EDITOR’S NOTE: 75% of all solution providers will be gone by the end of 2025. Based on the above post, I was asked to provide a high-level overview of my take on the pending AI Bubble Burst and identify three companies I thought would emerge relatively unscathed and whole.
As I am not generally a fan of the M&A game—or, as I call it, market share grabs to boost portfolios with replaceable parts, e.g., solution providers—I could not ignore the timing of the Jaggaer acquisition. You should also be following what’s happening with NetworkOne. By the way, I really like Jagaaer’s progress over these past few years and greatly respect Georg Rösch.
That said, here is my take – and be sure to check out my 2017 interview with Ivalua’s Alex Saric and a more recent post on why I have tracked Zycus since 2009.
The procurement software landscape has witnessed significant shifts over the past few years, with private equity firms increasingly taking center stage. The latest development in this ongoing saga is the acquisition of Jaggaer, a prominent Source-to-Pay (S2P) vendor, by Vista Equity Partners. This move echoes a similar scenario from a year ago when Coupa was acquired by Thomas Bravo, sparking widespread industry speculation and concern among its customers.
Over the last five decades, I’ve watched this space evolve—vendors rise and fall, technologies advance, and companies consolidate. Each phase has brought challenges and opportunities, but one theme remains consistent: when private equity firms acquire software vendors, customers must often navigate uncertain waters.
The Private Equity Playbook: Efficiency Over Innovation
Private equity (PE) firms typically operate with a clear objective: maximize the value of their investment within a relatively short time frame, often three to five years. This objective drives them to employ a set playbook that prioritizes cost-cutting and margin improvement over long-term innovation and customer satisfaction.
Historically, PE firms have made deep cuts in research and development (R&D) budgets, which inevitably hampers a vendor’s innovation ability. Product roadmaps may be delayed, new features may be shelved, and long-term strategic initiatives may be abandoned in favor of short-term financial gains. Such disruptions can have far-reaching consequences for a solution like Source-to-Pay, which is traditionally considered the operational lifeline for procurement departments.
Marketing, sales, and customer support functions often take a back seat to improve profitability and, where applicable, shareholder value. While these changes might boost margins on paper, they can also lead to a deterioration in service quality. The departure of top leadership and key team members—often the first to leave after an acquisition—only exacerbates the situation. When leadership churns, continuity is lost, and customers are left with a sense of instability. (Note to self: I know Michael Lamoureaux will have much to say about the “top leadership departure” issue.)
The Impact on Customers: A Three-Tiered Approach
The uncertainty surrounding an acquisition can be unsettling for customers, especially those whose contracts are nearing renewal, who have recently signed up, or who are evaluating new vendors. Each group faces different challenges and should approach the situation with a tailored strategy.
Customers Nearing Renewal:
For customers nearing the end of their contract terms or coming up for renewal, this period of uncertainty can be a blessing in disguise. These organizations can re-evaluate their vendor relationships and consider migrating to a more stable, profitable vendor with a clear long-term vision. The current market conditions favor proactive ones, as they can leverage their position to negotiate better terms or even replace the software entirely.
Recent Buyers:
The situation is more precarious for those who have recently committed to these solutions. They may find themselves “stuck” with a vendor undergoing significant internal upheaval. In these cases, it is crucial to revisit the exit clauses in the contract, renegotiate where possible, and ensure that service level agreements (SLAs) are robust enough to protect against potential degradation in service. Moreover, creating a backup or fallback plan is no longer optional—it’s a necessity.
Active Evaluators:
The timing couldn’t be better for organizations currently in the evaluation phase. This phase provides an ideal moment to apply additional scrutiny to potential vendors, placing greater weight on stability and long-term vision. The recent acquisitions should serve as a stark reminder that not all vendors are created equal, and those with a stable ownership structure and a commitment to innovation should rise to the top of the shortlist.
The Broader Market Context: Coupa, Jaggaer, and Beyond
Coupa’s acquisition by Thomas Bravo last year sent ripples through the industry, leading to shifts in its innovation strategy, marketing focus, and customer engagement. While the dust has yet to settle completely, early signs indicate that the company has shifted priorities in ways that may not fully align with its customers’ needs.
Jaggaer, under the ownership of Vista Equity Partners, might face a similar trajectory. The vendor has already experienced several ownership changes, which could lead to more strategic pivots and operational adjustments. These shifts could create challenges for customers relying on Jaggaer for mission-critical procurement processes.
The broader Source-to-Pay market is also experiencing shifts. Once a leader, SAP has been slow to innovate and has consequently moved out of the leaders’ quadrant in recent analyst reports. This departure leaves a gap in the market that vendors like Ivalua, Zycus, and GEP are well-positioned to fill. These companies have managed to maintain a steady course, focusing on innovation and customer satisfaction without the disruptions that often accompany private equity ownership. (For added emphasis, I have been covering Zycus since 2009 and Ivalua since 2017 following their big Arizona win. Meanwhile, Coupa – who was one of this blog’s first sponsors in 2007 makes me wonder, “Where have you gone, Joe DiMaggio? You can read my Coupa archive using the following link.)
