Earlier today, SAP AG (NYSE: SAP) announced its intent to acquire Vendor Management System (VMS) provider Fieldglass, one of the world’s leading platforms for managing contingent labor and other types of contract talent. The deal is expected to be closed sometime in the second quarter of 2014, subject to regulatory approval and final negotiations. Other details will emerge but, for now, the SAP and Fieldglass teams state that the VMS provider will operate independently as an SAP company in their cloud line.
SAP’s acquisition of Fieldglass represents a veritable “game-changer” in the contingent workforce industry, as this deal is the first instance of one of the top-tier VMS solutions (a list that includes Beeline, IQN, and Peoplefluent, among several others) being linked so directly with a supply management suite provider with a depth in eProcurement (Ariba and also, SAP). It is also, of course, the first deal where a VMS provider is snatched up by one of the world’s two largest ERP providers. Ardent Partners expects the contingent workforce management market to grow by 30% over the next three years, so the interest by larger providers in this complex and fast-growing area has been quite apparent for years (so much so, that predicting a near-term deal in this space was no great feat). Additionally, besides being an interested suitor in a few acquisition opportunities over the years, Ariba has spent the past year refining its own Contingent Workforce and services procurement solutions. Ariba’s focus on services procurement now maps to the increasing maturity of its procurement customers who are looking to move beyond managing their indirect (and direct) items and are focusing on services as the next wave to place more spend under management.
Harder to predict has been the convergence of total talent management and supply management and the speed in which it is occurring. This factor makes the union of Fieldglass with Ariba/SAP AND the union of Fieldglass with SuccessFactors/SAP all the more interesting as the combined solutions begin to map to the collaborative strategies and approaches that enterprises are using to manage these workers and category of spend.
SAP’s acquisition of Fieldglass will enhance and broaden its ability to support its clients’ workforce management depth – with SuccessFactors currently attacking the FTE and talent management elements for SAP’s customers, and Ariba’s network-based approach allowing for a wider grasp of suppliers (of all types and sizes). Along with tried-and-true success of the procurement unit, the Fieldglass acquisition addresses a sizable gap in how the SAP suite supports the management of the total workforce, in which a heavy component is the strategy for controlling and managing contract workers.
Ardent’s research has found that while VMS users are ably managing their contract talent and nearly all aspects of the Contingent Workforce Management Framework (particularly complex contingent labor, which includes SOW-based labor and professional services), some critical issues do exist for these users. Only 49% of VMS users can accurately forecast, in real-time, contingent workforce spending against corporate budgets. Furthermore, only 31% of companies leveraging VMS technology are currently enabled to build a standardized supplier optimization strategy. The breadth of software provided by Ariba’s platform (and network) will help address these items. As we’ve noted before, the merging of supplier management and contingent workforce management is a strategy that can pay huge dividends.
While visibility is certainly a prime benefactor to customers of Fieldglass, Ariba, SuccessFactors and SAP, the fact that the convergence of these solutions can support the growing concept of total talent management is perhaps the most exciting avenue to come out of this acquisition. Ardent Partners identified this progressive strategy some time ago as an area that would represent the future of contingent workforce management. A key takeaway from our research in this arena revolves around one idea: in order to develop and execute a program that can capture the totality of both traditional, full-time talent and contract talent (from data to resources to projects to succession planning and more), a deep array of integrated technological capabilities must be leveraged in support of a strong process and strategy.
As Tim Minahan, CMO of SAP Cloud, indicated earlier today that many solutions miss the new dynamics in regards to capturing the totality of both internal and external talent. Minahan stated that SAP’s acquisition of Fieldglass will allow for a common talent management schema (leveraging SuccessFactors) that can blend human capital management attributes with an approach that can help enterprises organize talent pools. This idea supports a quicker path to engaging new talent and managing the total workforce in a balance and holistic manner.
Arun Srinivasan, VP of Marketing and Strategy of Fieldglass, added that, from the Fieldglass perspective, this acquisition will allow the solution to expand its “spend, supplier and talent footprint” into new areas to help its customers gain total visibility into all spend attributes, suppliers of talent and both workers and projects that sit across the enterprise. SAP’s breadth across its own platform, Ariba’s network, SuccessFactor’s human capital technology and now Fieldglass’s stout VMS platform will spark natural points of convergence between procurement, human resources and IT for managing the totality of the contemporary workforce.
Stay tuned for more analysis.
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