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Article
Why Selectica + Iasta?

Selectica (a contract management/configuration solution provider) recently announced their acquisition of Iasta (a sourcing solution provider). Here we discuss the fit and some of the reasoning behind the deal.


Full Article Below -
Untitled Document

Figure 1 – Iasta's Footprint

The Functional Footprint Fit

On June 5th, Selectica announced it has reached an agreement to acquire Iasta and the deal closed on July 2nd. From a functional footprint perspective, this acquisition looks like a good fit, especially for extending Selectica into a full upstream sourcing solution.

Iasta’s core has been in sourcing, focused on RFx, auctions and decision optimization1 in their early days. They were and have always been known for ease-of-use and making sourcing capabilities more accessible to the procurement professional (rather than requiring a PhD to run it). Since then Iasta has broadened their footprint to a complete upstream sourcing solution, including spend analytics, business intelligence, supplier information management, contract management, and supplier performance management. For the downstream procure-to-pay piece, Iasta partners with various leading P2P players.

Selectica started out on the sell side, focused on product configuration. In 2005, Selectica acquired Determine Software and got into contract management and compliance which has become central to their business. Their footprint includes contract lifecycle management, contract discovery (contract audits), and CPQ (configure, price, quote).

Big companies like Cisco and GE use the CPQ product to configure complex products. However, there is some footprint overlap with Iasta in the area of contract management. Iasta has a narrower footprint in that area and was focused only on the buy-side contracts from a repository perspective, whereas Selectica also has sell-side contract management, discovery and more advanced features in areas such as contract administration, process management, authoring, electronic signatures, and mobile support.

Compliance and Risk

Together the companies have quite a complete upstream solution for spend analytics, sourcing, supplier management and contract management. An interesting area of intersection and focus is compliance and risk management—with Selectica having contract analytics and contract discovery capabilities, and Iasta having compliance/risk dashboards, supplier information and performance management tools. This may prove to be a key attractor for future customers, as regulatory and internal compliance is an area of growing attention and importance for many industries.

Analytics

Iasta introduced spend analytics several years ago. Their solution is able to provide on demand analysis, easy reporting, and drill-down and filter capabilities. They provide easy sharing of the analysis and support a collaborative decision making process. Recently they introduced a Savings Tracker and Supplier Diversity Dashboard as part of their analytics suite. Selectica also has contract performance analytics to analyze the contract lifecycle and find and fix bottlenecks, analyze risk associated with contract language, and improve the accuracy of forecasts for cash, liabilities and revenue. It will be interesting to see how these two sets of analytic capabilities work together in the future.

The Customer/Industry/Geography Fit

The combined company will have revenue of about $27M and about 250 clients, with about half the clients coming from each. Both Iasta and Selectica tend to sell to large (over $1B) companies, and some very large ones (over $10B). In terms of industry focus, both firms are largely horizontal, going across many industries —everything from industrial manufacturing to pharmaceutical, media, retail, aerospace, fast food, apparel, construction, high tech, non-profits, utilities, healthcare, food and beverage, insurance, banks, energy, and more. Selectica’s clients are for the most part headquartered in North American (though many are global/multi-national companies). Iasta also has many North American customers, but also has about 25%-30% of their direct customers, and those through partnership, that are based outside the US. Selectica plans to leverage Iasta’s presence in Europe for further growth. They also plan to go after emerging markets,2 focusing on implementing the foundational analytics, sourcing and supplier management capabilities. You can see who some of Selectica’s customers are at selectica.com/customers and examples of Iasta’s customers at Iasta.com/customers.

The Partner/Channel Fit

Figure 2 - Selectica's Partner Strategy Overview – Source: Selectica

Integration of Selectica and Iasta partner networks could be interesting. Selectica has tight integration with salesforce.com, DocuSign, and others. Certainly some of these, such as DocuSign, would make good partners with Iasta too. Selectica has partnerships with LPO (Legal Process Outsourcing) and BPO (Business Process Outsourcing) firms, as well as system integrators. Iasta also has deep partnerships with leading consulting and BPO firms including both global and regional players in strategic sourcing and procurement consulting. We could see some multiplier effect in combining their respective partner networks.

The Cultural Fit

I saved this for last, because it is one of the most important aspects to making any merger or acquisition work. To be honest, I don’t know the current management team at Selectica that well (yet), though we had some recent conversations.3 However, I’ve known Dave Bush (CEO of Iasta) for over a decade. I have some sense of how important his company’s culture is to him and his team. He is very proud (and rightfully so) of the many awards they have won, but perhaps none more than the “Best Places To Work In Indiana” award. He has always struck me as a man of integrity who stands behind his word and that is reflected in Iasta’s culture. So when Dave told us that the cultural fit was really important to him, I believe that really was an important factor in why this deal was done.

Overall the two firms seem like a good fit together. They have very well-respected capabilities individually and now form an important and quite competitive player in the market. It will be fascinating to see where they take it from here.

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1 I.e. Sourcing decision optimization -- Return to article text above

2 They refer to these as ‘non-mature’ markets, which includes some developed economies like Australia, the Far East and South America. -- Return to article text above

3 I met Selectica’s founding management team a few times back in 1999-2001. However, all of those folks have since left.


To view other articles from this issue of the brief, click here.

 




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