Not to be undone in a week filled with supply chain technology news, SAP announced this afternoon that its SAP America, Inc. subsidiary has entered into an agreement to acquire Ariba for an estimated value of $4.5 billion, or $45 per share.  The transaction represents a 20 percent premium over Ariba’s closing stock price yesterday. Ariba’s board of directors has already approved the this deal and the transaction is expected to close in the third quarter of calendar year 2012, subject to Ariba stockholder approval, clearances by relevant regulatory authorities and other customary closing conditions. According to SAP, the transaction is expected to be accretive to SAP’s non-IFRS earnings per share in 2013.

The announcement itself will provide some shock to the procurement technology market, especially on the heels of IBM’s December acquisition of principal Ariba competitor Emptoris.  The interesting aspect at the closing of the transaction is the likes of SAP, IBM and Oracle competing in the area of sourcing, procurement technology and supplier networks.

With the addition of Ariba, there will be considerable overlap among existing SAP procurement and SRM functionality which will have to rationalized for customers in addition to value-added procurement technology and services provided by SAP SRM partner’s, Hubwoo and Crossgate. In our Supply Chain Matters commentary related to SAP’s recent Sapphire conference, we noted bold vision but confusing messaging and execution.  The Ariba acquisition, at face value, obviously adds to those internal challenges, not to mention that some Ariba customers are also SAP customers who passed on SAP SRM.

Stay tuned for further Supply Chain Matters commentary and insights as more definitive information becomes available.

A final thought relates to Oracle, who may have to consider beefing-up its procurement capabilities for customers in the light of these two significant moves from both IBM, and now SAP.   One wonders if Oracle was also involved in Ariba’s courting dance.

Bob Ferrari

Emptoris Inc., provider of procurement strategic supply and contract management technology today announced that it had acquired Xcitec, a Munich based provider of strategic supplier management software.  Financial details were not disclosed and the transaction has recently been completed. This acquisition comes on the heels of a previous acquisition of Rivermine in January.

The announcement makes note that this new combination promises to provide a single offering that manages all of the business processes associated with supplier on-boarding, qualification, risk assessment, performance management and rationalization.  That may well prove to be significant as the competitive landscape of procurement and strategic supplier management continue to heat-up.  This is all good news for technology buyers.

Supply Chain Matters was briefed by Emptoris senior management regarding the acquisition, and it is our view that this acquisition will both broaden Emptoris’s capabilities in larger scale supplier lifecycle management deployment needs as well as provide broader appeal to the SAP Procurement and SRM customer base.  Emptoris has had its eye on the supplier management space for over two years, and it was the influence of joint Emptoris/Xcitec customers that brought these parties together. The acquisition further strengthens Emptoris’s influence in Europe, along with its abilities to support multinational and multilingual process needs. We would also anticipate that this acquisition will strengthen Emporis’s penetration in manufacturing related industry, where strategic supplier management is a very big deal, and where in-house management of suppliers is viewed as more strategic.

The timing of this acquisition could not be better for two distinct reasons.  The recent series of industry supply chain crisis brought about by the recent earthquake and tsunami in Japan has brought keener awareness to the overall importance of supplier lifecycle management and risk assessment.  Second, competitors to Emptoris including Ariba and SAP have each been very active of late in enhancing supplier management process support capabilities. B2B network providers such as GXS have also become more active in augmenting supplier management and collaboration capabilities. SAP has especially been active in trumping supplier management activities through network capabilities provided by network providers Hubwoo and Crossgate.

Xcitec’s market visibility has been primarily in the European region where it has targeted and assumed 36 percent of DAX-listed companies.  This provider has garnered recognizable manufacturing and services customers such as BASF,  Deutsche Telekom, Deutsche Post DHL, EADS, ThyssonKrup, Siemens and Vodafone, among others, many of which share a large global  supplier base with over 100,000 users. These customers also share a strong SAP installed base and integration presence.  Xcitec technology can be deployed in either an on-premise or SaaS model, but the current majority of installations are on-premise deployments.   Xcitec’s technology platform is SOA and web-services based, and boast of integration with SAP ERP backbones via both supplier and purchasing portals or through the SAP Enterprise Portal.  Xcitec has also achieved Powered by SAP NetWeaver certification.

