Analyzing the GEP/Enporion Acquisition (Part 2: Customer and Competitor Implications)

Earlier in the month, we published two posts covering GEP's acquisition of Enporion (you can read themhere and here), a former industry marketplace turned source-to-pay suite provider targeting the utilities industry. In this installment, we'll first explore some of the implications of the deal for GEP and Enporion customers. Then we'll begin to analyze what it might mean or signify for GEP's BPO and software competition. Most important, we do not believe Enporion customers are going to face anything like the decline in service levels, slowing levels of innovation or rising costs that have plagued some customers of other acquired providers in recent years. GEP, which has enjoyed very solid -- we estimate double-digit -- annual growth for years, has made a focus on differentiated software assets (for a BPO) an important component of its broader BPO and solutions value proposition.

In addition, there are a number of other customer takeaways we think are worth considering:

  • GEP P2P customers are likely to gain access to enhanced capabilities in the coming quarters from the acquired Enporion assets in the areas of network-based supplier connectivity, supplier portal/integration, electronic invoicing and other related areas
  • GEP customers (more generally speaking outside of those using their P2P capabilities) are likely to benefit from the ERP and supplier integration IP that Enporion brings with its platform, which we expect GEP to leverage in its own suite and solutions; there are many integration touch points in a broader source-to-pay context that matter outside of P2P including supplier management/vendor master data integration
  • Given that both companies develop on a .Net platform, the time to realize combined platform integration synergies is likely to be faster than had the two companies developed on different platforms. Moreover, it's been Spend Matters experience in broadly observing companies in the Spend Management sector that vendors developing on .Net can bring new features, solutions and releases to market more quickly, in comparison to Java environments (OK, feel free to start tossing virtual tomatoes at us with this statement)
  • It is unlikely that GEP will focus on investing in building out highly specific applications for the utilities industry beyond the existing focus of the Enporion development organization; however, we expect that GEP may increase its BPO and services offerings tailored at the utilities market if the Enporion customer base is open to considering it
  • GEP customers should expect to be treated more along the lines of traditional customers of a software/solutions company rather than as members of a shared-services development organization (this potentially brings positives and negatives with it)

From a competitive standpoint, we believe the GEP/Enporion transaction will have a range of implications, including:

  • Ultimately making GEP more attractive as a premium takeover candidate by a larger BPO wanting to buy its way into procurement market growth (or accelerate existing penetration) by acquiring a differentiated provider with broad software suite capability, consulting services and typical BPO-type offerings (it should be noted GEP was a premium takeover candidate before this acquisition and over half a dozen providers have queried Spend Matters about our view on acquiring GEP in recent years)
  • Providing additional fodder for competing BPOs to invest in incremental efforts in building out integrated P2P (inclusive of eProcurement and e-invoicing) and supplier network offerings that stand out in the marketplace
  • Encouraging further M&A activity among other BPO providers looking to acquire differentiated -- and often highly focused -- software assets across the source-to-pay marketplace (beyond P2P) while also speeding up the pace of consolidation
  • Potentially encouraging competitors -- or at least giving them the idea -- to become more vertically focused in M&A activity, looking to acquire customers, revenue and IP from specialists which may have been overlooked in the past given their narrow industry orientation (which might be extensible across industries)
  • Putting pressure on P2P providers such as Ariba to speed up the pace of innovation as more-and-more competitors (including GEP) extend their capabilities, becoming more competitive through enhancing their solution breadth and depth (with the ability to leverage the feet on the street of larger sales organization than smaller providers)

- Jason Busch

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