I have received numerous comments regarding my last couple of posts, particularly as it relates to a free press and the prevalence of native advertising or content. You should check out the John Oliver commentary on native advertising through the following link; https://www.youtube.com/watch?v=E_F5GxCwizc
In the meantime, the reference in yesterday’s post to the falling knife analogy got me to thinking. Specifically, is there a common characteristic relative to vendors like SciQuest, who are experiencing, or have experienced, significant market challenges?
Ariba almost immediately came to mind.
Here are the reasons why:
- Both SciQuest and Ariba have had their fair share of notable failures. For SciQuest there are the Colorado’s and Oregon’s, and for Ariba there is the Ontario Education Collaborative Marketplace or OECM, to name just a few.
- Following my posts of high profile client missteps, I received a call from interested (make that concerned) investment bankers and/or analyst firms, involved with both SciQuest (Pacific Crest Securities LLC) and Ariba (Craig-Hellum).
- Both companies have posted losses on a fairly regular basis in their annual reports.
- Both company’s stock prices share a seemingly similar end of roller coaster ride trending (see images below). On September 24th, 2010, SciQuest’s stock was priced at $12.27 a share. Despite a brief surge between 2013 and 2014 – when the stock hit a high of $30.41 per share, on July 24th, 2015, it returned to $13.32. In terms of Ariba, in December 1999 their share price was at $57, then in March 2000 the shares hit a high of $173, before finally closing at $45 on October 2012, when they were acquired by SAP.
- Despite their being considered as classic examples of the “catching a falling knife” analogy, both have been/are acquisition targets. In 2012, Ariba was acquired by SAP, while most recently, it has been reported that SciQuest is a possible acquisition target for companies such as Oracle and IBM.
Now you might be thinking “sure, there are obvious similarities, but why should I care?”
Here is the answer . . . what the above shows us is that the real game being played out has little, if anything to do with producing positive customer outcomes, and more to do with maximizing share value – especially for the executives of the company holding the shares. The April 13th, 2000 article by Adam Lashinsky in TheStreet titled SciQuest’s Misadventure Is a Sign of the Times makes for interesting reading regarding this latter point.
Now one might reasonably think that customer success is a key factor in terms of increasing share price. One would think.
At the end of the day, while customer successes are nice, they are not as necessary as you hope. It is the new customer wins – or the potential for new customer wins leading to increased market share, that is most important. This is the real engine of perception that drives the solution provider community (and share price) – including it’s potential appeal as a possible acquisition target.
It is also the reason why native advertising or content is becoming increasingly important to solution providers such as SciQuest, in that analysts, journalists and bloggers covering the procurement industry are, as New York Times Executive VP Meredith Levien put it in the above referenced Oliver video, “sharing their story telling tools with the marketer.”
The fallout from this symbiotic relationship between those in the media and the companies they are covering, is that the end user ultimately foots the bill as a result of failed initiatives or problematic implementations.
This is why, in my response to one executive who had written me to let me know how much they liked my recent post, I wrote the following:
Far too many organizations equate a technical analysis or seek a Magic Quadrant-type endorsement as being the starting point for selecting a “solution,” when they should instead be seeking a partner. With the former, you rarely if ever, find a true partner because such analyses rarely if ever look at the people behind the company, or for that matter the company itself – such as if the executives are selling their stocks.
This of course requires a greater investment that goes beyond a features, functions and benefits analysis or, the hollow endorsements from existing clients. You will have to remind me one day to tell you the story about Multnomah County and SAP, in which the latter used Kings County as a key reference that did not turn out as expected.
The good news is that you ultimately have to be your own best filter. As I tell my readers, while I will strive to always provide thorough and insightful coverage of the industry, you should still challenge me as you should any source of information. If what I am saying is on the mark, it can and will ultimately stand up to scrutiny.