SciQuest Leaves the Diversity Enrichment Business: Who Now Has the Best Supplier Diversity Data?

Spend Matters welcomes a contribution from Lead Analyst Thomas Kase.

My earlier post on SciQuest -- after the NMSDC conference -- led to a follow-up discussion with SciQuest around their product strategy and activities in the supplier diversity field. The acquisition of AECsoft USA at the beginning of this year gave SciQuest a new range of products (in the fields of supplier management, including supplier diversity, as well as e-sourcing and contract management) and a slate of new Fortune 500 clients outside SciQuest's traditional hunting grounds in higher education.

From discussions with SciQuest's team earlier this week, I have learned a few things. The first thing is that the company is moving away from professional services -- a common approach among software providers who have gone public, or are aiming to otherwise satisfy external investors, and need to polish their business valuation. Witness Ariba's shift away from professional services as perhaps the clearest case of this approach.

To be clear, SciQuest's change only impacts some of their more labor-intensive supplier diversity solutions -- their professional services support of other software solution implementations remains unchanged. To current SciQuest supplier diversity clients, TrueMatch solution (vendor master data cleanses used to identify and report on which portion of a company's spend falls within a given supplier diversity area -- woman-owned, small, veteran, minority-owned etc. -- as well as to manage parent-child linkages, tax ID validation, OFAC and other list checks) is effectively dead, as these services will no longer be performed by SciQuest internally.

In a cascade effect, this also spells the end of the TrueLocator tool -- a database with over 1 million diverse vendors -- which was a byproduct of the TrueMatch solution. Likely, SciQuest feels that this is a minor loss as they have another supplier network (SQSN) product, although this only contains around 30,000 suppliers and is not a supplier diversity tool.

SciQuest wants to make it clear that their commitment to supplier diversity remains unchanged and that solutions within SciQuest that touch on supplier diversity (ownership) status leverage such data points. For example, this may include vendor selections in the e-sourcing tool prior to an upcoming RFx. But compared with the past, these data points must now be brought into SciQuest solutions from a third-party content/validation provider.

In the marketplace, these types of vendor master data cleanses are performed not only by bigger firms like D&B and Equifax but also by CVM Solutions, a niche provider with a supplier diversity focus. With SciQuest discontinuing their data cleanse services, it's our view that the most accurate diverse vendor data currently available for US vendors is most likely found with CVM Solutions. But since CVM was recently acquired themselves, it remains to be seen if the same shift from services to software will not take place under their new management. Making matters worse for Fortune 500 supplier diversity professionals looking for quality services, the big name data providers are not known to have particularly good diversity data; this niche field is both too small and too labor intensive for them to allocate sufficient resources.

Back to SciQuest, potentially filling some of their professional services gap when it comes to supplier diversity will be Chicago-based Ralph Moore and RGMA -- a firm with long experience in providing supplier diversity consulting services to the Fortune 500 segment -- particularly regarding the minority side of the diversity equation. Spend Matters plans to look closer at how the partnership with Ralph Moore pans out once the dust has settled. Currently both firms are proposing their solutions, on their own paper.

Still, despite SciQuest's continued embrace of supplier diversity on the marketing surface, it's Spend Matters' view that they will now have little or no advantage in the diversity area compared with other software providers that also OEM data enrichment content. Over time, this will likely cost them the direct relationships they had gained from AECsoft with supplier diversity professionals, making some of the intangible elements of the acquisition less valuable.

Specifically, the NMSDC refuses to make its database available to technology providers -- thus forcing its corporate members to manually conduct individual vendor lookups in order to validate certification status. This approach is long overdue for a change and ultimately, if the NMSDC is serious about increasing diversity spend among North American companies, they will need to revisit how they work with and power technology solution providers that want to leverage diversity content based in part on their underlying database and validation services.

- Thomas Kase

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