Navigating the Future: Strategic Considerations for Procurement Leaders
In this evolving landscape, procurement leaders must adopt a proactive approach to managing their software vendors. Here are a few strategies to consider:
Demand Transparency:
Engage with your vendor to gain a clear understanding of their post-acquisition strategy. Ask tough questions about product roadmaps, R&D investments, and support commitments. The more information you have, the better equipped you’ll be to make informed decisions.
Diversify Vendor Relationships:
Consider diversifying your portfolio of procurement solutions to avoid over-reliance on a single vendor. This approach can provide a safety net if one vendor undergoes significant changes affecting their ability to deliver value.
Stay Agile:
The ability to pivot quickly in response to market changes is crucial. Keep your procurement processes flexible and be prepared to make swift decisions if your vendor’s direction no longer aligns with your needs.
Leverage Industry Insights:
Stay connected with industry thought leaders and peer networks to understand how other companies navigate similar challenges. Sharing experiences and strategies can provide valuable guidance as you chart your course.
The Industry Landscape: Who’s Left Standing?
The landscape has shifted dramatically among the top players in the S2P space. With Coupa and Jaggaer now under private equity ownership, SAP—a behemoth in the industry—has been moving at its own pace, which may have led to its gradual decline in the leaders’ quadrant. The result is a narrowed field of vendors who remain independently owned and committed to long-term growth: Ivalua, Zycus, and GEP.
These vendors represent a safe harbor in the stormy seas of private equity-driven acquisitions. They are not merely surviving but thriving, with a clear focus on innovation, customer satisfaction, and long-term strategic growth. For procurement leaders, this stability offers peace of mind, knowing that their S2P solution is backed by a vendor with a vested interest in their success.
Conclusion: Charting a Course Through Uncertainty
Vista Equity Partners’ acquisition of Jaggaer, like Thomas Bravo’s acquisition of Coupa, underscores the inherent risks involved when private equity enters the picture. While these moves might make sense from a financial standpoint, they often lead to a period of turmoil for the customers who rely on these solutions to run their businesses.
Procurement leaders must approach this new reality with a strategic mindset. Whether you’re nearing contract renewal, recently committed, or evaluating your options, it’s imperative to understand the potential impacts of these acquisitions and take proactive steps to mitigate risk. Today’s decisions will reverberate through your organization’s procurement operations for years. Choose wisely.
NOTE: In a future post I will explain my thinking regarding GEP.
30
Procurement Insights
Navigating Uncertain Waters: What Acquisitions Like Jaggaer Being Acquired By Vista Equity Partners Means for the Procurement World
Posted on August 14, 2024
0
EDITOR’S NOTE: 75% of all solution providers will be gone by the end of 2025. Based on the above post, I was asked to provide a high-level overview of my take on the pending AI Bubble Burst and identify three companies I thought would emerge relatively unscathed and whole.
As I am not generally a fan of the M&A game—or, as I call it, market share grabs to boost portfolios with replaceable parts, e.g., solution providers—I could not ignore the timing of the Jaggaer acquisition. You should also be following what’s happening with NetworkOne. By the way, I really like Jagaaer’s progress over these past few years and greatly respect Georg Rösch.
That said, here is my take – and be sure to check out my 2017 interview with Ivalua’s Alex Saric and a more recent post on why I have tracked Zycus since 2009.
The procurement software landscape has witnessed significant shifts over the past few years, with private equity firms increasingly taking center stage. The latest development in this ongoing saga is the acquisition of Jaggaer, a prominent Source-to-Pay (S2P) vendor, by Vista Equity Partners. This move echoes a similar scenario from a year ago when Coupa was acquired by Thomas Bravo, sparking widespread industry speculation and concern among its customers.
Over the last five decades, I’ve watched this space evolve—vendors rise and fall, technologies advance, and companies consolidate. Each phase has brought challenges and opportunities, but one theme remains consistent: when private equity firms acquire software vendors, customers must often navigate uncertain waters.
The Private Equity Playbook: Efficiency Over Innovation
Private equity (PE) firms typically operate with a clear objective: maximize the value of their investment within a relatively short time frame, often three to five years. This objective drives them to employ a set playbook that prioritizes cost-cutting and margin improvement over long-term innovation and customer satisfaction.
Historically, PE firms have made deep cuts in research and development (R&D) budgets, which inevitably hampers a vendor’s innovation ability. Product roadmaps may be delayed, new features may be shelved, and long-term strategic initiatives may be abandoned in favor of short-term financial gains. Such disruptions can have far-reaching consequences for a solution like Source-to-Pay, which is traditionally considered the operational lifeline for procurement departments.
Marketing, sales, and customer support functions often take a back seat to improve profitability and, where applicable, shareholder value. While these changes might boost margins on paper, they can also lead to a deterioration in service quality. The departure of top leadership and key team members—often the first to leave after an acquisition—only exacerbates the situation. When leadership churns, continuity is lost, and customers are left with a sense of instability. (Note to self: I know Michael Lamoureaux will have much to say about the “top leadership departure” issue.)
