The news came out yesterday:
Capgemini Group today announced its acquisition of on-demand purchasing solutions provider IBX and with it, the availability of the industry’s first global end-to-end, Procurement-as-a-Service offering. Having collaborated together since summer 2009, Capgemini and IBX decided to join forces in order to drive development of a new global procurement service offering and further expand the addressable market for IBX’s best-in-class technology. The deal adds IBX’s strength in software-as-a-service purchasing technology to Capgemini’s global sourcing, business process outsourcing (BPO) and transformation expertise.
According to AMR Research, outsourcing of supply management processes has grown in recent years: « The market grew 30 percent in one year, driven by procurement and strategic sourcing services being offshored to India in record numbers. » With a solid track record on the BPO procurement area, Capgemini is ready to tackle this new growth opportunity and will make use of its Rightshore® delivery network including strong offshore operations in India, China, Brazil and Poland.
From my perspective, the value of this M&A relies on 4 key components:
- A rather common Process: Purchasing and procurement
- Branding: Capgemini global footprint and branding enabling better market penetration,
- Technology: IBX technology is almost SAP plug & play and Capgemini’s SAP implementation know-how makes it ‘easy to implement’ theoritically.
- Offshore: leveraging Capgemini’s workforce and ‘service factory’ in India makes the end-to-end offering cheaper from an implementation or sourcing services stand point.
Capgemini has been working hard since a couple of years changing its delivery model to achieve:
- Cost effectiveness: shifting for local to global, becoming the ‘global services’ provider of choice thanks to its growing Indian team,
- Value based fees: shifting from ‘selling manpower’ to ‘selling solutions’.
I believe this acquisition will enable Capgemini to get – at last – closer from its dreamt business model, selling a higher-margin solution = Unique On Demand technology + services. Brilliant move to experiment the idea
Key Success factor: With 40M€ turnover, IBX was still relatively small. Time to market shouldn’t exceed a quarter+ (time needed to turn concept into an offer / reality)
Threat: combining business et technology cultures together…