Clients often ask me, when they are selecting an ePurchasing product such as eProcurement, whether they should choose the best product in that category or look for a vendor that also offers products in related categories such as contract lifecycle management (CLM) and supplier risk & performance (SRPM). My answer is that it’s a tradeoff, but in general, functionality, strategic vision, and domain focus will usually beat integration. For most CPOs, the other ePurchasing modules will be like a hotel gym — they want to have it available, even though they are unlikely to ever use it. Few enterprises ever get round to implementing the full ePurchasing suite from a single vendor. It usually takes years to roll out the first couple of modules, by which time momentum has waned and other priorities have taken over. So in general, I advise comparing products on their merits based on the immediate scope while including as one decision criterion the availability of a broader portfolio for subsequent scope expansion.
One caveat, however, is that a specialist BOB vendor needs to have sufficient funding to execute on its vision and keep pace with larger competitors. In “The Forrester Wave™: Supplier Risk And Performance Management Platforms, Q1 2018,” I wrote that:
“Hiperos . . . is a good choice for enterprises that want a standalone SRPM solution” . . . “Prospective buyers should consider whether this relatively small independent player can keep pace with the larger sourcing and GRC suites when it comes to innovation, such as using AI to analyze large data sources.”
Coupa’s acquisition of Hiperos reduces this concern, because Coupa’s larger sales and marketing teams will accelerate Hiperos’ revenue growth, which will in turn fund greater product investment. Coupa’s early years demonstrate how an innovative, focused BOB can beat older, broader competitors. All ePurchasing’s subcategories have BOBs that are either leaders, such as Aravo (SRPM), Beeline (services procurement), and Icertis (CLM), or innovative disruptors, including Scout, SourceDay, and tealbook. But all risk being caught and overtaken by the larger players unless they can continue to innovate faster and smarter.
Another frequent debate is between the vendors that favor organic development of a unified suite with a single code base, including GEP, Ivalua, Synertrade, and Zycus, and those who prefer to acquire BOBs and absorb them into the portfolio, such as Basware, Coupa, JAGGAER, and Tradeshift. I take a pragmatic view: I’d prefer native integration but not at the expense of category-specific innovation and vision. I want a consistent UI and a single source of truth, but I also want an open product that can integrate with the rest of the application landscape, including any BOBs in other ePurchasing niches. We believe few clients will implement the full ePurchasing suite, which is why our Forrester Wave evaluations focus on individual subcategories. It’s tough for suites to be equally strong in all subcategories. It’s not only ePurchasing: We see specialist BOBs taking market share from inconsistent suites in many other software categories, including BPM, ECM, HCM, and PLM.
The acquisition approach enables a vendor to fill gaps in its portfolio much faster than through internal development. Suite vendors often struggle when they try to expand their suite because they don’t know what they don’t know about the new subcategories. The main risk, however, is incompatibility — either cultural, commercial, and/or architectural — which has undermined several previous ePurchasing mergers. Infighting and jockeying for career advancement can distract from execution. Replatforming can slow product innovation. In this case, Hiperos is larger than most of Coupa’s previous acquisitions and may be a harder meal to swallow, although Trade Extensions was a similar size. Tradeshift’s proposed acquisition of Basware would be even more complex. Customers of any acquiree should watch for warning signs, such as key executives departing, a slowing of innovation elsewhere in the portfolio, or delays on releasing fully integrated product versions.
Bottom line: Take a pragmatic approach to the suite versus portfolio versus BOB question. Favor native integration but not at the expense of innovation, vision, and openness. Acquisitions can be good news for customers of both acquirer and acquiree if the former can absorb the latter’s expertise, integrate its code, accelerate product development, and expand its market reach.