SciQuest to Acquire Upside: “Upside” All Around or Not?

Today on Spend Matters PRO, we published a 1,600+ word analysis of SciQuest's recently announced acquisition of Upside. Spend Matters PRO Core subscribers can gain immediate access to our commentary. Here are some excerpts from our initial analysis.

"Yesterday, SciQuest announced its intent to acquire Upside Software. Upside, for those who do not know it, is one of the top providers of contract management software, which told Spend Matters at the end of 2010 that 80% of its business was from CD-based licensing (though they also offer a SaaS model as well), Its simpler hosted application, Upside "Live," never really gained traction relative to Ariba and other SaaS contract management tools. Still, Upside has a single code-base for its installed and SaaS solutions..."

"Upside's 2012 revenue numbers are potentially down from 2011 based on our sources, which would explain the low valuation ... Spend Matters estimates Upside's revenue was over [at its height] ... Upside's founder and CEO, Ashif Mawji, maintained close control over the venture for many years..."

"SciQuest appears to be perfecting the art of buying assets at reasonable valuations in a market where most will pay higher prices. As with AECSoft, Upside was a company that was closely held and owned by the founder – founders in the case of AECSoft – where the owners walked away with significant personal gain even without a high multiple because of a lack of significant outside investors..."

"The deal will provide SciQuest with the ability to up-sell and cross-sell into the Upside customer base (and vice versa); but more important, it will help SciQuest get shortlisted for contract management deals at the higher-end of the market (which is where it wants to be) and unlike Upside, SciQuest is willing to make the capital investment to truly "SaaSify" the higher end offering, but ..."

"Upside, did, however make a number of enhancements in 2011 to the platform aside from truly moving to SaaS as a primary delivery model. These included a new code base ... Upside also focused on usability in this upgrade (reducing the number of clicks to navigate, for example) ... Overall, these investments have paid off in selection, checklist and analyst comparisons. Forrester's recent 2011 review of Upside was strong. Spend Matters own selection work in the contract management area provides further support for their capabilities ... From an authoring/drafting perspective, Spend Matters ranked Upside ..."

"So we're left, essentially, with platform and functional depth that was rich and recently upgraded (including an improved UI), but not ready for cloud primetime outside of the architecture ... SciQuest took advantage of this to buy what Warren Buffet might describe as a "Cigar Butt" -- a stogie with a number of puffs left on it but without having to pay the price for a premium Cuban smoke. Moreover, it's one they hope that can be transitioned to a fully SaaS business and delivery model based on the underlying product and architecture assets."

"Spend Matters analysis of the transaction, focusing primarily on solution integration and the customer/prospect perspective, will continue in August and September."

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- Jason Busch

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