SAP Acquiring VMS Provider Fieldglass: Fast Facts and Sector Background

SAP announced earlier today that it was acquiring Fieldglass, the largest pure-play vendor management system (VMS) provider in the services procurement market. The deal continues SAP’s march into the cloud applications sector following its acquisitions of Ariba and SuccessFactors, the two largest providers in the source-to-pay and employee performance management market.

Spend Matters has already begun to provide insight into SAP’s announced acquisition of Fieldglass (see our earlier coverage today here and here). But we thought it might be useful to have a single post providing some basic facts on the acquisition announcement.

  • The terms of the announcement were not disclosed, but Spend Matters analysis and discussions suggest the transaction valued Fieldglass in excess of 10X trailing revenue (a low estimate).
  • Fieldglass had recurring SaaS revenues in excess of $50 million (a low estimate) and was profitable (highly profitable, according to sources). The company could have alternatively pursued an IPO route versus acquisition (which likely suggests the valuation was significantly above market).
  • The transaction is expected to close in Q2 2014.
  • Fieldglass has approximately 350 employees. Deployments span 100 countries and 16 languages.
  • Frequent Fieldglass VMS and SOW competitors (in North America) include IQNavigator, Beeline, and Provade.
  • Fieldglass is the leader by market share (based on transaction volume and customers) in the software area of the services procurement market. Our definition of services procurement includes the sourcing, buying, and paying for labor-based services, including both contingent labor and Statement-of-Work (SOW)-based labor such as contractors/freelancers/consultants. It is a subset of other procurement areas, but also can include a superset of functionality for managing labor and talent beyond just procurement. Providers can include managed services providers (MSPs), but more specifically includes the services procurement application technology providers that are better known as vendor management systems (VMS). Also includes providers (software, services, and solutions) offering support for customized or complex services categories such as print, telecom, marketing, legal, BPO, and other areas.
  • SAP and Ariba suggest the contingent labor and SOW services market is a “$3.3 trillion high-growth” sector of the global economy. Note, this is the global size of the overall procurement services market, not software.
  • Fieldglass had a strong foothold with large, Global 2000 customers including America Airlines, Monsanto, P&G, United, Kaiser, GSK, Rio Tinto, Johnson & Johnson, CVS, HMS, Verizon, and Reed Elsevier but has recently begun to make inroads in the middle market as well, and its pricing models can scale down.
  • The majority of VMS customers do not pay for the application directly – rather, the fees are passed through to suppliers and paid directly by them in a model that has proven itself sustainable in the contingent staffing market. However, a minority of larger customers have negotiated fixed pricing for a VMS that is more in-line with SaaS industry norms rather than the variable-supplier paid fees.

Additional Spend Matters coverage of the transaction will be published throughout the day and week. For additional analysis of Fieldglass and the services procurement market, see also:

For more information on SAP’s acquisition of Ariba, see:

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First Voice

  1. billy no mates:

    The challenge SAP faces as it seeks to integrate Ariba, Successfactors and now Fieldglass is how not to allow very specialist businesses (with deep understanding of their niche) to be sucked into the generalist world of SAP. It is already clear that the best people are leaving Ariba and SSFRs in droves and this calls into question the residual value of the technology when there are few people left who truly understand it. SaaS revenue is not like a maintenance stream which can be relied upon for 5-7 years… this creates a huge opportunity for the remaining niche vendors to move in and fill the gap. SAP is trying to build a “cloud company” by buying revenue streams but it remains to be seen whether that is a viable approach in the medium term… I suspect not.

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