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First Take Analysis: Workday’s Acquisition of Scout RFP (Part 1: Scout Background, Strengths/Weaknesses, Deal Rationale)

Workday, a provider of finance and human resources solutions, has announced its intent to acquire Scout RFP for a cool $540 million in cash. For those with a long-time background in the industry, this might at first seem like a somewhat mind-boggling sum for a sourcing provider, bringing back memories of Ariba buying Trading Dynamics in the early B2B sourcing era.

But things are a bit different this time, as Scout is bringing rapid growth, material customer numbers (240+ customers) and material ARR growth to the table (we’ll do a back-of-the-napkin analysis of ARR and revenue contribution later in this series). Moreover, it’s an innocuous way for Workday to target procurement without having to go after “the hard stuff” (another key theme we’ll explore).

So beyond the somewhat shocking number at first, the deal can begin to make sense if you peel the transaction onion. So let’s begin.

As we kick off our analysis in this Spend Matters Nexus series analyzing the transaction, we’ll focus this first brief on providing a quick overview of Scout, graphically explain where it fits in the source-to-pay landscape, explore the provider’s strengths and weaknesses, and then begin to delve into the rationale for the deal from the Workday vantage point.

Later this week, we’ll offer an analysis of the M&A and deal components of the transaction (e.g., estimated multiples), provide deeper insight into the integrations/touchpoints between Workday and Scout, and share an analysis of the impact on the competitive landscape (for competitive ERPs, source-to-pay suites and independent sourcing providers).



Jason Busch serves as Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs in the procurement and finance solutions marketplace (including contract management, B2B marketplaces/connectivity, indirect procurement, services procurement, direct procurement, commodity management, payment, trade financing, GRC/third-party management and related adjacent sectors).

Scout RFP

As part of the SolutionMap RFI process, Spend Matters continuously solicits customer references to determine a procurement technology provider’s placement on the ranking graphics. This is a Spend Matters curated summary of verified customer feedback for Scoutr RFP, a SolutionMap-ranked provider.

What Makes It Great: The Scout RFP Customer Experience (Sourcing SolutionMap Analysis)

What if a procurement technology provider could build an entire market around usability and adoption rather than absolute feature/function capability alone, creating true evangelists within its customer base? Such an act has been done within e-procurement and procure-to-pay. Just ask Coupa. And it redefined an entire market, at least initially. Such was Coupa’s first act, before it focused on investing in functional leadership to complement best-in-class usability.

Scout RFP is following a similar path in the sourcing market. Its customer references and candid feedback from Spend Matters’ Q3 2018 Sourcing SolutionMap suggest it is not a typical provider but rather one that is redefining an entire market by focusing on customer adoption and the user experience. Like Coupa, it is creating a movement among procurement organizations. But where and how does Scout stand out in this competitive technology market with customers? Let’s dive into Spend Matters’ SolutionMap to find out what customers had to say.

“What Makes It Great” is a recurring column that shares insights from each quarterly SolutionMap report for SolutionMap Insider subscribers. Based on both our rigorous evaluation process and customer reference reviews, each brief describes where it excels and concludes with a checklist for ideal customer scenarios in which procurement organizations should consider it.

Sourcing Provider Head-to-Head Comparison: Scout RFP vs. EC Sourcing

The boom of the “Nimble” buying persona first started in e-procurement and coincided with the momentum that gave rise to Coupa’s leadership position as a “must shortlist” candidate for procure-to-pay (P2P). Spend Matters describes the Nimble buying persona as typifying companies with often early formalization of process, limited technology investment to date and potentially decentralized operations. Middle-market companies are also quite often Nimble buyers. But regardless of size, procurement organizations that fit the Nimble persona look to cloud-based technologies that can deliver on speed, efficiency, low price and quick value.

Anecdotally, Nimble is the most common buying persona Spend Matters sees today.(We will have data to corroborate this in later in 2018.) Even highly complex procurement organizations are often willing to trade off unique requirements to conform to the Nimble norm. And Nimble is not just a top buying persona for e-procurement. Nimble-minded procurement organizations are increasingly looking at solutions that meet similar criteria in other technology domains, including sourcing solutions. Based on Spend Matters Q4 2017 SolutionMap for North America customers, two of the top performing sourcing technology providers for the Nimble persona are Scout RFP and EC Sourcing.

But these providers could not be more different when it comes to outlook, motivations, management style and, most important, technology and solution strengths and weaknesses. Join us as we take off the gloves and based on Q4 2017 SolutionMap data, put Scout and EC Sourcing “head to head” into the Spend Matters evaluation ring. We’ll start by providing a technology summary comparative rating of each provider and then explore business requirements and scenarios, calling out the winner in each circumstance. PRO customers with advisory can reach out for us to comment on non-functional/technical considerations.