The Impact on Customers: A Three-Tiered Approach
The uncertainty surrounding an acquisition can be unsettling for customers, especially those whose contracts are nearing renewal, who have recently signed up, or who are evaluating new vendors. Each group faces different challenges and should approach the situation with a tailored strategy.
Customers Nearing Renewal:
For customers nearing the end of their contract terms or coming up for renewal, this period of uncertainty can be a blessing in disguise. These organizations can re-evaluate their vendor relationships and consider migrating to a more stable, profitable vendor with a clear long-term vision. The current market conditions favor proactive ones, as they can leverage their position to negotiate better terms or even replace the software entirely.
Recent Buyers:
The situation is more precarious for those who have recently committed to these solutions. They may find themselves “stuck” with a vendor undergoing significant internal upheaval. In these cases, it is crucial to revisit the exit clauses in the contract, renegotiate where possible, and ensure that service level agreements (SLAs) are robust enough to protect against potential degradation in service. Moreover, creating a backup or fallback plan is no longer optional—it’s a necessity.
Active Evaluators:
The timing couldn’t be better for organizations currently in the evaluation phase. This phase provides an ideal moment to apply additional scrutiny to potential vendors, placing greater weight on stability and long-term vision. The recent acquisitions should serve as a stark reminder that not all vendors are created equal, and those with a stable ownership structure and a commitment to innovation should rise to the top of the shortlist.
The Broader Market Context: Coupa, Jaggaer, and Beyond
Coupa’s acquisition by Thomas Bravo last year sent ripples through the industry, leading to shifts in its innovation strategy, marketing focus, and customer engagement. While the dust has yet to settle completely, early signs indicate that the company has shifted priorities in ways that may not fully align with its customers’ needs.
Jaggaer, under the ownership of Vista Equity Partners, might face a similar trajectory. The vendor has already experienced several ownership changes, which could lead to more strategic pivots and operational adjustments. These shifts could create challenges for customers relying on Jaggaer for mission-critical procurement processes.
The broader Source-to-Pay market is also experiencing shifts. Once a leader, SAP has been slow to innovate and has consequently moved out of the leaders’ quadrant in recent analyst reports. This departure leaves a gap in the market that vendors like Ivalua, Zycus, and GEP are well-positioned to fill. These companies have managed to maintain a steady course, focusing on innovation and customer satisfaction without the disruptions that often accompany private equity ownership. (For added emphasis, I have been covering Zycus since 2009 and Ivalua since 2017 following their big Arizona win. Meanwhile, Coupa – who was one of this blog’s first sponsors in 2007 makes me wonder, “Where have you gone, Joe DiMaggio? You can read my Coupa archive using the following link.)
Navigating the Future: Strategic Considerations for Procurement Leaders
In this evolving landscape, procurement leaders must adopt a proactive approach to managing their software vendors. Here are a few strategies to consider:
Demand Transparency:
Engage with your vendor to gain a clear understanding of their post-acquisition strategy. Ask tough questions about product roadmaps, R&D investments, and support commitments. The more information you have, the better equipped you’ll be to make informed decisions.
Diversify Vendor Relationships:
Consider diversifying your portfolio of procurement solutions to avoid over-reliance on a single vendor. This approach can provide a safety net if one vendor undergoes significant changes affecting their ability to deliver value.
Stay Agile:
The ability to pivot quickly in response to market changes is crucial. Keep your procurement processes flexible and be prepared to make swift decisions if your vendor’s direction no longer aligns with your needs.
Leverage Industry Insights:
Stay connected with industry thought leaders and peer networks to understand how other companies navigate similar challenges. Sharing experiences and strategies can provide valuable guidance as you chart your course.
The Industry Landscape: Who’s Left Standing?
The landscape has shifted dramatically among the top players in the S2P space. With Coupa and Jaggaer now under private equity ownership, SAP—a behemoth in the industry—has been moving at its own pace, which may have led to its gradual decline in the leaders’ quadrant. The result is a narrowed field of vendors who remain independently owned and committed to long-term growth: Ivalua, Zycus, and GEP.
These vendors represent a safe harbor in the stormy seas of private equity-driven acquisitions. They are not merely surviving but thriving, with a clear focus on innovation, customer satisfaction, and long-term strategic growth. For procurement leaders, this stability offers peace of mind, knowing that their S2P solution is backed by a vendor with a vested interest in their success.
Conclusion: Charting a Course Through Uncertainty
Vista Equity Partners’ acquisition of Jaggaer, like Thomas Bravo’s acquisition of Coupa, underscores the inherent risks involved when private equity enters the picture. While these moves might make sense from a financial standpoint, they often lead to a period of turmoil for the customers who rely on these solutions to run their businesses.
Procurement leaders must approach this new reality with a strategic mindset. Whether you’re nearing contract renewal, recently committed, or evaluating your options, it’s imperative to understand the potential impacts of these acquisitions and take proactive steps to mitigate risk. Today’s decisions will reverberate through your organization’s procurement operations for years. Choose wisely.
NOTE: In a future post I will explain my thinking regarding GEP.
30
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