Will SAP Become More Acquisitive? New Strategy for Procurement and the Supply Chain (Part 3)

In the third part of this post examining the potential for SAP to become more acquisitive in the enterprise applications market -- from both a technology and financial leadership position, implying potentially running solutions and maintaining acquired brands -- I'll tackle some specific providers that SAP should consider procuring. In addition to the names I mentioned in Part 2 of this post, Ariba, Emptoris and SciQuest, all of which are large enough from a software perspective to warrant either a strategic or financial deal, I'll add a number of other vendors into the mix, largely based on size as well as solution uniqueness and growth.

One company that I'd put on par with the three listed above as a prime acquisition candidate is BravoSolution. Even though many in the industry -- including me, until they set me straight with details of their software growth -- consider BravoSolution largely a services provider with particular emphasis on the public sector, software is a large and fast growing part of their business. They're definitely up there in the game league of Emptoris and SciQuest in terms of software traction and growth. Granted, their solution portfolio overlaps 100% with SAP (and SAP has arguably stronger capabilities in the combined spend visibility / supply risk area with their new Spend Performance Management solution), but BravoSolution brings a strong combination of production (sourcing, spend analysis and performance management) to SAP as well as industry expertise in healthcare, CPG, public sector and other areas.

Zycus is another provider that may prove interesting to SAP from a software revenue and growth standpoint, and that also materially overlaps with SAP from a solution perspective (moreover, there could be some religious issues between the two in terms of spend classification, but I'll leave that to the spend shamans to duke it out over UNSPSC and other approaches). Still, Zycus could play an interesting role as part of a broader roll-up play if SAP pursues an Oracle-style acquisition strategy.

Personally, however, I still think Emptoris and SciQuest could prove most interesting, given their current size and software focus (except Ariba, which I'll tackle separately). In particular, SciQuest's strength in life sciences is a great complement to SAP (which also excels in the same market, albeit from a back-end perspective). Both companies could also bring much needed product management, sales and leadership talent into SAP, potentially capable of bridging SAP's internal Spend Management product development and leadership divide. However, if the IPO market turns around and Emptoris and SciQuest can maintain or increase their current growth, both will be prime candidates in 2011 or 2012 depending on conditions (SciQuest filed their S/1 recently and if they don't make it out this year, 2011 or 2012 is a much greater certainty). This will make their investors likely to dismiss any offers that come in at a lower end of the valuation spectrum (e.g., less than 2.5X revenue) from SAP or others.

Jason Busch

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