A few days ago, SciQuest announced it was acquiring AECSoft, a vendor focused on a range of supplier management and supplier data enrichment areas. Yet AECSoft made an early name for itself as a purveyor of supplier diversity content and tools, competing in typically small — often low five and even the occasional four figure deals — in a single, highly targeted area. In recent years, AECSoft has been able to expand its relationships with many existing clients into broader supplier management programs. But they also continue to attract smaller content and broader spend enrichment-type customer programs as well. The two models clearly worked well for the ambitious and highly profitable diversity vendor that could. But will they work within a larger organization without a long-time track record in peddling high-end solutions that cross the software and vendor content line (aside from catalog content, which is an entirely different game)?
I think that for a number of reasons, the fundamental content/software wall can be difficult to cross for organizations of a certain size that focus on stamping out consistent and large solutions to complicated problems across a client base. While these hurdles are not specific to SciQuest, consider the following challenges that could come from combining software and proprietary content inside a larger vendor:
- Content in procurement is a scale and transactional game, where order taking is the norm. Software (including cloud/SaaS) often relies on a sales model that combines hunters and gatherers, resulting in lucrative multi-year relationships that can span into the millions of dollars. Managing the two types of sales organizations can double commercial complexity and cause customer and potentially channel headaches
- The perception of lesser or poor content — it seems that nearly every supplier diversity, general enrichment and supply risk content provider has a number of serious former/current customer detractors for one reason or another — may cause an implied bias customer against a software/SaaS package where it is not warranted, potentially harming often more lucrative software sales
- “Owning” content in one area may make it hard to resell content in another. For example, a company like D&B or Equifax is less likely to sell content to a software vendor, which also has a proprietary content business in other areas where it competes against the bigger name provider (e.g., risk data)
- Content validity and legality; the grey area of supplier content is quite large indeed. At least some providers resell, aggregate, combine — perhaps “mash-up” is a better term — different information, making licensing monitoring difficult…