Minima Maxima Sunt: Why SAP’s Acquisition of Fieldglass is not like Buying Ariba

- March 27, 2014 2:11 PM
Categories: Commentary, M&A | Tags: ,

Over the past 24 hours on Spend Matters, we’ve had the start of what promises to be extensive coverage of the largest services procurement software acquisition in history: SAP’s acquisition of Fieldglass. See links to our earlier coverage under Related Articles. While much of our analysis will ultimately be centered on the solution, the technical side of product innovation and capability of the two combined providers, and the implications for customers and the broader market, there’s another, ironically “human” element to the deal that makes it very different than SAP’s acquisition of Ariba.

Simply put: contingent and services procurement professionals network and talk to each other (in contrast to the typical old-school procurement type).

If you’ve ever been to a contingent staffing event (e.g., SIA or a vendor event), you know that they’re lively affairs. Attendees tend to be much more social and interactive than those at typical procurement conferences. They’re also far keener to share information and trade best practices, even amongst competitors (e.g., rival banks or manufacturers). And this interaction carries through to sharing information and ideas outside of network events as well. Indeed, contingent workforce management and services procurement represent a very small world indeed.

It will be critical for SAP to realize that the relative lack of choice provided to customers (e.g., “buy this cloud P2P thing, don’t upgrade Buyer or SRM”) in the wake of the Ariba acquisition will not fly with the much tighter knit services procurement practitioner community, which would be up in arms over being told what they can and cannot have. The flip side of this, of course, is that small and large staffing firms alike have already rolled over and played dead (largely) when it comes to accepting the supplier-paid fee model of the MSP and VMS market.

The bottom line: lest anyone at SAP forget, it will be critical to remember that those in the contingent workforce sector tend to be far more interactive with each other and word will travel like wildfire based on their actions. In contrast to Ariba, this should have very significant implications for how SAP defines integrated roadmaps, prioritizes the potential for “choice” and flexibility in models, and generally treats customers (buyers and suppliers mind you!) after the acquisition close. The tiniest details and customer engagement will matter here more than ever in contrast to Ariba customers, many of whom have quietly complained and then done nothing more.

Or said another way, dusting off my college Latin, Minima Maxima Sunt (the smallest things matter most!)

Comments

  • Ian Anson:

    Well Jason, I agree mostly your article, but you are incorrect to assume staffing companies rolled over on the VMS, MSP bit. In fact, they understood fairly early in the late 1990’s when CHIMES started to organize the VMS space that this was another money sucking pig on the industry value chain. I fully remember Kelly going on a vendor strike with Chimes, which at that time wanted an unaffordable 4% take. But ultimately their customers forced the changes and the take of the VMS subsided to 2% or less. The fragmentation of the US staffing industry made a necessity of vendor management in a volume market where no vendor has more than 5% market share. So after a lot of huffing and puffing about setting up a staffing industry vendor neutral proposition ie. a VMS owned by the industry, they finally accepted (except in France where PIXID operates successfully as an industry owned proposition), that they could live with third party VMS providing the VMS take was less than they could provide themselves – which it pretty well is.

    CHIMES might have been the first but it died owing the industry millions after a fraud, and collapse which led to unpaid wage accounts. But Fieldglass was a much sounder product, followed by IQN, and a couple of others. Bear in mind the success of the staffing industry is in its evolution from a tactical to strategic proposition with some companies now pretty much outsourcing the whole of the shop floor.

    The emergence of MSP was another necessity, driven not by the staffing industry but by the tension in the client company between HR and procurement. One wants the best product, the other the lowest cost. Though the MSP/RPO model is by no means clear, for the most part it means shifting to locus of control to a point of mediation between HR, Procurement and the Supplier. And for the most part it seems to work.

    A problem for SAP is their general arrogance, mediocre products and high pricing. Oracle is pretty much the same. ERP companies understand the need for re-invention, as newbies like SalesForce and Netsuite build on the ERP incapabilities. I fully expect that Redwood Shores is spending a lot of time in Denver at this moment….they are a “me too-catch up” firm and IQN will surely be in their sights.

    But here’s the thing….world wide skilled people are in short supply and the skills are even shorter today than yesterday. Mess around with a staffing company and they simply stop supplying and move on to better value propositions. Randstad, Manpower, Kelly, RHI, Adecco and others have recently done just that. So if the VMS proposition leads SAP to simply integrate this into their supply chain offerings, and ignore how Fieldglass built their market (which was not on superior technology, but superior understanding of the industry) they will fail. They needs the industry, and here we do not disagree. But In a fragmented supplier market, VMS, MSP/RPO, properly positioned and handled has obvious value for all parties.

  • Jason Busch:

    Ian,

    What an outstanding history lesson and observations for all of us. Thank you. I only got into this sector in the past decade just a couple years before the entire Chimes incident. My view of services procurement in general is definitely more informed by have spent much longer in sourcing/supply chain compared with human capital / contingent workforce. But I’m learning — or at least trying! I’ve gotten to know enough over the years just how different this market is from other “categories” as well call them in procurement-speak. Completely unique. Your last observations on Fieldglass inside SAP are so spot on … it’s the institutional knowledge (and relationships) not just the technology. Thanks again!

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