Accenture acquires Procurian to form procurement outsourcing giant

So the merger and acquisition madness in the procurement solution provider industries continues unabated into October, with the announcement of the biggest of the recent transactions, Accenture’s acquisition of Procurian from ICG (Procurian’s parent company).  They’re paying $375 million in cash, which ICG may use in its core cloud computing business.  That price represents around 3x Procurian annual revenue according to Jason Busch at Spend Matters US – and you can read his immediate thoughts on the deal here.

There is a particular irony about this. Readers with long memories will recall that ICG Commerce had a relationship with Andersen Consulting (Accenture’s forerunner) in its early days. Here’s something from a young analyst called Pierre Mitchell I found via Google from November 2000.

“ICG Commerce, an e-procurement Business Service Provider (BSP), will merge with ePValue, Andersen Consulting's BSP division. The new ICG Commerce will pick up ePValue's global operations, 250 employees, $20M in revenue, and a few more billion in spending from Andersen Consulting and some of its clients such as Sara Lee”.

Andersen took an equity stake in ICG and, as Pierre said, the business ran much of Andersen’s / Accenture’s own procurement for a while.  But Accenture disposed of their stake around 2004 I believe,  took their own procurement back in house, and started developing again their own  procurement BPO practice.  Since then of course that has expanded , sometimes competing directly against ICG Commerce, who then changed their name to Procurian in 2012!

This will have major market implications. Procurian are the largest of the pure procurement outsourcers, with GEP and Proxima in that group too. Accenture and IBM lead the list of those firms with wider interests but with strong procurement practices, along with Cap Gemini, Genpact and others. Xchanging are unique in having a limited but deep and focused range of fairly unconnected outsourcing areas, of which procurement is a strong element.

So this move changes the market dynamic considerably. Accenture will be a very clear number one (assuming they maintain customers) in the market, and as Procurian have worked at times with Genpact and Cap G, we can’t see that happening now. So this might trigger more action in this market as the larger firms look to fight back against this new behemoth.

We’ve reported for some time the health of the procurement outsourcing market, not just the hard numbers but also our subjective view that more and more CFOs and CPOs are feeling comfortable about  getting external assistance for at least part of their procurement portfolio. This deal emphasises that this is a hot market now.

And whilst Cap and Genpact may be concerned by this, I suspect Xchanging and Proxima – our two UK domiciled players – may not be. In a sense this takes one competitor out of the market , so they will find themselves up against one less bidder in formal competitive situations. And certainly in terms of  Proxima, you can’t help think that they’re going to be getting a few potentially very interesting phone calls coming in over the next few weeks...!

More to come from us too on this deal.

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First Voice

  1. Christine Morton:

    It’s exciting, I must say! 🙂 🙂

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