The News

On Monday, news broke that Workday, which provides cloud-based ERP tools for finance, HR, and enterprise planning, reached a definitive agreement to acquire Scout RFP, a cloud-based procurement and strategic sourcing solutions provider, for $540 million in cash. Workday’s Chief Product Officer, Petros Dermetzis, announced the agreement in a company blog post. The two Bay-area solution providers have been integration partners for more than a year: Scout has been a Workday Ventures portfolio company and a Workday Software company, which have enabled Scout to provide mutual customers with its cloud-based sourcing solutions.

Petros framed the acquisition as the logical next step for Workday, which already offers cloud-based procurement and finance solutions. As part of the deal, Workday will acquire Scout RFP’s suite of strategic sourcing solutions, including RFX, reverse auction, contract management, and supplier management tools, to become a source-to-pay solutions provider. Workday will also incorporate Scout’s customer base and more than 160 employees across North America and Europe. It is unclear how much of Scout’s original leadership team will continue to lead the company post acquisition.

Petros stated that Workday leadership does not intend to “re-platform” Scout’s strategic sourcing solutions, but he acknowledged that over time, Workday will essentially stratify Scout’s solutions under Workday’s “Power of One” user interface and experience. This will provide “access to one data model, one security model, one user experience, and one Workday community.” The deal is expected to close in the fourth quarter of Workday’s 2020 Fiscal Year (January 31, 2020), subject to all standard conditions and approvals.

Ardent Analysis

This deal proves that innovative approaches and solutions can still succeed in relatively mature solution markets. In the world of procurement, the eSourcing and strategic sourcing technology market(s) are fairly mature with the majority of market share spread across a few longstanding providers. Scout was able to enter and shake up this fairly staid industry. Congratulations are in order to Scout’s team of founders (and executives). This group of young, but proven, entrepreneurs entered a new market with scant experience and were able to quickly build a company that garnered attention, investment, and a slate of dedicated customers. They exit with a rich valuation based on our revenue estimates and stand as a great example for new entrepreneurs and investors alike to to enter the space.

We’ll offer expanded coverage on this deal and its implications after connecting with the leadership of both teams.

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Tagged in: Complex Categories, Innovation, P2P, Solution Providers, Sourcing, Technology