Procurian in Accenture: The Profitable Son Returns

Back in 1999, I had hung up my consulting cleats and joined AMR Research (now Gartner) as an industry analyst covering ERP and supply chain. But having done strategic sourcing and knowing its value, I was surprised to see that procurement was so poorly covered. The market was littered with indirect procurement vendors, eMarketplaces, buying consortia, and every form of imaginable, all flush with venture money.

At the time, “bricks and mortar” firms were setting up industry consortia and even traditional consulting companies were getting into the mix, such as EDS/AT Kearney with its CoNext venture or Andersen Consulting with its AC Ventures arm that spun out its ePValue group (250 employees) to ICG Commerce (now Procurian) for $20M (which I wrote about here). ICG Commerce (and its parent) was a high flier, but a bit of a dubious model of a combination of GPO and ‘virtual distribution’ oriented horizontal marketplace. I was not kind to ICGC, and had a very strained relationship with them because of it.

And then everything changed with the crash in 2000/2001. Interesting, though: the core sourcing teams in the once 550-strong firm were able to not only save ICGC as it morphed to a traditional pure-play Procurement BPO, but also save its parent, ICG. Yet, it was a cash cow services business locked within a technology holding company.

But it could not be more fitting that ICGC (sorry, I mean Procurian) just delivered a $375M cash bump to its parent company to allow ICG to pursue its cloud-based platform pursuits (hopefully they'll be thriftier with the cash and will retain Procurian as their outsourced procurement department!).  And so, the story of the prodigal son has turned 180 to become the story of the profitable son who has returned back to the Accenture roost to become a “tower of power” within Accenture’s multi-tower business. It was a shrewd move. Rather than killing each other to win every deal, they joined forces and are putting IBM and Procurian’s ex-partners on their heels.

They’ll be happily cross-selling into each others customer bases, and Procurian’s focus on execution and proven outcomes will play well in a firm that has smarted in the past from over-reaching in some of the early mega procurement BPO deals.

However, there is still a lot of work to do. Accenture has a grand vision for its 'Business Process Platform', and while it aligns well to where we think the market is going, the ability to make procurement business services more modular and easy to consume at lower price-points has not been a strong suit for either of the individual firms, nor will it likely be a short-term priority.

That said, procurement organizations are just beginning to ready themselves to consume “mass customized” services platforms. We’ll write more about this in future posts, and Jason Busch has just written a piece on some of the market implications on Spend Matters PRO. But suffice to say that this deal will be a win for pretty much everyone, and even for the competition to raise their game against this potential juggernaut.

Indeed, forget the prodigal son, for the profitable son has returned.  Let's now see what kind of future kingdom he will build.

Discuss this:

Your email address will not be published. Required fields are marked *