Eight Years of Procurement Software Part 1 – the Success Stories

Today, a look back on how the procurement technology world has changed in the eight years I’ve been writing here at Spend Matters UK/Europe.

I guess the biggest change has been the move from premise-based software to “SaaS” (software-as-a-service), pay as you go, cloud-based providers and products. Coupa has been the firm that exploited this move perfectly; arguably, Rob Bernshteyn has created more shareholder value ($3 Billion plus) than anyone else in our industry in the past decade, as Coupa’s strategy just hit the zeitgeist spot on, with their easy-to-use, (relatively) easy-to-implement, constantly improving SaaS platform.

Another big change has been the growth of the “suite” concept. While specialists continue to do fine in certain areas (we’ll come back to that), the market is increasingly dominated by firms who offer a wide range of capability across the procurement landscape - purchase to pay, sourcing, analytics, contract management, etc.

However, it is interesting to note that there are two very different approaches to how firms achieve that market positioning. Some – but probably a minority – have built the different capabilities from the ground up, Ivalua probably being the best and most successful example of that. But most have extended their offering by acquisitions as well as organic development. Even for Coupa, matters got somewhat blurred as the firm started out with that build-it-yourself proposition, but then went on the acquisition trail with purchases such as Spend 360 (now "Coupa AI Classification") and Trade Extensions (now "Coupa Sourcing Optimization").

Buying capability meant SAP Ariba picking up Fieldglass and Concur; SciQuest bought Upside, CombineNet and Spend Radar, then became Jaggaer and made one of the biggest acquisitions in our industry to date, picking up a firm we loved working with, BravoSolution. Proactis made several smaller and successful acquisitions then took a giant leap (into the unknown, some might say) with the Perfect Commerce deal.

Some of these stories have been huge successes, as we say, while the jury is still out on others. On the other hand, Determine (created from Selectica, Iasta and b-pack) has not been a success, from a shareholder value perspective at least, even if the product is pretty good according to the Spend Matters Solution Map analysis. It’s interesting that even one of the most innovative and supposedly “disruptive” firms in our sector of the past decade, Tradeshift, has added solid revenue and capability by buying IBX and is now looking at a bid for Basware, a long-established firm which has been making a somewhat painful transition to SaaS. (We should say that Tradeshift founder Christian Lanng has also created considerable shareholder value, in theory at least.)*

But some providers have stuck to the organic growth approach. We mentioned Ivalua, but others such as Zycus, Sievo and Wax Digital have performed steadily in a generally growing market, without showing the dramatic advances of a Coupa or Tradeshift. But we suspect life might get tougher for those mid-tier firms if we see an economic downturn, given the strength now of the giants in this market. For instance, SAP Ariba, a business that seemed initially somewhat complacent about the Coupa threat, has been revitalised in the past three years or so and is growing strongly again.

Meanwhile, real specialists can thrive, although increasingly it looks like their end-game is to sell out at a decent price to a bigger firm. The spend analytics firms have generally done that (Spikes Cavell, Spend 360, Spend Radar etc.) although Rosslyn Analytics has stayed independent, but has destroyed rather than created shareholder value to date.

Similarly, advanced sourcing firm Trade Extensions – one of the most innovative and exciting firms of the decade – realised that they could only grow so far in their sector and took Coupa’s cash – not that we are “blaming” either firm for what seems like a very good move for everyone. Keelvar remains the only independent in that optimisation sector.

But we’ve been working with a number of great niche firms over the past year or two – including riskmethods in supply chain risk management and HICX Solutions in vendor master data management. Others, such as Bloom and Comensura, combine a degree of software provision with a managed services approach in particular category sectors. They will be good indicators of how the market is going over the next 2 or 3 years. Is there enough potential for firms like that, excellent in their own areas, to keep them growing and independent into the next decade? We’ll see.

But for the buyer, the tricky question can still be “best of breed” versus “integrated suite” (or indeed "best of breed within an intergrated suite" which is how some of the leading firms now position themselves!)  The other interesting question is whether we will see more true innovators and disruptors in our sector. I have my doubts; the move to Cloud and SaaS is what gave Coupa and Tradeshift their opportunity really, and I can’t see another change of that magnitude on the horizon. And firms like Coupa, Jaggaer, SAP Ariba and others listed here are so capable and smart these days, I can’t see them being blindsided by the next innovation or change in market demand (mobile, AI etc.) anyway.

Do remember you can get informed commentary and analysis on these issues and more from Spend Matters, particularly from our US colleagues, through the in-depth Solution Map analysis and other material. And the good news is that procurement technology, as you might hope, is so much better than it was when we started here in 2010! But in part 2 we’ll look at some of the less positive tech stories in our sector over those years.

* Following publication of this article, Christian Lanng has pointed out on Twitter that the core Tradeshift platform is "built from the ground up" and he says that revenue from acquisitions is now only 10% of the total.  We're happy to pass on that insight.

Voices (3)

  1. Michael:

    I rather enjoyed this article, interesting insight from a long and successful career in the world of procurement.

  2. Mathew Brian:

    everywhere I go I see Ariba dominating this market but that’s certainly not reflected here. I looked at Coupa and they have such a small market presence. Why the bias? Are they paying you to promote them? Are you guys just another example of paid-for editorials? Why can’t the press provide meaningful news anymore?

    1. Peter Smith:

      Mathew, i don’t know where “here” is (where Ariba doesn’t dominate). Write us an article if you like – would be delighted to publish that! “I looked at Coupa and they have such a small market presence” again, may be true in your market but you can’t ignore the fact that globally, the firm has gone from nothing to be certainly one of the top 3 on our sector in the last 5 or 6 years really. “Paid for editorials” – no, absolutely not, unless we explicitly say that “this is a sponsored article” or similar. Yuo might be surprised if I told you (and I will do that privately if you like) that the article you commented on upset several firms, including some that I thought I was being pretty positive about! We do make money of course from these firms, from advertising, papers, webinars etc – in fact tomorrow I will publish a list of the 54 firms we have worked with commercially in the last 8 years! that means almost everyone in the industry which is why we can be honest. “Meaningful news” – well, news is just news. if what you really want is “meaningful analysis” of tech firms, then spend a bit of money on my US colleagues Solution Map product which is totally independent and is simply the most detailed analysis of procurement software you will find anywhere – makes Gartner look basic. Or of course you might just be a troll who works for one of the firms we don’t cover much because the product isn’t very good (I tend to work on the principal that “if you can’t say anything nice, don’t say anything at all” as my Grannie used to say). Anyway, thanks for commenting, always happy to be challenged, and do LinkedIn with me if you want a more detailed and off the record chat.

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