ISM acquire ADR North America – US Institute moves further into professional services

Last week, the US based Institute of Supply Management announced the acquisition of ADR North America. Jason Busch and I caught up with ISM’s CEO Paul Novak and Bill Michels (CEO, ADR North America) to find out more. But first, here's an extract from the formal announcement.

ISM has invested in the consulting firm ADR North America (ADR NA). ADR NA will continue to operate under its own name, providing a full range of supply management consulting, including baseline assessments, transformations of supply management operations, coordination of procurement across enterprises, risk management, category strategies and other related services.

ADR NA and ISM already have a very close relationship, as ADR NA deliver ISM in-company training, have a joint venture (the ISM-ADR School for Supply Management), and last year, ISM and ADR NA established a permanent training location in China.

ADR NA are part of the wider ADR consulting family, being affiliated with ADR International, which also has offices in the United Kingdom, South Africa, Australia and the Czech Republic. This move doesn’t affect any of those firms, including the well-established UK operation. But, as Michels explained, "ISM Services, Inc. will be a licensee of the ADR International intellectual properties, including web-based sourcing and supply chain skills analysis tools.” So ISM Services, Inc. will license the IP of ADR International, in the same manner in which ADR North America had previously.

Michels will continue in his role as president of ADR NA and president of ADR-ISM Supply Chain Management Consulting (Shanghai) Co., Inc., and he has also been named a senior vice president of ISM.

To make this happen, ISM has set up a not for-profit company ISM Services, Inc. (US rules on not-for profits meant this was necessary to retain tax benefits etc).  In the greater scheme of things, it’s not a big deal – a handful of staff transferring, and a cost for ISM that we don't believe runs into the millions. But it is interesting strategically for a couple of reasons.

Firstly, it gives ISM access to ADR consultants and consulting intellectual property, and a route to develop a consulting business. This is not only a potential source of revenue for ISM, but should allow them to understand better what is going on in the real world of purchasing, and bring that knowledge and IP back into the services they provide members.

Secondly, the presence in China has obvious potential as that country grows and professionalises its own purchasing and supply chain activities. The UK based Chartered Institute of Purchasing and Supply (CIPS) has built student membership very successfully in China, and is probably ahead of ISM there in terms of “education” services. But the opportunities for training and consulting are probably even greater in the long run, and there CIPS is weaker; indeed, as well as ISM, both the Dutch and German Institutes have offices in China, which CIPS doesn’t.

However, ISM stress that they don’t see CIPS as “competitors” in any real sense. “We’ve never come up against CIPS in a competitive situation in China”, Novak says. And CIPS and ISM have discussed collaborating to serve certain large global corporates, although nothing tangible has come of this as yet.

There would seem to be few risks for ISM in the deal. Some members may feel this takes them away from their core purposes, but it could, as we said above, actually help ISM get better at understanding and meeting members’ needs. Perhaps more significantly, smaller consulting firms in the sector may feel aggrieved that ISM  are now competing with them. But again, it’s a huge market, and until ISM are much bigger consultancy providers, it’s unlikely that many firms will lose too much sleep over their activities.

It does indicate another step in a developing theme for procurement Institutes globally, as they move away from their original heartland both geographically and in the sense of being principally membership based, not for profit organisations. They don't have to get larger or more commercial of course - but I think the major Institutes all feel they have to do this to stay relevant, keep up with everyone else, and to fund provision of the services members demand.

The trick for the Institutes, assuming they do go down the expansion route, is to retain the benefits of that membership ethos and charitable heritage, while developing the more commercial, and global approach. That’s not an impossible challenge, but it’s also not necessarily straightforward; so we’ll watch progress with interest.

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Voices (2)

  1. VegasChild:

    As an outsider (but member of CIPS and ISM) it’s had to tell how significant this is; are ISM just tidying up the arrangement with what was in effect their captive provider, or is it a strategic move to broaden their offering? If the latter, then a good test for the new CIPS governance structure

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