Earlier today, Ariba announced that it closed the sale of its consulting (process, operations consulting/sourcing services, not technology implementation) assets to Accenture. Ariba and Accenture are positioning the deal as "giving Accenture ownership of Ariba's category expertise, sourcing process expertise and strategic sourcing execution resources." The deal is limited to these areas, as "Ariba has retained its sourcing technology and the resources within its Global Services organization that are dedicated to software implementation, enablement and adoption."
Even though the deal is being spun as a divestment of Ariba's "sourcing services and business process outsourcing (BPO) services assets," the best way to look at the transaction is that Accenture has purchased a combination of strategic sourcing bench strength, process expertise (and low-cost sourcing services delivery) and category experience, especially in the indirect/services areas, as a good portion of the broader direct material capability of legacy FreeMarkets asset has been eroded over the years. Moreover, Ariba never really had BPO capability beyond cursory experimentation (the former Alliente deal in 2004 never amounted to much).
In terms of the financial impact of the sale of the services assets, Ariba has updated its guidance for 2011 and "now expects total revenues to be approximately $347 million +/- $5 million. The subscription software and maintenance revenue outlook remains unchanged at $266.5 million to $270.5 million. The services revenue outlook is now expected to be $78.5 million +/- $5 million." But what matters most is the impact on customers, and in this regard, it's our belief that this deal is the best outcome for both parties.
In the view of Spend Matters, the FreeMarkets asset never amounted to what it could have been at Ariba, owing largely to a professional services organ transplant rejection by the host. In addition, internal politics held back the FreeMarkets asset. The third leg of the combined company -- the Pittsburgh office (former FreeMarkets headquarters) -- dangled out in an Appalachian abyss compared to Ariba's Sunnyvale headquarters during the unofficial period of power transference to Atlanta. But that's a much longer story and mostly irrelevant for customers (except for the fact that much of the real procurement, sourcing and process expertise in the formerly merged company was situated in Pittsburgh).
For Accenture (and from the perspective of Accenture BPO and consulting clients), the deal could not be coming at a better time, as Accenture has either not been invited to the table and/or lost a number of recent, significant BPO deals to Infosys, Genpact, IBM, Cap Gemini/IBX, ICG Commerce and others.
For this perspective as well as our past coverage and analysis, check out our recent posts (and video) on the subject: