Last week, Spend Matters covered Rearden Commerce's Acquisition of Ketera in three posts:
- Rearden Commerce Acquires Ketera, Creating a New, Broad Spend Management Offering
- With Ketera, Will Rearden Prove a Viable P2P Competitor to Ariba, Basware, Coupa, SAP, Oracle, etc.?
- Rearden and Ketera -- Acquisition Implications for Ketera Customers
After additional discussion in the past week, I've come to believe the deal will either play out in one of two ways -- with little chance of anything in between. If Rearden cuts its cards in one direction, they could very well leverage a significant amount of both the technical and business model assets of the Ketera model (more on this in a minute). But Rearden might also opt to decide there are only limited assets worth salvaging, for reasons I'll get to in a bit. Regardless, Ketera customers should not be concerned, as the legacy technology assets are far more stable with Rearden than Ketera as a stand alone entity in either scenario.
Under the first scenario, I could see Rearden leveraging a combination of Ketera's core P2P and supplier enablement technology to expand their own commerce network and "personal services" procurement/T&E offerings to create a highly scalable solution set with significant channel distribution and reach. This strategy might form the basis of a means for travel and financial services institutions already partnered with Rearden to begin to offer a full P2P suite that expends far beyond just e-invoicing, supply chain finance (including P-Card) and related offerings. Targeted at the middle market, this particular move would ultimately trump anything Coupa or others could come up with based on channel distribution (and to a lesser degree, broad suite integration alone).
In the middle market, the best and most user-friendly technology matters far less than scaling the distribution side of the business (we're talking orders of magnitude here potentially). However, this scenario will be entirely dependent on Ketera's technology suite and stack passing detailed diligence with the Rearden team, as well as other functional capability (gap analysis) and commercial (business model) areas passing muster as well. I'm personally not yet 100% convinced that simply porting Ketera's capabilities to a better sales, operating and distributing channel will be enough to scale the model past the spend tipping point.
This brings be to the second scenario, which has some potential to play out as well. Under this model, Rearden would only selectively leverage certain technology assets of Ketera. For example, Rearden could easily apply Ketera's spend visibility offering across its own customer base. Ketera's catalog management capability might also prove interesting as well. The former of these areas, incidentally, had a significant role in keeping Ketera going from a deal flow perspective in the past twelve months.
However, Rearden might opt to toss out or start from scratch in areas such as contract management, sourcing and aspects of P2P for one reason or another. Given Ketera's recent challenges on the commercial side in P2P, sourcing and areas relative to general competitor adoption and growth, this scenario is not necessarily any more far-fetched than the first. There's also an argument that says a material amount of what Ketera does is tangential to where Rearden wants to take its own business model and where the largest growth opportunities are in the Spend Management market. For example, having a second tier contract management play not tied closely into a top-notch sourcing platform is a recipe for stagnation on the buy-side (the sell-side and legal is something else entirely).
Clearly, Rearden has acquired a Spend Management smorgasbord of solutions with its Ketera acquisition. But in my view, it must consider first and foremost that despite any outward "network" marketing position, Ketera's competitive areas will require functional and modular strength, focus and depth to win deals in the future, not just an ability to connect buyers and suppliers in a marketplace environment. In fact, I'd argue that it was the network bet/model that proved the ultimate short-term commercial loser for Ketera (and that, in turn, led to this deal). Given this, there's at least some food on the platter that's been aging without many takers (or receipts) to show for it, and Rearden will need to decide quickly whether to compost it or send it back to the kitchen to mix into another recipe for tomorrow's Spend Management menu.