Xcitec’s existing team is now a part of Emptoris and  co-founders Martin Berr-Sorokin and Uwe Krieger will also join the Emptoris executive team. Berr-Sorokin is designated to be SVP and GM of Supplier Management and Krieger will assume VP of Development and Operations for Supplier Management. Emptoris also plans to continue to offer Xcitec’s strategic supplier management technology on a standalone basis, or as part of the Emptoris applications suite.

Customers with needs in strategic supplier management continue to gain more options and this recent Emptoris acquisition will certainly add more competitive dynamics to this sector. Emptoris customers should view this acquisition as yet another positive step in deploying a broader set of sourcing, contract management and now procurement intelligence and supplier management capabilities.  We would not be surprised at all to be commenting on further Emptoris acquisitions in the coming months.

Bob Ferrari

Supply and contract management technology provider Emptoris today announced that it has completed the acquisition of telecom expense management provider Rivermine Inc.. As with previous Emptoris acquisitions, financial details are sketchy, and we choose not to speculate on either the cost of revenue multiple involved.  Both companies have private ownership.  However, in the view of Supply Chain Matters, this acquisition appears on the surface to be a move that will benefit both Emptoris and its existing customers.

Fairfax Virginia based Rivermine provides technology that helps firms to gain visibility into, and control over, their telecommunications spending, including ordering, inventory, invoice processing and auditing.. The company claims coverage of over $6 billion in telecommunication spending and a healthy revenue growth rate. Rivermine has also had its share of previous acquisition activity, acquiring two separate companies a mere year ago, including MBG Expense Management.

Procurement teams, especially those residing in Fortune 1000 companies, view the control of telecommunications expense as one of their top challenges, with typical corporate-wide expenses in the millions of dollars.  This area, however, typically falls under the management umbrella of IT.  With the current explosion of mobile-based and other advanced communications, these same companies increasingly have difficulties in understanding the various components of spending and utilization over communications spending. Traditional ERP procurement software suites lack the deep functionality to manage this particular area. Rivermine provides its customers an on-demand software-as-a-service platform to manage and control this activity, and the savings can be substantial.

This acquisition fills another strategic hole for Emptoris in its ability to provide customers broader tactical management tools surrounding key services procurement. The acquisition also serves as further evidence that Emptoris primary investor, Marlin Equity Partners, continues to follow through on a growth strategy that includes bankrolling strategic acquisitions for the company.  In 2009, Emptoris acquired the labor services and contract management of Click Commerce which has since been rebranded as Emptoris Services Procurement.  The acquisition of Rivermine adds telecommunications spend analysis and capabilities to the services procurement support area.  Industry vertical penetration also appears to be complimentary with both companies targeting similar industry verticals. Emptoris management indicated an existing customer overlap of between 5-10 customers, which provides lots of opportunity for upselling.  Major system integration partnerships are also similar, featuring both IBM and Accenture, which provide certain telecom business process outsourcing and control services.

In our acquisition briefing, I was informed by Emptoris management that initially Rivermine will remain independent as a wholly-owned subsidiary, and will retain its existent management team. This is a smart move on the part of Emptoris management, since telecom expense management brings specific expertise, and as previously noted, may involve target audiences beyond procurement.

With this acquisition, Emptoris will now include over 300 installed based customers with 650 global based employees, and a significant profile in the best-of-breed procurement technology arena.  Emptoris customers should view this acquisition as a positive in that over time a broader suite of functionality addressing telecom management will be available for consideration.

Bob Ferrari

I had the opportunity to attend the annual Emptoris Empower 2010 customer conference held in Boston this week. Overall it was an interesting and well attended event that provided some significant announcements and certain considerations for the installed Emptoris customer community.  I was pleased that I attended.

This strategic sourcing, procurement and contract management technology provider has been on a roll of late, taking maximum advantage of the need to control material costs across many industry settings, and that was certainly reflected in the communication from CEO and President Patrick Quirk.  He noted a 91% improvement in sales bookings growth during the first half of 2010 with more than 100 customers going live with Emptoris applications. The two biggest competitor’s for Emptoris are of course  Ariba and to some extent, SAP. Since Emptoris is a private company, actual revenue numbers are not shared, which is somewhat of a shame, given this type of momentum in a slowdown economy.  Quirk described the past year as one investing in the company, its relationships, and the customer community. He also described the company as embarking upon a global presence with new and planned presence in many new countries and geographic regions, including Latin America.  Emptoris already has a significant presence in China and India.