Granted, there’s not a bad choice among the two for the Nimble buyer. But let’s put them to the Spend Matters test and see which is the best fit for different requirements. If you’re considering either vendor or sourcing competitors, including other ranked SolutionMap providers Coupa, Determine, GEP, Ivalua, Jaggaer, Jaggaer Direct, Keelvar, Market Dojo, SAP Ariba, Scanmarket or Zycus, look no further for a head-to-head evaluation and comparison that you can’t get anywhere else.

Scout RFP: Vendor Analysis (Part 3) — Competitive and Summary Analysis

Oracle

The e-sourcing market might have met its Coupa in the form of Scout RFP. But whether Scout can add core functionality and related modules quickly enough to build out its own view of what a next-generation upstream suite needs to look like, as quickly as Coupa has in the P2P area, remains to be seen. There’s also the broader question of how Scout RFP could differentiate through tightly-coupled API, platform or “app” based partnerships in areas such as market intelligence, supply market directories, supplier management, contract lifecycle management, commodity management, analytics, e-procurement, e-invoicing and related areas. In such a fragmented and competitive market, following in Coupa’s growth footsteps won’t be easy. And successfully pulling off a “triple, triple, double, double, double” while maintaining near 100% SaaS renewal rates is a long shot, even for the best cloud products companies. This third and final installment of this Spend Matters Vendor Snapshot covering Scout RFP provides an objective SWOT analysis of Scout and offers a competitive segmentation analysis and comparison. It also includes recommended shortlist candidates as alternative vendors to Scout RFP and offers provider selection guidance. Finally, it provides summary analysis and recommendations for companies consider Scout RFP as a potential vendor. Previous installments provide an in-depth look at Scout RFP as a firm and its specific solutions (PART 1) and a detailed analysis of solution strengths and weaknesses and a review of the product’s user experience (PART 2).

Scout RFP: Vendor Analysis (Part 2) — Product Strengths and Weaknesses

digital

Scout RFP went to school on its procurement technology and geographic neighbor, Coupa. Just as Coupa focused on delivering a best-in-class user experience for core e-procurement initially and built out support for related components and then adjacencies such as AP automation and e-invoicing — so too has Scout RFP focused its product development locus on a single area, emphasizing usability, from which it has expanded. That said, in Scout RFP’s case, it has focused on the “upstream” areas of procurement technology, centered on e-sourcing. Perhaps it’s not surprising that the three-year-old provider, like Coupa, decided on using the Ruby on Rails application framework, a development platform and language that emphasizes efficiency and speed in coding.

Despite the fact that the core of Scout RFP’s functionality is not all that different in enabling sourcing capability than 15-year-old technology (remember Procuri?), what makes Scout RFP unique is how it has streamlined its overall user experience, including wrapping a new generation of collaboration, communication, project management, basic supplier management, reporting, savings tracking and supplier portal capability in a cloud-native environment. In short, it’s the first truly “modern” independent e-sourcing technology we’ve encountered with sufficient depth and breadth to serve as a core management platform and cockpit that can compete against incumbents in the market.

This Spend Matters PRO Vendor Snapshot explore Scout RFP’s product strengths and weaknesses, providing facts and expert analysis to help procurement organizations decide whether or not to shortlist the vendor. It also offers a critique (pros/cons) of the user interface. Part 1 of our analysis provided a detailed overview of the solution and the company, along with a recommend fit list of criteria for firms considering it. The remaining parts of this series will offer a SWOT analysis, user selection guide, competitive alternatives, and additional evaluation and selection considerations.

Scout RFP: Vendor Analysis (Part 1) — Background and Solution Overview

RFP

Some might question why anyone would launch a new business in the e-sourcing market, precisely what Scout RFP has done. After all, the complexities of basic sourcing capability typically pale in comparison with what is required to tackle areas like procure to pay (P2P) and contract lifecycle management effectively, which is why so many second-generation vendors in these sectors have used new technology stacks to all but completely overtake early providers in capability (perhaps with the one exception of SAP Ariba, which is still holding its own with growth). Moreover, there is arguably greater value from advanced sourcing approaches that begin to incorporate elements of total cost management, constraint-based optimization and supply chain network design than basic e-sourcing alone.

Yet Scout RFP is proving the observation wrong. In North America, it’s adding customers faster than just about any other provider. In this Spend Matters PRO Vendor Snapshot series, we tackle Scout RFP, a three-year-old e-sourcing vendor that started by offering only a basic RFP module, without even auctions.

This three-part brief will provide facts and expert analysis to help buying organizations make informed decisions on whether Scout RFP should be on their shortlist of e-sourcing providers to consider, either as a new solution, a replacement for existing e-sourcing tools or a complement to them. Part 1 of our analysis provides a company background and detailed solution overview, as well as recommended fit suggestions for when organizations should consider Scout RFP. The rest of this multi-part research brief covers product strengths and weaknesses, competitor and SWOT analysis, user selection guides, and insider evaluation and selection considerations.