GXS Acquires Rollstream — Turning a Supplier Management B(2)B Gun Into a Cannon

Yesterday, EDI provider GXS announced that it had acquired Rollstream, a supplier management software provider. For recent coverage of Rollstream on Spend Matters, you can check out an introductory post series in two parts from late 2010. See Part One and Part Two. Flash forward a few months from our initial write-up of Rollstream and GXS is positioning the announcement as deepening their "commitment to the social supply chain, a vision that brings together information flows and information workers to break down barriers hampering supply chain efficiency".

We'll dissect the true rationale behind the acquisition in the coming days -- "social supply chain" is jargony garbly goop in our view -- but regardless of deal positioning mumbo-jumbo, we believe this small acquisition is a turning point for the sector. By uniting a traditional EDI network with a supplier information management toolset that leads with compliance and supplier enablement, GXS has the potential to remake itself into a next generation Ariba Supplier Network. Add in one more element, electronic invoice presentment payment (EIPP), and GXS could be far ahead of its EDI -- and perhaps even supplier network -- peers in vision and ability to execute in a world where traditional electronic data interchange is mattering less and less. I'm sure some of you thought EDI was withering on the vine. Guess again.

Who is Rollstream, and how could they help drive an evolution of the GXS business model? Rollstream is a small provider in the supplier management sector -- albeit all providers in this sector are small -- that competes against the likes of Achilles, AECSoft (sciQuest), Aravo, CVM Solutions, Hiperos and Xcitec. Ariba, Oracle and SAP also have solutions in this area (with Oracle and SAP having stronger offerings than Ariba, ironically, at least based on current capabilities -- stay tuned for a research report coming out on SAP's and Oracle's foundationally decent capabilities in this area). We previously wrote "even though it's possible to use RollStream as a true virtual vendor master, pushing and pulling supplier information to/from ERP vendor masters and other systems of record and updating information in a single repository, only a handful of customers are actually using the application this way today. In fact [Rollstream} suggested that only 15% of their customers are to this point -- and it takes on average over two years to get a new customer up to this level if they start with a single basic initiative. Nearly all opt to focus on one compliance issue as the initial charter for such a program before going broad."

In other words, even though Rollstram provides a complete supplier information management platform and wraps it in a social networking Facebook / Linked-in interface wrapper, the tool is largely used in targeted ways today around supplier compliance issues. This is not necessarily a bad thing as supplier compliance could be "the burning platform in which to convince potential customers to invest in this emerging area," as was previously suggested to us. Curiously, Rollstream has had success selling outside of procurement into the IT organization. In late 2010, Nick Parnaby, RollStream's Founder, told Spend Matters "that it's primarily the 'B2B IT guys' who are driving the decision process [for their solution]. In other words, the interest nexus is where 'IT meets purchasing,' as he describes it." Based on this, we opined that "perhaps this explains why RollStream realizes decent success through its partnership with legacy EDI vendor GXS, which is positioning RollStream as a means of driving collaboration and community on top of data exchange." And now it's more than a partnership, mind you!

From a solution standpoint, RollStream is rock solid in the areas it focuses on, despite its consumer-like wrapper. We previously wrote "the level of detail and visibility that RollStream can get you to [into suppliers], provided you have the means to assess or obtain the information in the first place, is impressive. And it can begin with a dashboard that measures where suppliers are on a relative basis. Take compliance, for example. A simple view can enable a user to drill down not only on how vendors have performed in the past, but on the specifics about which suppliers, and what percentage, are in remediation, what number have completed and sufficiently updated profiles for the given quarter or year and the status of upcoming audits. In addition, users can define the system to provide a higher-level view of auditing trends and other activity in addition to showing supplier-level compliance and related information with a few simple clicks."

Might GXS be able to turn what amounts to a powerful little supplier management B(2)B gun into a game changing supplier management and connectivity cannon? Perhaps. Stay tuned in the coming days as we continue to investigate what this deal means for GXS and Rollstream customers, competitors, the broader market and most important, the future of the supplier management, transactional enablement/interchange and supplier network sectors. In the meantime, if you're curious to learn more about the supplier management market, here's a highlight of some of the available research titles we've published in the past few months (all of it is free to download):

Leveraging Supplier Management Platforms for Multiple Goals: Risk Reduction, Supplier Diversity and CSR

Supply Risk Management and Supplier Performance Management – Managing Your Supply Base in Real Time

Supply Risk Management – Segmenting the Technology and Content Landscape and Choosing the Right Category of Solutions

The Intersection of Analytics and Supply Chain Risk Management -- Using Intelligence to Drive Early Intervention

Beyond Basic Scorecarding -- Supplier Performance and Development Approaches to Drive Competitive Cost and Risk Advantages

Jason Busch

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