Capgemini Acquires IBX — A More Flexible Procurement Outsourcing Model? (Part 2)

In the first post in this series, I provided some background details on Capgemini's recently announced acquisition of IBX. In recent years, I've covered IBX in a number of Spend Matters posts, including a two-part series in the fall of 2009. You can read Part 1 and Part 2 of this series by clicking these links. Clearly, a major rationale for Capgemini making this deal was the ability to bring to market a procurement BPO offering, one that builds upon the evolution of outsourcing models driven by labor cost into process-focused approaches that now encompass technology as well.

I agree with IBX that in today's market, "tapping into commodity expertise and technology" are key in a BPO setting; however, IBX and Capgemini are not alone in this vision. ICG Commerce, a North American rival to Capgemini, has built much of its model on deep category and process knowledge and an enabling technology infrastructure designed around realized savings on the category level. IBM also touts its deep category expertise across indirect categories, gained from its own purchasing expertise and team. Accenture, Genpact (an ICG Commerce Partner), Infosys, and others also share a similar procurement BPO vision that transcends simply moving transactional bodies to lower-cost regions (not to mention the simple improvement of basic processes such as A/P).

Therefore, understanding solution differentiation and approach at the product level is key to unearthing what separates procurement BPO and hosted procurement technology services from each other (i.e., On-Demand software solutions that deliver additional capabilities beyond a basic hosted-delivery model). In this regard, IBX supports a range of sourcing, P2P, contract management, and related technology components. It currently delivers a SaaS-based SRM solution based on a customized version of SRM 4.0; however, IBX will be upgrading and rolling out SRM 7.0 later this year and migrating existing customers onto the upgraded capabilities in the first half of 2011.

IBX also continues to development its own business intelligence solution (which is separate from SAP Spend Performance Management, a platform on which other SAP BPO partners, including Hubwo and Bristlecone, are standardizing). Moreover, IBX continues to work with both Emptoris and SAP in the sourcing area, and with SAP for contract management. IBX's SAP e-Sourcing solutions are currently based on the Frictionless platform. To entice IBX to make the switch from Emptoris, SAP initially offered to provide IBX with new capabilities ahead of the market (e.g., optimization), but relented to pressure from Hubwoo (and possibly others), and soon offered a similar advanced timeline to others as well.

Much of IBX's current value-added capabilities in the P2P area stem from organic internal development rather than heavily modified SAP products. IBX has moved away from JCatalog and MDM in the area of content management, for example, and now has its own solution in this area, with a new release coming this spring. It is also developing a capability for invoice management outside of SAP. IBX plans to stick with SAP as a core technology platform partner, but in outsourcing situations where it encounters a customer with an Oracle, Ariba, or other third-party application environment, it will support this technology as required. In the types of larger outsourcing deals for which Capgemini competes, it will be essential to offer this flexibility. Still, outside of the SAP ecosystem, a combined Capgemini/IBX organization might have less experience in Oracle and Ariba environments relative to their peers (and there is no guarantee that IBX's internally developed supplier management, content management, search, and related enabling technologies will seamlessly transition to a non-SAP environment).

So where does IBX's technology hodge-podge leave Capgemini? I'd argue with a very solid starter kit to enable SAP shops to accelerate spend under management, spend visibility, sourcing, and related capabilities. However, large outsourcing and consulting shops don't exactly have the reputation for being stellar on the software-development front. Given this, the aspects of IBX on which Capgemini will focus in the long term from an organic development perspective, as opposed to partnering with best-of-breed providers to deliver solutions, remain to be seen.

Next up in this series on Capgemini/IBX: analyzing the broader solution offering in the context of the outsourcing and procurement services market.

Jason Busch

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