Strategic Sourcing Europe

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[1], 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.

You can read the full Capgemini press release here, and first feedback from Jason Bush there.

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

Other thoughts:

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…