I’ve fished this news fresh from today. It has been posted here on cc-hubwoo website.
The news went fast around as I found it initially on SpendMatters a couple of hours ago, thanks to Jason Busch.
Before sharing some of my feelings and first thoughts on the face of it, let me remind you cc-hubwoo’s strategy as presented in several press-releases since september 2006. It might definitly help to understand cc-hubwoo’s move:
The vision of the Group is to become the leading global on-line network for buyers and suppliers
(B2B). The strategy of cc-hubwoo consists of three components:
1. Continue to build a leadership position in our buyer-driven business by focusing on growing the
network and providing complete ‘Source-to-Pay’ solutions in products and services.
2. Develop and grow, step by step, a successful supplier-driven business by becoming the
preferred internet-based B2B sales and marketing channel for our suppliers across the world.
3. Achieve durable profitability and long term competitiveness through the lowest cost structure in
Now that the company has a stable basis for profitable growth, the execution of the first component
targets the realization of value in the current model with applications and services oriented towards
the buyer customers
– Catalog, content, and connectivity solutions
– SRM ‘on-demand’ (Supplier Relationship Management)
– Integrated ‘Source to Pay’ applications
– Broadening ‘change management’ services; the implementation of a first wave of buyer focused
services is in progress.
Now my comments:
- This move from cc-hubwoo looks justified with regards to following objectives:
- Increasing its leadership on its buyer-driven business: Thanks to Intersources, cc-Hubwoo might be present much early at client sites and be able to increase its sales pipeline and its success rate. cc-hubwoo will by the way enter on the small but dynamic and international Dutch market.
- Getting Speed to market: Speed to reach profitability and critical mass is critical to stay/become a leading vendor.
- Gaining a Sourcing & Procurement consulting Expertise: Intersources has very good reference and is recognised as an excellent Sourcing and Procurement service provider. cc-hubwoo couldn’t have acquired within a couple of year this recognised expertise.
- Increase Margin / reduce losses: Strategic Consulting is bringing higher margin than any ICT service provider. Adding 40 high-margin resources shall help 1) acquire more business and 2) improve the EBITDA. Other leading providers from the same sector are successfully using consulting to balance their business: Ariba, BravoSolution, IBX.
- First hand it looks a great move, but the devil might be hidden in the details. Below are 3 potential issues I see:
- Intersources was founded in 2003 by established sourcing & procurement professionals who identified a need in the market for a software-independent services solution… with cc-hubwoo, Intersources will not be software independent anymore, it will definitly have an impact on Intersources business.
- I feel as well – as Jason – that the deal looks generous for InterSources; I say I feel because I don’t know the financial situation of Intersources. To my knowledge, a good offer is expected to be 6-7 times the net-benefits. Currently the offer is between 5 and 7,5M€-ish which would mean that the benefits of Intersources are between 700K and 1M€ (ie 20 to 30% net margin). Difficult to believe for a company employing 40 sourcing experts with 3,2M€ revenue unless the company uses LCC specialists… Would be good to know more about that.
- What is cc-hubwoo core business? the best Technology and Content provider for eSourcing and eProcurement initiatives? or the best consulting specialist? I feel some conflicts there which might make their core-business difficult to grab by customers if not clarified.
- Finally, I would question this diversification preference compared to acquiring an other eSourcing/eProcurement technology provider. Diversification is right, but only once you are proven profitable on your other businesses.