Accenture’s procurement deep dive

Acquisition of sourcing specialist Procurian opens opportunities for logistics clients.

   In the past two months, two major procurement-related deals have underscored the value in this stage of supply chain management.
   American Shipper dissected the topic of spend management solutions provider SciQuest’s $43 million acquisition of procurement and sourcing software provider CombineNet in its October issue (page 26). But in early October, a potentially more significant deal went down, with Accenture purchasing the outsourced procurement services provider Procurian.
   In dollar terms, the Procurian deal certainly trumps the CombineNet acquisition. Accenture paid $375 million for Procurian, a statement of intent about its plan to build out its outsourced procurement services offering. But the price also reflected the value of taking Procurian’s strengths out of the hands of Accenture business process outsourcing (BPO) rivals Genpact and Capgemini, both of which had partnered with Procurian.
   The deal will also have implications for IBM, currently the largest provider in the $1.7 billion procurement outsourcing market, according to the analyst Everest Group. With Accenture and Procurian at No. 2 and No. 3 on the list, respectively, the combination would create the biggest company in the market. Together, Everest estimates Accenture/Procurian and IBM would account for 60 percent of the procurement outsourcing market, one that has found its footing, with 13 percent compound annual growth in 2013.
   It should be noted that Procurian competed directly with Accenture for outsourced procurement business. Procurian’s ultimate value lies in its in-depth analytics capabilities, a reality mentioned specifically by Accenture’s top BPO executive in characterizing the deal.
   “The addition of Procurian’s deep strategic sourcing category expertise, advanced analytics capabilities and delivery resources will complement and scale our already-significant sourcing and procurement business services,” said Mike Salvino, Accenture’s group chief executive for BPO.
   Procurian’s customer list includes heavy hitters in the large beneficial cargo owner (BCO) world, companies that look to Procurian to help them wade through the reams of data created by their complex procurement processes. Among its customers are Whirlpool, Kimberly-Clark, Hertz, Symantec, Timken, and Harley-Davidson.
   One of Procurian’s key categories is transportation procurement, part of its wider supply chain offering. A little more than 10 percent of the spend managed by Procurian is tied to its global logistics practice. That practice handles around 250 projects on an annual basis, accounting for some 2,000 contracts.
   The practice handles the breadth of logistics endeavors, including procurement of all modes, down to warehousing and distribution, and third party logistics services procurement.
   The strength of the logistics practice centers more on its technology offering than in Procurian’s eight or so other practice categories, a nod to the robust optimization engine the company uses to refine the procurement processes of its clients. Its relative strength across the business comes on the market intelligence side.
   For Procurian’s transportation- or logistics-oriented clients, the acquisition presents some food for thought. It surely builds scale for Procurian’s current offerings, and expands the capital available to the business, given Accenture’s huge global footprint. The two companies are likely to cross-sell their services, as well, and it’s conceivable Procurian’s customers might notice a decrease in how nimble the company is once it’s folded into the larger Accenture structure. But Procurian will also benefit from the wider reputation of Accenture, winning deals it may have lost when pitted against Accenture.
   Interestingly, Procurian’s pending integration into Accenture raises some questions about which direction the two organizations will go. Will Accenture’s procurement business follow the lead of Procurian’s core strength — robust technology solutions and market intelligence — or will Procurian get more involved in pure managed services?
   “Procurian will potentially be able to unlock a greater spectrum of value on the procurement services continuum than they’ve previously succeeded in doing,” Jason Busch wrote on the Spend Matters blog. “They are a solution provider that has been on the fence when it comes to delivering modular managed services. Accenture, on an overall BPO basis, has demonstrated a larger set of assets on the managed services continuum, but it is unclear how ‘low they will go’ with the unbundling of capabilities such as saleable market intelligence. We suspect that if the Accenture procurement BPO mindset wins out — which could be described as ‘large relationships über alles’— we will not see any stand-alone offerings in this regard.”
   This is not to say Procurian doesn’t offer deep expertise across a range of procurement categories — that’s surely a complementary motive behind Accenture’s acquisition. It’s just Accenture’s primary background is consulting, and Procurian’s (formerly known as ICG Commerce until February 2012) is in market intelligence.
   As with many acquisitions in the supply chain IT space, this is not only about supply chain. Accenture, essentially a household name around the world, is a massive business services conglomerate, while Procurian serves more than just transportation markets. But as with other deals — CombineNet being an example in the procurement space — those shippers that use Procurian for transportation procurement assistance have come to rely heavily on their offering. So for those clients, as well as prospective ones, the deal and its consequences are significant.
   As the procurement analyst HfS Research said, “You know a market’s (heating) up when the leading specialists start getting plucked by the top tier,” calling Procurian “the darling of niche sourcing specialists.”
   HfS said it will be interesting to see how Accenture goes about leveraging Procurian’s strength on the technology side.
   “Technology is becoming a real differentiator in the procurement business process outsourcing market,” HfS said. “From analytics to platforms to dashboards, the exposure to — and adoption of — IT procurement offerings are changing the market landscape, and one of the things that we will watch most carefully from this acquisition is the degree to which the Procurian technology suite becomes integrated into the core of Accenture’s offerings and becomes part of a simplified technology roadmap over time.”