticalnet and Ariba / Procuri acquisitions, the post hints that there might be more to come. For the post, European Leaders interviewed Forrester's Duncan Jones, who suggests that "the rash of deals seen since the turn of the year have been driven by three major factors -- scale, major player influence and, finally, customer driven demand." I agree with Duncan that too much consolidation activity could actually hurt the market: "A little bit of consolidation is good but you still need choice ... insufficient competition is not conducive to driving the kind of innovation that procurement needs." Amen (on both sides of the Atlantic).

It's my guess that 2008 will be a year of not only more deals, but possibly larger ones as well. One area that I'm sure we'll see significant activity in is software industry roll-ups. Private equity firms are currently flush with cash, and I suspect that we'll see a number dangling large sums over vendors who agree to their Faustian acquisition driven bargains (you can take our money, but you've got to promise to spend it!) Personally, I've seen enough acquisitions fail over the years that I think any roll-up strategy is fraught with risk. The only exception to this is when the acquirer has a core competence in acquisition integration, which is not something any vendors in this sector that I know of exactly have at this point.

Jason Busch

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