Similar to when I received a call from investment banking firm Craig-Hallum regarding my post that the Ontario Education Collaborative Marketplace or “OECM” had decided to drop Ariba and eat $20 million in the process, the conversation I had with a representative from an investment banking firm shortly after I had posted my article on SciQuest, was equally telling.
Of the many questions their Equity Research Associate asked me regarding my coverage of SciQuest, these are the ones that stood out the most:
- Are the company’s challenges limited to the commercial market, or are there also similar issues within the higher ed market?
- What were my thoughts regarding the State audit surrounding the University of Connecticut spending “more than $900,000 in licensing fees on SciQuest software” that it had never actually used?
- To what extent is pressure from competitor’s such as Coupa having an impact on SciQuest’s performance and future?
- Is the reported and repeated delay in the signing of a large contract a sign that the deal will not go through?
In answering these, as well as other questions, the underlying tone was clear . . . SciQuest is definitely a company that is in big trouble.
To start, and referencing the recycled press release announcing purportedly “new” wins in higher education, it is evident that SciQuest’s problems extend to what was once a stronghold in terms of its indigenous market. Rumblings of a growing dissatisfaction with the company’s solution within the higher ed sector signal the decline of what was once – at least for a period of time – a winning partnership. Simply put, if your one time strongest constituents are no longer supporting you what does that tell you?
Just as a side note, and while the research associate indicated that the recycled press release was technically accurate in that they represented new contracts involving existing higher ed relationships, he acknowledged that it was nonetheless a somewhat dubious practice.
In my response to his question regarding the UConn audit, I had indicated that this was the perfect example of the dash and dine approach of the company in terms of implementing its solution. While there are without a doubt unique elements with every implementation, this seems to be the central issue with SciQuest customers across the board including Colorado and Oregon. It is also likely the reason why another state will soon be dropping the company.
Even though neither state has gone live with the “full set of solutions they purchased in 2011,” SciQuest CEO Stephen Wiehe (yes the same Stephen Wiehe that led the privatization of the company back in 2004), is taking an aggressive position. Specifically, Wiehe is of the opinion that his wayward customers do not have the right to cancel the contracts, and that if a settlement cannot be negotiated, the company will pursue “all of my available remedies.” – from SciQuest comes full circle with CombineNet acquisition (Part 2 of 2) by Jon Hansen, Buyers Meeting Point
He then asked if existing higher ed institutions will follow suit or wait until their contracts expire to move on to a new vendor.
Given SciQuest CEO Stephen Wiehe’s “response” to Colordao and Oregon’s decision to cancel their contracts with the company, I indicated that most higher ed institutions will likely ride it out to the end rather than face a similarly heavy-handed response. Either that, or hope for a UConn-type audit to give them a reason to get off the hook.
Regarding the impact that competitors were having on SciQuest’s fortunes, he asked me about Coupa – which in and of itself I found interesting – as well as who might fill the void for a solution provider in the higher ed sector. Regarding the latter question, I had indicated that companies such as Unimarket seem to be making serious headway. However, I also emphasized the fact that the focus should not be on the companies but their results in terms of successful implementations. At the end of the day, it is ultimately the point of consideration or measurement that matters most.
As for Coupa, look for my post on this sometime next week.
From the standpoint of the delay in the signing of a new, large contract, my answer was fairly simple. Given the above scenarios, would you want to be the person putting your name on the dotted line to engage the services of a company whose clients are in various sates of dissatisfaction and distress?
We agreed to stay in touch as further developments come to light. In this context, and as always I will keep you faithful reader, in the loop!