Commentary: Emptoris’ Acquisition of Click Commerce a Question of DNA Expansion versus Evolution

Posted on May 15, 2009

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“The biggest challenge in transitioning to an on-demand model is not really financial per say, nor is it about the technology investment.  It’s really about changing the DNA of the company.”

Ahmed Rubaie, CFO Ariba Inc. – PI Window on Business Interview (May 7th, 2009)

As part of the Procurement Insights Blog’s readership you already know that I always try to view industry events through a different and what I hope is a unique lens.  A lens which looks beyond the obvious headlines, and technological pairings to provide insight into what at times have turned out to be the most critical (and often overlooked) elements of a particular situation.

With Emptoris’ announcement that they had acquired Click Commerce’s Contract and Service Management solution, the issue of corporate DNA, and the differences between expansion versus evolution was the first thing that came to mind.  Especially given my recent interview with Ariba’s CFO Ahmed Rubaie and his statement that the biggest challenge his company faced in making the transition to an on-demand model was “changing the company’s DNA.”  And it is this “DNA change” that has been the greatest stumbling block for the majority of organizations in terms of creating versus destroying value regardless of whether they were making an Ariba-type transformation, or part of a merger and/or acquisition.  Even with Ariba, only time will tell if early success is in fact indicative of a sustainable outcome.

Recalling a 2007 study in which Thomas Straub analyzed the high rate of Merger and Acquisition (M&A) failures I could not help but wonder what this recent news actually meant in terms of an ultimate outcome for Emptoris.  While the majority of pundits will point to a complimentary marriage of technology, or a strategic pooling of resources in an effort to gain greater market share, or for that matter any of the other “synergistic” attributes that may have led to the transaction taking place, in truth this rarely tells us anything beyond the usual business speak sound bites that for the most part collectively numb an increasingly knowledgeable (and cynical) public.  Let’s face it, and as Straub discovered, “despite the goal of performance improvement, results from mergers and acquisitions are often disappointing.”  And while I will leave the utilization of Straub’s “four statistical methods” to assess the viability of the Emptoris-Click Commerce deal in the hands of the analysts (at least for the time being anyway), I thought that I would take a more holistic view of the past day’s events in an effort to put the acquisition into some form of context that will be meaningful for the business professional.  This is especially important given the fact that the early results from a Procurement Insights/PI Window on Business Poll indicate that respondents do not believe that the transaction will have an impact on the market as a whole.  And the market’s perception at the end of the day is what will ultimately determine the value of the acquisition.

This leaves us with a simple question, what does the Emptoris acquisition of Click Commerce’s Contract and Service Management solution really mean?  The answer is surprisingly simple . . . it rests in the company’s DNA.

What Emptoris has done is successfully maintain the balance of its indigenous innovative insights (or DNA) with an increased breadth of service offering to expand its ability to better serve a growing, mainstream market.  In essence, Emptoris is expanding and adapting their solutions to meet the dynamically changing requirements of a market that is eschewing the licensing models of traditional ERP vendors like Oracle and SAP (and the old Ariba), in favor of a more responsive, price-performance oriented model.  A model in which longstanding and proven performance capabilities are preferred over the recognized risks associated with evolutionary transformation.

So while everyone else talks about technical functionality, financial upsides and aligned synergies (all important but not of great interest to the majority of the professionals who are responsible for making a solution work on a day-to-day basis), the fact remains that on the other side of this deal Emptoris has significantly increased its capability in terms of staking its claim as an “emerging giant” in a rapidly changing world that was once dominated by the large Enterprise Resource Planning (ERP) providers.

If you have had the opportunity to read the first two parts of the Procurement Insights exclusive three-part Guest Post Series by Dr. Olga Raskina, Lead Scientist with Emptoris, you will truly understand this assessment.  If not, I am more than happy to provide the following links; (Part 1) Why Optimization Matters: Moving Beyond Price Driven Auctions, (Part 2) Optimizing Value in the Economic Downturn [and Recovery].

Webcast Scheduled for June 10th, 2009

To find out more about the Emptoris Service Procurement solution or to register for a complimentary webcast on services procurement visit Emptoris Services Procurement.

The Emptoris webcast on services procurement will be broadcast on June 10th, at 7:00 a.m. Eastern Time/12:00 p.m. London Time/13:00 p.m. Paris/Berlin (CEST) with a rebroadcast at 2:00 p.m. Eastern Time/11:00 a.m. Pacific Time.

PI Window on Business Special Broadcast (For Want of a Nail: The Pandemic Effect)

Be sure to mark Tuesday, May 26th on your calendars so that you will remember to tune in to the first of four PI Window on Business 90-minute Specials.  In this initial Special titled “For Want of a Nail: The Pandemic Effect,” I will be joined by Nick Kelley, a researcher from the University of Minnesota’s Center for Infectious Disease Research and Policy, and the lead author of the November 2008 white paper “Pandemic Influenza, Electricity, and the Coal Supply Chain (Addressing Crucial Preparedness Gaps in the United States), to discuss the true nature of the latest swine flu crisis in terms of its potential impact on supply chains.  It is a show you will not want to miss!

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