Accenture on Thursday acquired the outsourced procurement services provider Procurian in a $375 million deal that looks set to shake up the business process outsourcing (BPO) market for procurement.
Procurian provides procurement technology and consulting services (including transportation and logistics) to a range of verticals, and is seen by most analysts as the top outsourced provider in its class.
The deal could well benefit Accenture in a couple different ways, despite the hefty price tag. First, according to analysts, Accenture gains Procurian’s expertise and technology, providing it a deeper, more compelling offering while also widening the base of potential Procurian customers.
Just as significantly, Accenture takes Procurian’s capabilities off the market. In the past, Procurian had partnered with Accenture BPO competitors Genpact and Capgemini.
“There will be competitive ramifications here in terms of basically severing any ties that Procurian had with Capgemini and Genpact, who will now be scrambling to augment their native capabilities with deeper category expertise,” wrote Jason Busch on the Spend Matters
blog. “ It is also likely to set off further consolidation activity in the procurement services marketplace, as the difference between the ‘first tier BPO’ and the smaller second tier players increases considerably.”
Another procurement analyst, HfS Research, said much the same.
“Where Procurian has been a sourcing partner to other BPO service providers such as Genpact and Capgemini in the last few years, with Accenture it has been a head-to-head competitor – for example winning its landmark Kimberly Clark procurement engagement against Accenture in 2006,” HfS wrote.
“Acquiring Procurian therefore takes out a direct competitor for Accenture (especially in strategic sourcing services) and also undermines the procurement positioning of Genpact, which will most likely need to look to either organically to build up its own sourcing depth quickly, or may look to acquire one of the other remaining stand-alone sourcing and procurement service providers. Capgemini was also working in partnership with Procurian, where the two firms enjoyed a recent procurement BPO contract win with U.S. chemical manufacturer Ferro, and may need to seek a niche acquisition in the market to supports its IBX platform and growing supply chain BPO business.”
The deal is the biggest in the procurement space since SAP acquired Ariba in May 2012 for $4.3 billion.
“The overall sector importance of the deal can’t be overstated,” Busch wrote. “It will be the ‘SAP/Ariba’ shot-heard-round-the-procurement-services world. But from a competitive perspective landscape and M&A perspective, it is even more important than the combination of the two software giants.”
The deal is expected to close by the end of 2013, with Procurian’s 780 employees expected to join Accenture.
“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.