In case you missed it…

February 5th, 2008 at 05:46am David Bush - Iasta

Our last newsletter was a big hit, I got a lot of positive feedback and messages from people that even said they had forwarded to others they thought would relate to it. Apparently, it struck a cord with a few folks, so I am republishing it now. If you are not subscribed to Iasta Insights, its easy and you can do so here. It is a bi-monthly produced newsletter that takes on supply management challenges in all forms. Amazingly, it just started its fifth year.

Software Acquisitions: Is Wall Street’s Gain Your Loss?

In the past year, we’ve seen a flurry of acquisition activity in the sourcing and procurement software world. Most recent, industry giant Ariba acquired venture-leveraged Procuri. In full disclosure, both vendors are companies we respect and often run into in competitive situations. But while deals like this might be good for the fat cats on Wall Street, are they really good for customers? A recent article in The Wall Street Journal offers a strong perspective which suggests customers should watch their wallet when it comes to mergers and acquisitions their providers engage in.

According to the venerable daily, as “software companies flesh out their integration plans internally, customers on the outside are left with unanswered questions about their future. It often takes years for software makers to integrate all the products they have bought — if they manage to at all — making it hard for customers to decide what to buy in the meantime. Some customers worry about losing negotiating power in the long run as the number of product choices dwindles. And all the deal making can crimp a CIO’s ability to plan, since it’s unclear which software makers will survive.” But perhaps an Oracle / Peoplesoft customer interviewed for the article says it best: “In my experience [following the acquisition], it’s been a dog’s breakfast wrapped in a nice pretty ribbon.”

At Iasta, we’re not fond of serving up dog food. In fact, we’re the only vendor of comparable customer reach in the e-Sourcing world that we know who has been able to grow organically without acquisitions which would threaten our focus or customer service ethos. But perhaps even more important, what you see with Iasta is what you get. Unlike everyone else we know in the space, Iasta has no outside investors. Early on, this constrained our ability to grow quickly, but over the long term, it has – and will continue – to afford us tremendous freedom to make decisions that are right for our customers over the long-run versus what is best for external shareholders looking to make a buck.

In fact, this last point would appear very close to home given the recent Procuri deal. Procuri – like Iasta – was experiencing sustainable market growth before Ariba acquired them, but it was not enough for investors who had complete control of the company (and who made 90+% of the money on the “exit”). According to Gartner Research in 2007:

“Ariba has several decisions to make in the wake of this acquisition, as no major functional gaps in Ariba’s product line are enhanced with Procuri’s offerings. Instead, Ariba will have two product lines with primarily duplicate functionality. Since Procuri’s solution set is built on .NET, and Ariba’s is not, Gartner believes that the Procuri platform solution is less likely to survive during the next two to five years as a separate technology platform.”

Now, Procuri customers face a choice – work with a provider with a questionable commitment to a legacy application, or consider other options. If early customer fall-out is any indication, many are clearly opting for the latter.

At Iasta, we remain 100% committed to putting our customers first rather than doing deals to keep our investors happy, but which will ultimately disappoint those who matter most – you. Whether it’s through e-Sourcing, advanced optimization, or contract management, Iasta is committed to driving innovation, value and customer success first. We wish we could say the same about everyone else, but then again, they’re not providers who boot-strapped their way to success, one customer at a time.

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Entry Filed under: General, Technology / SaaS, e-Sourcing Marketplace