Capgemini Acquires IBX — A More Flexible Procurement Outsourcing Model? (Part 1)

Earlier today, in the worst kept M&A secret so far this year, Capgemini announced it was acquiring IBX, a procurement services and software as a service (SaaS) provider, for an undisclosed sum. IBX has experienced steady growth in recent years and now counts 240 employees in its ranks, including a 40 person consulting team. The transaction, which is still pending closure later in February, originally took shape as a partnership that began last summer. After speaking earlier in the week with Pontus Björnsson, who serves as SVP of Products and Marketing for IBX, I learned quite a bit more about the acquisition rationale and the role IBX will play as part of Capgemini's procurement outsourcing/BPO practice. What I came away with almost immediately is that Capgemini is treating IBX as a growth play, a means to accelerate its own traction and solutions in the BPO market.

Leif Bohlin, who serves as CEO of IBX, will become the "newly appointed head of the combined procurement BPO services unit" of Capgemini, according to the announcement. I've had the chance to sit down with Leif on multiple occasions and I've found him to have some strong perspectives on the best means of delivering value to procurement organizations through services offerings that combine hosted third-party technology (e.g., SAP SRM), internally developed solutions that make up for the functional shortcomings of existing systems and expert services. Indeed, IBX today, prior to the acquisition, very much represented a solution-driven procurement vision rather than simply an outsourced or technology only procurement model. For this reason, despite their relatively small size (just over $40 million in 2008), they've accumulated a marquis customer list over the years of large Nordic and pan-European companies including Volvo, Skanska, Ikea, Lufthansa, Hydro, Vodafone, SAS, Allianz and Ericsson.

In delivering a nearly complete range of enabling technology and solution capabilities (stay tuned for part 2 of this column when we explain IBX's solutions in more detail) to large companies, nearly all with a common SAP back-end, IBX has leveraged a range of internally developed capabilities (e.g., supplier search and content management) alongside third-party delivered -- but IBX hosted and customized -- solutions from SAP, Emptoris and others. This fits with the vision that Capgemini is touting as "Procurement as a Service" in positioning its expanding procurement BPO business unit. IBX will help expand its offering, in Capgemini's words, to provide a unique set of capabilities that spans "procurement business process outsourcing, a scalable multi-tenant technology platform, a global supplier network, sourcing and procurement expertise and strong transformation capabilities."

Moreover, they will all be delivered under the Procurement as a Service label by "The same vendor on a global scale". And this, specifically, is what I'm guessing is the primary rationale for the deal. Relative to IBM, for example, Capgemini can now claim to have their own solution capabilities to manage large procurement outsourcing deals rather than simply serving as a general contractor that pieces together various solution elements. For example, IBM is currently engaged in a large procurement outsourcing deal at a large CPG company where they opted to sub technology hosting, delivery and supplier enablement to Hubwoo. If Capgemini had won that relationship with IBX's capabilities, they could deliver a single-provider solution with more experienced, in-house resources and infrastructure responsible for On-Demand SAP SRM capabilities and solutions.

Stay tuned for Parts 2 and 3 of this analysis of Capgemini and IBX when we look at the combined solution and talent footprint of the combined providers and how the deal has the potential to shake up the procurement services and BPO landscape.

Jason Busch

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