Rivermine and Emptoris -- Customer and Competitive Implications

Earlier today, Emptoris announced it had acquired Rivermine, one of the leaders in the niche -- but then again, not so niche -- telecom expense management (TEM) market (see initial Spend Matters coverage here and Spend Matters UK / Europe coverage here). I spoke to a colleague yesterday in brief about the transaction and at first, I must admit, he was a bit surprised. His shoot from the spend hip gut: "not sure I get this move entirely." Following this reaction, I proceeded to lay out the case in my mind about why this acquisition will be positive for the broader market (customers, competitors, consultants, etc.), if only because it will bring greater procurement mindshare to the telecom opportunity and hopefully drive more companies to aggressively pursue telecom spend as a core part of sourcing, compliance and related cost reduction strategies.

Spend Matters believes that from a company and user perspective, the Emptoris / Rivermine relationship will have the following implications:

• Procurement organizations will begin to look at telecom as another complex, unique category like contingent labor, non-contingent services, transportation travel, etc. that requires its own set of expert resources and solutions to manage (but that ultimately will be managed in a centralized manner by cost-focused stakeholders)
• Emptoris customers will now be prodded to investigate telecom spend (often a $100 million category for most Fortune 500 companies) more aggressively and the savings it can provide. In the past, IT has taken more of a leadership role in the ongoing management and execution of telecom as a category, but Spend Matters believes that procurement will now get more actively involved in managing its lifecycle, just as they have contingent procurement and related services areas
• As Emptoris customers and other procurement organizations become more focused on the nuances of managing categories like telecom, they will realize their skills and technology emphasis will need to augment general spend analysis, sourcing, contract management and P2P tools with specialized capabilities and solutions across complex categories; they will also realize that traditional sourcing and P2P approaches are often futile in realizing the savings that complex categories can – and should – bring
• As a catalyst to starting potential conversations inside organizations, this transaction has the potential to bring procurement and IT organizations closer together to tackle a set of related categories in a more collaborative manner
• While Emptoris will no doubt be a beneficiary of this focus and shared IT/procurement discussion, Spend Matters believes other telecom expense management vendors such as Tangoe, Symphony and Profitline will also benefit, as procurement organizations focus more effort on analyzing the potential vendor field to help with their cost reduction efforts in the telecom spend area

From a competitive perspective, we believe the transaction will have the following implications:

• Transaction, general connectivity and "commerce" focused vendors with general solution sets not focused on complex categories or lacking the capabilities of best of breed vendors on category specific levels will need to decide whether or not to focus on the opportunity by building out organic capabilities in the area or making acquisitions -- or simply not competing in the market at all. Spend Matters believes that just as Ariba largely exited the T&E and contingent services procurement markets years ago by de-prioritizing capabilities in these areas, that SAP, Oracle and Ariba will make similar "non-moves" in this case
• Competitive telecom expense management vendors and related solution providers will need to reorient their sales approach to treat procurement as a potential customer/end-user rather than just one of a number of co-decision makers and contract negotiators
• Services and BPO-driven organizations such as IBM, Accenture and others with telecom expense management practices (and solutions, in certain cases) must analyze whether or not they partner with best of breed software providers as enabling technology providers or continue to build out organic solutions internally, often combining both proprietary and third party technologies and capabilities
• Consultancies with telecom expense management practices without enabling technology beyond Excel/Access will feel increased pressure from customers to create partnerships to enable "leave-behind" technologies to enable clients to capture continuous savings after initial opportunities and credits are identified

Disclosure: Spend Matters Group, LLC, a Spend Matters affiliate, provided limited advisory services to Emptoris related to this transaction. See full Spend Matters and affiliate organization client disclosures by clicking here.

- Jason Busch