Among the multiple announcements made in conjunction with the conference, the most significant  in my view, was that Emptoris has signed a global agreement with SAP regarding the use of SAP Business Objects technology for business intelligence reporting and analysis needs across the Emptoris suite of applications.  I suspect a good majority of Emptoris customers also have SAP installed, and that most likely drove the decision to go with the Business Objects decision.  No doubt, the IT communities among these customers will be pleased with this decision, from an overall integration perspective.  The announcement, in my view, is also reinforcement that Emptoris is responding to customer feedback, namely that data mining and business intelligence needed to be enhanced across the entire suite. There was however no mention of any SAP attendance at this year’s conference, which perhaps is understandable, given that SAP has its own offering of sourcing and procurement technology.

The keynote and customer presentations were all rather informative, but by far, the most interesting and thought provoking was delivered by Geoffrey Moore, author of ‘Crossing the Chasm’ and ‘Inside the Tornado’.  Every time I get the opportunity to hear Moore, I come away with a much better understanding of the big-picture as it relates to business and consumer information technology trends, and my sense is that I was not alone.  Moore spoke to the profound changes occurring in “Systems of Record’ or traditional ERP applications and “Systems of Engagement”, which are evolving person related applications. I will be posting a separate commentary related to this presentation.

Other very informative presentations from my perspective were delivered by Cardinal Heath Inc., Novartis, and United Health Group,  Both Accenture and PRTM shared rather interesting and updated research data on the state of procurement and supply chain risk management across industries, which we will also provide commentary in a separate posting.

Regarding Emptoris itself, a new and transformed management team has been clearly focused on getting closer to customer needs, while making implementation of its technology easier for customer to navigate and manage.  A five step transformation framework was adopted and I was not able to discern specific customer feedback on the benefits thus far.  I suspect that is because this methodology is rather new.  The current Emptoris product release is Emptoris8, but from the presentations I attended, there have been some scalability issues which Emptoris product development teams are addressing. Last year, the company acquired the former Click Commerce contract and service management business which is now re-branded as Emptoris Services Procurement, and after sitting in on the product development session, my sense is that more important functionality will come in future releases.

Some final thoughts relate to other observations.  There has been some debate regarding current customer preferences in deployment options for Emptoris software, specifically whether traditional license of Software-as-a-Service has been garnering the most attractiveness for current deployments. Some of this debate naturally relates on the fact that competitor Ariba tends to favor the SaaS approach.  The feeling I got was that behind-the-firewall or private cloud continues as the preferred option for Emptoris customers.  In the area of sourcing and contract management, it seems that companies are much more sensitive toward keeping confidential and legal content data behind the firewall.

Bob Ferrari

Tomorrow I’ll be traveling a short distance to attend the annual Emptoris Empower 2010 customer conference being held in Boston.  This strategic sourcing, procurement and contract management technology provider has been on a roll of late, taking maximum advantage of the need to control material costs across many industry settings.

Empower is conference which I look forward to attending every year since the Emptoris management team has been very forthcoming in granting industry analysts and bloggers access to customer attendees. I especially look forward to the annual executive luncheon, where as a community, we can share and exchange viewpoints and perspectives with invited customers and Emptoris executives.  This year, there will be the opportunity to sit and have dialogue with quite a number of chief procurement officers and as in previous years, I look forward to sharing current insights on that state of strategic sourcing and procurement.  I especially have interest in checking-in on that state of supply chain risk management from the view of the procurement and sourcing executive.  At last year’s luncheon, I introduced this topic, and to my surprise, the majority of executives attending did not view procurement as the prime driver of risk assessment and management.

Regarding Emptoris itself, a new and transformed management team has been clearly focused on getting closer to customer needs, while making implementation of its technology easier for customer to navigate and manage.  A five step transformation framework was adopted and I’ll be checking for customer feedback on the benefits of this model. Last year, the company acquired the former Click Commerce contract and service management business which is now re-branded as Emptoris Services Procurement.  It will be interesting to also check on progress from various viewpoints.   Finally, I like my fellow bloggers, remain curious as to which deployment option, traditional license of Software-as-a-Service has been garnering the most attractiveness for current deployments.

Stay tuned to Supply Chain Matters for additional updates.