Opera Solutions Acquires BIQ and Lexington: A Procurement and Supply Chain Analytics Aria

Later this morning, Opera Solutions will announce that it has acquired spend analytics specialist, BIQ (and BIQ distributor, Lexington Analytics). Many in the procurement space know of BIQ as a pure-play platform for spend analysis with a focus on the ability to rapidly build, leverage, dissemble, and reconstruct spend cubes of all types. This includes creating mash-ups from diverse data sources that extend beyond AP, invoice and p-card data. Opera is a lesser-known commodity from a product standpoint, but many of its personnel, including senior executives, have extensive resumes in purchasing and supply chain analysis.

As background, the eight-year-old company has over 600 employees and more than a quarter of them are PhD statisticians or scientists. According to an interview with the firm's CEO last year, the organization expected revenue in the "$100 million range" for 2011, and for 2012, was striding to hit a goal of "$140 to $150 million." BIQ's revenue is undisclosed, but based on customer footprint Spend Matters estimates BIQ license revenue in the low to mid-seven figure range (not counting significant related services revenue accruing to partners).

The terms of the deal will not be disclosed, but Opera's cash position would certainly have enabled them to complete any such transaction. In this regard, Opera raised $84 million in financing last fall, with Silver Lake Sumeru leading the round (which has a unique tie-in to the BIQ story, which we'll get to later in this analysis).

BIQ and Opera have had a long-standing relationship that goes back to 2005. The BIQ business model was unique -- and some might argue old fashioned -- as the company grew almost entirely through working with resellers (those who know founder Eric Strovink are aware that the engineering-focused organization cares more about building product than fueling large-scale sales and marketing efforts). Lexington Analytics, who Opera acquired alongside BIQ in this transaction, was BIQ's largest distributor.

Opera was BIQ's second largest distributor. Leveraging BIQ's underlying technology, Opera was able to build a practice of around 25 experts serving a range of customers across industries in the procurement analytics area (although BIQ was -- and will be -- used by Opera in other areas).

On its own, BIQ was a vendor like no other in the procurement sector. In the past, Spend Matters observed:

Across the over half-dozen BIQ users that Spend Matters has spoken with in recent quarters, it's become clear that BIQ has developed a cult-like following of adherents. For many consulting providers and practitioners alike, BIQ has largely succeeding in becoming the analytical standard to identify and investigate a broad range of spend-related opportunities, including but not limited to spend visibility (e.g., invoice analysis and auditing).

Some organizations have built entire practices (and in some cases businesses) around BIQ's capabilities to rapidly drill into data. Spend Matters also believes that the flexibility of the BIQ deployment business model (pay-as-you-go, hosted or installed, etc.) continues to garner particular appeal as [some] organizations embrace a shorter-term investment mindset, expecting not only significant savings but also near instantaneous ROI, even for second-wave procurement savings initiatives.

In contrast to other spend analysis providers, many of whom focused on slick reporting front-ends and data classification at the core, BIQ opted to stick to its OLAP and analytics powerhouse knitting, engineering maximum flexibility into the application itself at the expense of pretty dashboards (although BIQ does include some pretty slick reporting and charting, the focus is on drilling into and analyzing data rather than prettying it up for someone who really does not understand it). The BIQ team and the Lexington organization will continue to focus on these areas as part of Opera Solutions (both BIQ's Eric Strovink and Lexington's Bernie Gunther are taking senior positions with Opera). Eric shared with Spend Matters that, distilled to the core, Opera's basic procurement value proposition is "evolving and changing the way procurement analytics are consumed in the future."

"Imagine pushing interesting data patterns to users actively vs. just providing a platform for the user to explore," Eric suggests. Opera will provide both the pull and push capabilities, including offering the BIQ toolset for those who want to dig in the analysis dirt themselves. Moreover, the solution will be able to "strip insights out on a category-by-category level, even tying back to underlying commodity spend and inputs." Still, the core differentiated value proposition will be to provide automated analyses run on a continuous proactive basis to highlight savings, recovery and related opportunities.

Eric further suggests, "The philosophies of the two companies are aligned. Opera believes that human intelligence married to computational power outperforms either humans or computers. BIQ also believes that human intelligence supported by computational power wins the day; this is why we have focused on tools to improve human productivity, rather than trying to create a one-size-fits-all fully-automated solution that pales in comparison."

Fighting words, no doubt, but the solution roadmap for the combined organization is daring. Eric suggests that the first phase will involve "extending and vastly expanding" the complexity of datasets that can be analyzed via one-touch human-driven OLAP analysis. Next, BIQ and Opera will prioritize increasing the size of the datasets that can be analyzed as easily. And, the organization plans to make the BIQ OLAP engine available as a powerful back-end driver for new products providing new visibility for "human decision making."

In an interview from 2011, Arnab Gupta, Opera's CEO, suggests that Opera's overall strategy is to build a "solutions factory" to solve different functional and industry specific "Big Data" challenges. These solutions, in Gupta's words, will target everything from "marketing services, to credit and fraud to supply chain, to Wall Street and global markets, to government and national security." The secret sauce is that the organization has a team of "machine-learning scientists who essentially look at Big Data, discern underlying models and work with software development in our data groups to convert this into commercializable IT and solutions that can be deployed at corporations."

Opera is serious about recruiting the best human capital in the non-academic statistics world. When Opera failed to win the Netflix Prize to improve the recommendation algorithm (they came in second as part of a consortia), they ended up buying the team who won, who worked for Commendo, which is now part of Opera. Incidentally, Opera's team was in a statistical dead heat with Commendo for the Netflix prize -- they just happened to submit their result 20 minutes later than the competitor.

How BIQ, Lexington Analytics and Opera combine to drive the future of procurement-focused spend and supplier analysis remains to be seen. But we suspect the resulting products will prove transformative and we know that Opera (and their investors) have been eying BIQ for some time as part of the broader Big Data vision. On a courtesy (non-client) call with Silver Lake Sumeru in 2011, members of the PE organization grilled the Spend Matters team on the spend analysis market and BIQ, specifically. From this call, it was clear something was up (it was before the Opera funding).

Stay tuned as we explore the customer and competitive implications of the acquisition. We'll also look at the types of dataset mash-ups that have enabled BIQ users to identify and implement savings opportunities in areas far beyond first generation spend analysis solutions. In the meantime, we recommend for readers that are curious about the subject to download a range of papers exploring the topic of spend analysis on Spend Matters:

Getting the Most From Analytics and Benchmarking

The Intersection of Analytics and Supply Chain Risk Management -- Using Intelligence to Drive Early Intervention

Beyond the Basics: Using Spend Visibility to Drive More Than Category Sourcing Strategies and Spend Reporting

Analytics and P2P: Using Spending and Payment Insights to Drive Savings and Working Capital Management Strategies

The Future of Procurement Analytics and Content --Three Scenarios For Company Adoption

Supply Risk Management -- Segmenting the Technology and Content Landscape and Choosing the Right Category of Solutions

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

Spend Analysis - Making Quantum Leaps: Exploring the Realm of Possibility and Savings with Three New Strategies

- Jason Busch

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