Yet Ariba is just one public player in the sector. Even though I don't own any stocks in this sector because of my role in covering it, I often get asked where I would put my own money if I could invest. Candidly, I'd probably spread it across all the major public players (including Ariba) because I believe that longer-term, procurement remains a good macro bet in both software and services. I also think companies that focus on value-added services such as supplier auditing, certifications, credentialing and supply markets intelligence/content all offer an interesting way to play the market. But beyond Ariba, three players stand out to me that collectively offer a way to build a procurement-driven investment portfolio. SciQuest is one of them.
In Spend Matters' view, one vendor to consider alongside Ariba as a broader proxy for the procurement software marketplace -- albeit on a vertically focused level -- is SciQuest (NASDAQ: SQI). SciQuest has built a very strong vertical presence in both P2P plumbing (e.g., catalog management, supplier enablement) and modular requisitioning (i.e., core eProcurement) and invoicing capability in higher education, life sciences, healthcare and increasingly, the public sector. They have supplier management, diversity, contract management and additional capabilities as well. I've spoken with dozens of their customers and partners and the vibe about them is universally positive. I also attended their customer event earlier this year and had the chance to really get to know some of their users and see first-hand how SciQuest goes about engaging with them on driving adoption, adding incremental capabilities, etc.
While I don't have enough room in this post to go into the nuances of indirect buying needs and solution requirements across vertical sectors like higher education and life sciences -- e.g., in research/laboratory settings -- trust me, they're material and unique. In particular, the ability to manage catalog information as a service at the level of detail and frequency required is a serious undertaking for lab equipment and supplies. And SciQuest does it as well as anyone.
In addition to vertically-focused solution depth, what stands out about SciQuest is their ability to exist well in a broader partner ecosystem with vendors including Oracle and PeopleSoft (one company, but two different procurement solutions). Even though SciQuest has the ability to functionally displace both in many cases from a requisitioning perspective, they usually don't, instead opting to provide services around catalog management, supplier connectivity, etc. One of the PeopleSoft team members I talked to in the past year spoke very highly of the SciQuest relationship.
SciQuest is not without competition. Ariba, Coupa, Science Warehouse, UniMarket and others are worthy competitors in either select or broad functional areas, albeit some are more (or less) vertically focused than others in the same markets in which SciQuest excels (in addition, SAP, Oracle and PeopleSoft are also competitors). Moreover, SciQuest does not have the solution breadth of an Ariba or SAP in certain areas such as sourcing or spend analysis. Yet as part of a broader investment portfolio play on the procurement market, SciQuest provides a good proxy for general adoption of purchasing and supplier management tools across some of the faster growing vertical sectors when it comes to purchase-to-pay (P2P) and supplier management technology. And it's a company that has created a large fan base among its customers.
Stay tuned as we continue this series on a portfolio approach to playing this market.
Disclosures: Spend Matters team members and partners have served SciQuest in a research/advisory capacity and/or been formerly employed by the company. Over fifty other providers have engaged Spend Matters and our affiliates in recent years, including many direct SciQuest competitors. See our "Disclosures" section for a partial list. Jason Busch, the author of this post, is not an investor in SciQuest, Ariba or any other solution vendors in the procurement marketplace and does not hold any technology stocks because of his role covering the solutions market.