Consolidation in the Procurement Software Market – Warp Factor Ten, Captain!

Over the past seven years I’ve had discussions both in terms of covering their capabilities and about potential business opportunities for Spend Matters UK/Europe with SciQuest, Spend Radar, CombineNet and Pool4Tool. Didn’t turn into much commercially, but we did feature them in some way here and our US colleagues covered those firms much more deeply.

Here, we covered in some depth and had the pleasure of working with Coupa, Trade Extensions and Spend360 (lovely people all).

Over the past 5 years, those first four firms (along with contract management solution providers Upside) have become part of Jaggaer, now private again with private equity firm Accel-KKR as the main shareholder.

And Coupa acquired both Spend360 and Trade Extensions in the last year. We’ve also recently seen Tradeshift buying IBX, Proactis (after a steady acquisition spree over the past three years or so) merging in effect with Perfect Commerce, Ivalua taking over Directworks, and the IBM partnership with SAP Ariba, which is leading to the disappearance of the old Emptoris business.

It is only when you list out these moves that you realise quite how dramatic the consolidation in the core procurement technology industry has been over the past 12 months or so, and I suspect most procurement organisations and leaders have not really thought about it much. But it has real implications.

That’s not to say that genuinely innovative smaller firms can’t still do well – as we’ve seen with organisations we’re close to, such as riskmethods, Hellios or Keelvar.  But the general trend seems to be towards large firms who will offer all the core procurement tech capabilities, and who may well simply swallow up small innovative firms when they feel the need to add that particular competence to their armoury.

As an aside, this does also make life more difficult for analysts, conference organisers and the like (including us) if there are fewer firms to provide sponsorship or pay for exhibition stands!

But the implications for procurement leaders and clients of these firms are the more critical issue.  Does this all end with a similar market structure to the ERP market, with two firms (SAP and Oracle) accounting for a huge percentage of the total market?  Or CRM, where Salesforce are even more dominant? Certainly not every procurement software firm is thriving as this consolidation takes place. From blurGroup, Rosslyn and Cloudbuy at the “struggling minnow” end of the market, to Achilles in the “large but not growing” category, we can see some firms not exactly thriving.

That’s before we even look at the payments market, where the broader and more powerful firms are likely to threaten the specialists such as Tungsten, Taulia and Oxygen more strongly as time goes by.

Certainly, we can’t see that there will be ten or more large (let’s say >$50 m revenue) firms in the sector in five years’ time. In strictly alphabetical order, if we look at Achilles, Basware, BravoSolution, Coupa, Determine, GEP, Ivalua, Jaegger, Proactis, SAP Ariba, Science Warehouse, Tradeshift, Wax Digital and Zycus, (and there are more outside our US and Western Europe sphere of course), how many will still be around and independent by 2020, I wonder?

No more than five or six, we would bet. So let's think - in a future article - about what that means for procurement organisations who are making those tricky software choices now.


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