With 1stbp, it's clear to analysts and investors that Basware has acquired more than just e-invoicing volume or geographic presence. One of these specific technology gains, which we profiled in an earlier post, brought stronger virtual printer capability that replaced Basware's former Business Transactions Virtual Printer (BTS Virtual Printer) based on Internet Printing Protocol printing, but required longer to implement without all of the same benefits as the 1stbp capability. But aside from this single gain, Basware appears to be taking on more from 1stbp in its overall e-invoicing connectivity and network-based approach than usual for such a small acquisition.
In discussing the acquisition with Spend Matters, Basware mentioned that 1stbp not only provided stronger supplier-facing solutions than they had previously, but also had a distinct focus on packaged approaches for supplier connectivity. In contrast, we know there was a fair amount of confusion over Basware's connectivity offerings in the past, especially in the North American market (we've been asked numerous times by Basware prospects and competitors whether Basware even had a network offering in North America, let alone different means and approaches to connecting suppliers -- these questions have appeared to have been truly honest inquiries). Certainly, this transaction should help cement that Basware does have a standardized and packaged global approach to connecting suppliers in a network environment.
Basware is clearly also speaking the language of supplier enablement and supplier connectivity as a network provider more so than it has in the past, especially in comparison to OB10 and Ariba (which it has previously sounded different from in its customer and supplier facing market lingo). In its positioning of the transaction to Spend Matters, Basware suggested that "global supplier activation" for users of its supplier network services would be a major focus going forward. Customers and prospects should take note that Basware's language here is similar to competitors for the first time, compared to in the past where network connectivity was an afterthought that came a distant second to selling and supporting the complex multifaceted and customizable Basware P2P software products.
Basware will undoubtedly face stiff competition in the network space from a range of providers, including OB10 and SAP (through its Crossgate acquisition and network/connectivity partnerships with Hubwoo, IBX, etc.) However, it remains Spend Matters' view that until Ariba changes its pricing model to a document vs. dollar volume-based that they will not be a regular competitor in this market, aside from providing connectivity for those using its P2P and Buyer solutions vs. more broadly for those who are not on its platform. But perhaps most important, Basware appears to be truly embracing, as my colleague Pete Loughlin (Purchasing Insight) described to me as, a truly "open" network approach and model relative to its competitors.
Looking ahead, we suspect Basware will remain a highly acquisitive company around driving growth, competing against Ariba (and possibly others) to consolidate network volume across Europe, and potentially more broadly. But as Matti Copeland, Basware's ranking Corporate Strategy executive told us, it is Basware's intent to become a "serial acquirer" of technology and invoice volume across geographies. However, the supplier network M&A consolidation game that Basware is taking part in requires a significant amount of legwork to close deals, considering that within the space, "most targets are fairly small" but still come with the same "lengthy process" that is typical of most due diligence efforts.
However, at least from what we've seen so far, few of these efforts appear to be addressing some of the fundamental challenges that Basware faces on the product side of the P2P equation where its solutions are stronger when it comes to e-invoicing than e-procurement. For example, Basware's current abilities to support advanced supplier self-service for catalog/content management, search/federated search and a consumer-like shopping experience look more like ERP providers than their top eProcurement competitors.
But perhaps as important, the great majority of Basware's software revenue is coming from traditional installed deals (vs. SaaS/cloud) owing to both the solution architecture and the customization strength of the products. Now, don't get us wrong. There's nothing inherently bad about being strong in enterprise software deployment approaches. But if Basware has any hopes of achieving a premium valuation multiple like an Ariba, they're going to need to show growth in their SaaS business in a very meaningful way.
No doubt that going forward, it will be fascinating to watch how Basware begins to respond more aggressively to existing competitors in different parts of the P2P market. We have a feeling that an enhanced set of capabilities and some fresh thinking is not too far off.