Dealflow — March 2009 (Supply Chain Risk and P2P)

Last August, I penned a post that offered my take on the state of dealflow in the Spend Management market. I'd like to continue along the same subject line in this morning's post, taking a look at some areas where I'm seeing particular customer interest in recent months. I'll start with risk management, an area that's got everyone curious at the moment. When it comes to supply risk management, companies I talk to appear most interested in gaining greater visibility into supplier financial risk, perhaps owing to the news headlines of companies going out of business (or even their own suppliers closing down). Interestingly, many companies do not know exactly what they want at this point -- they just know that they need to tackle the problem.

I believe the benefits to vendors of this new found enthusiasm around risk management investments will fall into two buckets: content providers and application providers. There's room for both (though they will increasingly want to encroach upon each other's territory either building out their own offerings to encompass both content and technology or reselling third-party content). Regardless, I suspect we'll see significantly more supply risk-related deal activity as Q1 comes to a close and as we move into Q2. In fact, I bet that supply-risk related spending will more than double this year in both absolute deals and total dollars.

The next area I'm seeing quite a bit of interest in of late -- which represents a continuation from the fall -- is P2P. Companies who've done it for a while are either re-upping their marriage vows to existing vendors, in the process of getting divorced, or looking at more creative relationship options. There still seems to be quite an area of interest now around both content management and supplier enablement, especially among companies who've been up and running for a number of years (and among ERP provider customers, in particular). I'm also seeing more interest in the area around invoice automation and electronic invoice presentment and payment (EIPP) as well as questions around supply chain finance (though few I talk to seem to be able to define what supply chain finance is). Prediction: the concept of supply chain finance will long outlive the phrase itself (which will get tossed in the buzzword rubbish bin).

Perhaps the most important observation I can make around P2P is despite what vendors might have you believe, the whole market is not necessarily headed in a SaaS direction. I've had half a dozen meetings or calls in the past month or so with companies (or their consultants) debating the merits of on-premise versus SaaS models in specific situations. Perhaps owing to the economy, some of those companies considering on-premise deals are attempting to negotiate total costs more shrewdly with software providers so that their 5 or 10 year lifecycle support, third-party software, hardware, upgrade and maintenance costs look more like SaaS numbers than traditional ERP ones. On the ERP P2P note, both SAP and Oracle appear to be getting more flexible in licensing and deployment models, either selling their own hosted or back-end independent offerings or bringing in third party partners that can provide a SaaS-like model.

Anyway, enough from me. What are you seeing in the supply risk and P2P markets from a deal flow perspective?

- Jason Busch

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