GXS Acquires Rollstream — Key Implications: Market, Competitors (Part 1)

Last week, GXS announced it was acquiring Rollstream, a supplier management vendor that differentiates itself with a strong user interface based on consumer social networking UIs and a solid track record of enabling specific supplier compliance initiatives. For Spend Matters' initial take on the transaction and some additional background on RollStream, you can read our post covering the news from yesterday. We have not yet had the chance to talk to GXS about the transaction, but have time scheduled with them tomorrow and will relay our discussion later in the week. Until then, our cursory analysis of the acquisition, along with some other trends in the broader market, suggests the deal may be a partial catalyst for the supplier management market that has needed to break out from a bit of a early-stage growth funk (i.e., too many vendors chasing too few deals with only incomplete business cases built around investments -- and more than a handful of half-baked customer requirements and RFPs).

We believe that there are a number of implications of the acquisition for the broader market, including some subtleties that may be lost on many at first glance. These include:

  • An emergence of a new type of supplier network offering that includes transactional integration/support, supplier enablement and supplier information management (including risk, compliance and performance management)
  • A potential transformation of legacy EDI vendors into something broader, an evolution that could help drive broader adoption of supplier management capabilities into a large installed/customer base. No doubt EDI vendors like Sterling Commerce (IBM) and TrueCommerce are watching this acquisition with interest (if not, they should be)
  • Validation of the supplier management market as a stand-alone area. If any market needs it, this one is it. Providers such as Aravo, CVM Solutions and Hiperos have met with good but not overwhelming growth -- and interest -- in recent years. Spend Matters is aware of a number of recent large customer deals that have signed/are soon to sign in this market which, combined with the GXS deal, should help validate the supplier management market's potential and drive the exponential growth we believe it rightly deserves
  • The ability of providers like GXS (and potentially "new" EDIs like Ariba) to drive potential industry-changing business models through a truly next generation VAN model that incorporates community, supply chain traceability, financial and informational connectivity and related audit trails and data exhaust
  • The importance of prioritizing supplier compliance as perhaps the most common use case for broader supplier management platforms (which are capable of supporting a broad range of initiatives, from supplier risk management to supplier diversity to supplier performance management); Rollstream's strength in supplier compliance in certain markets (e.g., CPSIA) no doubt played a key role in convincing GXS their was a large market opportunity here

From a competitive standpoint, we believe the deal will have the following implications:

  • It provides validation that companies can safely consider best of breed providers over larger suite vendors for specialized capabilities (i.e., there's little or no risk of vendor viability given larger provider interest in the market)
  • It will force those sitting on the fence with limited or sub-optimal capabilities in supplier management today to either build out their offerings, acquire, partner with leading providers or exit the market entirely (just as Ariba quietly exited the T&E market previously, those with marginal capability today should consider their options)
  • It will enhance competition for potential deals where Rollstream was not considered given its limited commercial reach due to its small size
  • We expect it to drive supplier information management vendors to focus on network-offerings that encompass transactional connectivity rather than focusing just on serving as a steward and information hub for non-transactional supplier information
  • It will speed up the movement to build out a future market state as smaller providers and suite vendors like Ariba attempt to differentiate themselves in a more competitive environment. As we wrote previously: "In 2013, the network of the future will begin to take shape, looking like something of the following: Take a connectivity service like the Ariba Supplier Network and put it at the core. Strip out value-based transaction fees for commodity document exchange (and potentially make basic connectivity free). Add fees back in where value is actually created (e.g., financing) by taking a reasonable cut. Combine supplier discovery services that go beyond publishing an RFX to providing detailed insights on suppliers in the manner in which a buyer wants to see them as part of search capabilities that combine and aggregate third party information sources. Then toss in basic supplier enablement and supplier management and registration tools for suppliers to manage profile, financial, certification, credential and other data in a many-to-many matter."

If you're interested in exploring this market and what its solutions are capable of delivering in more detail, 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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