Provade Acquired by Pinnacle — VMS/MSP Consolidation Continues (Part 1)

Last week, Pinnacle Technical Resources, a minority and women-owned staffing firm (which is important for reasons we'll get to in a moment), acquired Provade, which for some time has been considered among the top five or six players in the vendor management system (VMS) marketplace for managing contingent labor spend. According to the Marketwire announcement, "The Pinnacle-Provade union offers an unprecedented combination that does not exist in the VMS marketplace today...Provade, which delivers the only enterprise VMS available in the market, serves corporations and organizations in more than 40 countries in numerous languages and currencies, with billions of dollars in spend under management. Together, Pinnacle and Provade offer the only Oracle-based VMS solution that natively integrates with Oracle Procure-to-Pay (P2P) systems."

While terms of the deal were not disclosed, it is likely that the valuation multiples Pinnacle assigned to Provade were materially less than the numbers that came up in Madison Dearborn's acquisition of Fieldglass last year, owning to the fact that Provade was not only smaller, but that they do not have the same independence and ownership all of their individual technical components (owing to their Oracle relationship). Specifically, Provade's early core code traces back to PeopleSoft, while today, the application continues to take advantage of its close ties to Oracle through embedding Oracle Business Intelligence throughout as its reporting, OLAP and analytical layer.

These close ties to Oracle may have hurt Provade's absolute valuation, but the benefits have shown in numerous places over the years including in the application (e.g., the level of detail surrounding global tax reporting and conformity to country requirements is extremely detailed, because it comes from, you guessed it, PeopleSoft's own engine). And on the commercial side, there's no question that a majority of Provade's customers have come either indirectly or directly from their relationship with the Oracle commercial team.

Pinnacle's acquisition of Provade appears to be quite strategic, and anything but a plug-and-chug numbers-type deal. I had the chance to catch up with Provade's Edward Jackson -- known to many as "EJ" -- earlier this week and he presented the rather unique situation Pinnacle finds itself in as a diversity MSP that now, with Provade, can also deliver core VMS capability as well, both directly to its customers but to other MSPs. Most important, Provade will remain a neutral, stand-alone VMS, managed as a separate entity with an arms-length relationship to the parent company. Going back to the Chimes demise many years ago, there's always been a stigma in the market of attaching both VMS and MSP together in one account, but certainly the recent success of Beeline and Consol (PeopleClick) among others, has shown that a VMS with parent MSP/staffing ownership is a model which most customers are willing to overlook, especially when the MSP works to encourage a neutral selection process of a third-party VMS.

In this regard, at this stage of market development, Spend Matters finds it fascinating that three of at least the top six VMS players (Provade, Beeline and Consol) are now owned by staffing/MSP firms. Fieldglass and Peoplefluent (formerly known as PeopleClick) remain completely independent of MSP ownership and do not have MSP offerings of their own. And IQNavigator, while maintaining MSP capability of its own, appears to downplay this in its go-to-market approach, taking a platform-centric approach that showcases its technical capability in most prospect-facing situations along with its MSP partners.

Stay tuned as our coverage of Pinnacle's acquisition of Provade continues. As part of this analysis, we'll dig more deeply into Pinnacle's place in the MSP market and Provade's VMS offering, including what makes it tick and how it stacks up.

In the meantime, we would encourage you to check out our latest research reports in the services procurement area (available for free download). We find it ironic that many in the HR side are just discovering our research in this area (welcome!), but we've actually published more in the past year in this area than just about any firm other than SIA, which takes a more staffing-centric approach to the area vs. our procurement-centric bias. In any event, our recent VMS and services procurement research papers and studies are listed below:

Selecting Services Procurement Technology -- Options, Approaches, and Philosophy

Services Spend -- Beyond Contingent Labor: Achieving And Implementing Savings Across Previously Unmanaged Categories

Making Procurement a Services Spend Ally: Tips and Tactics for Winning over Business Stakeholders and Spend Owners

The Managed Services Connection -- The Evolving Role of MSPs in Services Procurement

A Statement of Work (SOW) Backdrop -- The Foundation of a Business Case

Services Procurement Benchmarking -- Truth in Numbers to Achieve a New Level of Program Results

- Jason Busch

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