A Look Under the Sourcing Covers: Accenture Picks Up Ariba's Sourcing Services Assets (Part 3)

In the first post two posts in this series (here and here), I offered up thoughts on the deal from both Accenture and Ariba vantage points. In this final post, I'll share what it means for the market from overall landscape and customer perspectives. Later this Friday, I'll offer up some personal thoughts on the transaction, given that actuarially speaking, I gave something like 3.5% of my life expectancy to FreeMarkets only to have it eventually turn into a small pimple on the elephant's you know-what (I'm not bitter -- just sarcastic, and upset for what could have been had FreeMarkets done a better job executing rather than strategizing). But I digress. Let's dig in.

Landscape Implications

  • The sector is now left with a leader without any strong IP or process knowledge roots in the area in which it builds software for; this void is one that competitors may be able to exploit, especially if their products are informed by in-depth sourcing and procurement knowledge, rather than just the ability to develop good code from soliciting the input of procurement practitioners. At this stage of the sourcing game, Ariba is just another software/SaaS company (although the one with the largest market share in the sector)
  • The last remaining integrated services/software provider of any scale is BravoSolution. Emptoris has largely opted to transition its sourcing services work to partners. I suppose we could count AT Kearney Procurement Solutions (and potentially Capgemini/IBX) in with BravoSolution as well in terms of hybrid offerings, but in general, this model is become an exception for larger players (CombineNet, Trade Extensions and others are doing it on a smaller scale)
  • The transaction opens up the market to new entrants (e.g., Denali's new hybrid staff augmentation/services model) to offer differentiated and often lower-cost value propositions
  • Accenture BPO competitors (with the exception of ICG Commerce, which has much of the FreeMarkets sourcing DNA built-in and extended into contracting, vendor management, etc.) will need to react to stay competitive. This especially goes for offshore-based BPOs wanted to gain a foothold in sourcing as a key component of their programs
  • Depending on what Accenture does with the asset, the deal will further blur the line between what constitutes BPO and what constitutes strategic sourcing services
  • Some Accenture competitors I've spoken to have not yet figured out the best way to react, but most certainly, the deal will invite additional services consolidation (interestingly, I know from at least two sources at large services firms that Ariba had not shopped the deal to them; it appears the Accenture deal was in the works for some time and not shopped aggressively to at least some players in the market -- if not the broader market itself)

Customer Implications

  • Understand assignability and the ability of Ariba to sub-contract your agreements to Accenture (or not)
  • For Ariba software (not services customers), make sure you are not ignored in the transition, especially if you are involved in CD deployments/upgrades. Our very recent SI/channel/customer checks indicate that not all CD installs/customizations/upgrades are progressing at the level some had hoped; perhaps this is not surprising given that we all know Ariba is focused first and foremost on a SaaS/cloud business and deployment model
  • Make sure Accenture will continue to provide the attention you require if you do not intend to scale up a relationship to a broader BPO level -- Accenture is not currently set up to service many of the smaller deals within Ariba's sourcing services portfolio (e.g., <$250K per year) based on their target market, focusing on seven figure and larger opportunities
  • Position yourself so that you're not lost in the account management shuffle; even though Ariba's account management group is staying part of Ariba (and will continue to resell Accenture's services capabilities that used to be their own), there is often the potential in these types of situations to face a forced shift in who services your account
  • Ensure that Accenture will honor existing pricing arrangements for future sourcing projects; Ariba priced its services competitively in the market relative to other providers (e.g., AT Kearney Procurement Solutions); this transaction has the potential to increase typical fees charged by larger firms for such projects
  • By all means, consider sourcing services boutiques in addition to the big names for future engagements. For the most part, the DNA of firms like Tenzing, Insight Sourcing, Gibson, Paladin, etc. all came from FreeMarkets, AT Kearney and other firms who know sourcing inside and out (and in other cases, it came from best-in-class sourcing organizations like GE)
  • Consider alternative models such as Denali's new capabilities which look like a blend between project-based consulting (with a support structure) and expert contingent staffing (See posts here and here.)
  • Turn to specialists (e.g., Trading Partners) if you know you need reverse auctions
  • If you purchased Ariba software with the belief that sourcing/procurement expertise -- and the ability to receive market intelligence, on-demand services and category content in the context of the application -- was a critical piece of the decision equation, it might be worth considering other options on a longer-term basis

What do you think are the most important landscape and customer implications coming out of the transaction?

Jason Busch

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