Impressions of blur Group: Is a Bubble Forming around Procurement Solutions?
Categories: Procurement Commentary, Procurement Systems & Architecture, Solution Providers | Tags: L1, Technology
Last week in London, Spend Matters UK/Europe Managing Director, Peter Smith, and I met with blur Group, a new marketplace that has created quite a stir in the capital markets with such a high topline multiple (over 30X trailing revenue) that can only suggest a bubble-like market is starting to form again around B2B marketplace and procurement solutions. Blur is tiny.
The firm had revenues of $3.4 million USD for the first half of 2013, and lost $1.9m in the same period. Yet, when I checked last week, the company’s market capitalization on the London AIM Exchange was nearly $200m. If you do the math, that’s high indeed for a firm with market liquidity, especially considering this is a firm that in the US would be at a Series A or Series B stage – not public!
Frothy indeed. But what does blur do? In our meeting, I discovered that the firm provides somewhat of an intriguing spin on services procurement. They work on a project basis managing sourcing events, taking 20% of spend (not a misprint) to serve as a market maker for a variety of services including design, marketing (e.g., agency, print), content, art, technology, and legal. To date, blur has sourced nearly $70m in spend across 2,925 projects – a number that is cleverly advertised and updated, along with recent projects and the size of its supplier network, on the blur site (a.k.a., blur Trading™).
The company is a classic marketplace, serving as an intermediary between buyers and suppliers, and in this case, providing some degree of guarantee as to the effectiveness of a given supplier to perform. In other words, those who get the business are vetted, and blur provides some type of indemnification in the event of a failure to perform or other misstep. The example blur shared with us was a “false claim” an agency might make as part of an advertising campaign about a product, which results in regulatory enforcement.
Blur positions everything it does under the umbrella of “Services Commerce or S-Commerce.” The team believes it is creating a new market of sorts that could be a “Services Amazon,” in their words to us. Big ambitions indeed!
But there’s a problem with this argument in large part because a gigantic market for general services procurement and highly specialized category procurement already exists. Just on a statement of work (SOW) basis, cloud/SaaS providers Fieldglass, IQNavigator, and Ariba are all sourcing $4 billion (each) or significantly more in similar spend areas for their customers, according to 2012 numbers reported to Staffing Industry Analysts (SIA). Specialized vendors in the print, legal, marketing, and other areas are managing many billions of spend as well for clients on a total lifecycle basis – not just a sourcing one.
So where does this leave blur? The firm would argue the other providers do not provide matching – or market making – services. This is true and not true. Managed services providers (MSPs) as well as other intermediaries working with VMS providers absolutely do offer supplier identification, sourcing, and supplier onboarding services and capability, albeit not necessarily with the same marketplace spin. Yet blur does offer other services as part of its 20% fee to help find and identify the best possible suppliers for the job.
We’ll continue our analysis of blur in the coming days. Stay tuned.
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