Emptoris to Acquire Xcitec, Expand Supplier Management Offering and Reach Into German Market

Minutes ago, Emptoris announced that it acquired Xcitec, a Munich-based supplier management provider. Spend Matters first spoke to Xcitec and saw a product demonstration a few years ago, but given their complete lack of presence in North America, we have not dedicated much virtual ink to examining the provider and their solutions in the supplier management area, especially compared with domestic competitors including Aravo, Biznet, SciQuest/AECsoft, CVM Solutions, Hiperos, Ivalua and a range of other vendors (including Ariba, Oracle and SAP). Still, the Xcitec solution is impressive, and not just for its SPM capability. From supplier on-boarding to ongoing supplier management, development and joint-initiative/cost take-out, they've thought through all the essential elements of supplier lifecycle management, and how to scale it in very large deployments. Terms of the deal were not disclosed, but Spend Matters estimates Xcitec revenue as comparable or greater than the largest pure-play supplier management providers in the US. Xcitec has had 50 customers since its founding.

According to the announcement, "Emptoris and Xcitec customers will now have access to a single strategic solution that consolidates supplier information and provides central visibility and the ability to feed this intelligence into the analysis and decision cycle." The solution will provide a means to manage "all the business processes associated with supplier management; including supplier on-boarding, qualification, risk assessment, performance management and rationalization." In addition, key Xcitec employees have joined the Emptoris team. Specifically, "co-founder Martin Berr-Sorokin will be SVP and GM of Supplier Management at Emptoris and co-founder Uwe Krieger will be VP of Development and Operations for Supplier Management."

Our cursory analysis of the transaction suggests that Xcitec offers a solid combination of geographic strength/relevance and an overall product fit with Emptoris, which had solid SPM capability before, but lacked a broader supplier management offering comparable with best of breed providers. Spend Matters analysis suggests that Xcitec has leading market share among innovator/early adopter companies within the German market for supplier management and a proven ability to co-exist alongside SAP in key accounts (note, in a previous discussion with Spend Matters, Xcitec suggested they had 40% market share in their regional market). In addition, Spend Matters believes that this acquisition is insightful for a number of reasons, and could portend further consolidation in the supplier management market. Our quick take suggests the following:

  • Emptoris will become the only broad suite vendor (source-to-pay) with best-in-class supplier management technology that can compete against the likes of independents focusing only on this area (from a functional perspective)
  • Emptoris will be able to use case examples from Xcitec, like one diversified manufacturer with 80,000 active users (including internal users and suppliers) who use its supplier management system, to show the power of broader deployments of such capabilities
  • The acquisition is a strong answer to SAP's recent entrance into the supplier management sector and should help Emptoris differentiate its broader suite against SAP
  • The move begins to more aggressively open doors into the German market for Emptoris; Germany is a relatively closed sourcing society relative to other countries in Europe and German companies tend to buy from German providers
  • The deal provides significant up-sell potential for both parties in general, as the two vendors share only three customers in common: Vodafone, Deutsche Telekom, Deutsche Post
  • Emptoris will gain a solid, diversified customer base including a range of manufacturing organizations; interestingly, however, Xcitec's customer reach stretches across industries and includes a range of telecom, financial services, manufacturing, process-industry and retail/CPG companies, among other industries
  • The transaction should be an impetus for customers to look at Emptoris plus other supplier management vendors as more organizations become aware of this valuable supply/spend management component that intersects procurement, operations, finance and other areas of the business
  • While the terms of the transaction were not disclosed, it is well known that European firms tend to trade at a discount, so the deal was likely quite accretive to the valuation Emptoris may be expecting in the public markets should it file for an initial public offering (IPO) in 2011 or 2012
  • The technology synergy between both organizations should be material given the common J2EE development environment

Stay tuned for additional analysis of this transaction in the coming days, including what it means for customers, competitors, partners and the broader Spend Management market.

Disclosure: Spend Matters Group, a Spend Matters Affiliate company, has consulted with Emptoris from a strategic planning perspective.

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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