Services Procurement Hindsight is 20/20: Ariba, SAP, and Fieldglass

- March 26, 2014 10:32 AM
Categories: Commentary, M&A | Tags:

As the Spend Matters team gets cranking on its coverage of the SAP acquisition of Fieldglass, we present an oldie but goodie that dates back almost three years. I’m reprinting below an old post of mine in its entirety: What Does Ariba Have Up Its Services Procurement Sleeve?

As an anonymous source on our team commented after reading this, “They finally got what they wanted. Back to mother Ariba. Very Putin-esque…”

Reprinted Below: Original publication date 6 May 2011

Ariba has known for some time that in order to fulfill its vision — call it the “commerce cloud,” “spend management” or what have you — that services procurement must be on the table. For a while now, Ariba has had a decent if not overwhelming ability to address SOW spend through a custom driver that users can configure (we know companies have used it for print, legal and other spend areas). Last we reviewed it in 2009, it was not industry leading, but it worked.

At that point in time, contingent spend going through Ariba’s services procurement solutions accounted for roughly 50% of volume, while SOW spend accounted for the other half. Yet as the market went then (as it does now), Ariba was rarely considered a player compared to independent VMS platforms in the majority of larger platform deals for contingent or non-contingent spend (Fieldglass, IQNavigator, Beeline, PeopleClick Authoria and Provade, in certain cases, are much more common VMS choices). It’s clearly Ariba’s hope to change this now.

There’s a material body of evidence that suggests Ariba is embarking on initiatives — not just marketing rhetoric — to pursue this sector more aggressively. Consider the following:

  • Ariba was one of the parties bidding for Fieldglass (eventually purchased by Madison Dearborn, a PE firm)
  • Ariba continues a partnership with numerous VMS providers that integrate into its solutions (and Ariba has made some strides on SaaS P2P integration for VMS, but not as many as some organizations may require)
  • The company has continued to seek out and maintain partnerships with focused consultants in the past year in the area — they’ve also recently worked with expert partners on roll-outs of their service procurement capabilities, something that was often off the table before (as Ariba kept services in house in the past); yet hurdles remain on establishing and maintaining relationships with the staffing firms and MSPs
  • At Ariba LIVE in April, Ariba employees were overheard telling Beeline employees that they would soon buy them (which was news to folks at Beeline, especially considering Adecco’s strong commitment to the organization and growing R&D investment in it)
  • Just a week or two prior to LIVE, Ariba decided to make the decision to boot out another VMS partner from the event (perhaps who they saw as competition, or future competition?)

Our own due diligence in talking to those close to Ariba suggests that while it appears there is no major platform overhaul or significant contingent or SOW upgrade for Ariba’s VMS or category driver capability — outside of normal incremental release enhancements — on the horizon, that clearly something is up in this area. Which, of course, makes perfect sense. Services procurement is a giant opportunity within the Ariba customer base, and one that few organizations are tackling well. Yet whether Ariba finally decides to get very serious about this sector and executes a bold move to create broader penetration within the market — as a number of folks inside Ariba would clearly like to see — remains to be seen.

Still, no one should count them out of this critical and growing procurement market segment. From a business model fit with network/transactional-based revenue on the VMS/contingent front to the ability to further penetrate existing accounts (many of which aren’t doing much in the area) with an up-sell that could result in greater annual revenue than standard P2P deployments, the services spend opportunity is an ideal one for Ariba. And this why we believe there’s something up their sleeve in this area.

Stay tuned for more coverage of SAP’s announced acquisition of Fieldglass throughout the day.

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