We interrupt this SciQuest Series . . . by Jon Hansen

Posted on August 26, 2015

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Analysts, however, didn’t share his unwavering confidence, with Stifel, Nicolaus & Co, Inc’s Tom Roderick asking what assurances Wiehe could offer that implementation issues didn’t contribute to the contract dispute.

“How much comfort do you have that we won’t see this sort of situation replicated with other large bodies?” he asked.

Wiehe repeatedly insisted Colorado and Oregon were isolated cases. “The other states are either fully in production or their implementation projects are well underway,” he said. “So we assess the risk as very, very low. Having said that, I’m asking you to take my word for it, and it’s difficult for me to give you other facts other than that.” – from the August 2nd, 2013 Triangle Business Journal article SciQuest shares spill as two customers backpedal

After reading the above, here is a question . . . have you wondered why the SciQuest letter threatening legal action, followed by the SLAPP document, hasn’t deterred me from writing posts?

Would it also surprise you that rather than silencing the market, SciQuest’s actions have actually had the opposite effect?

As indicated previously, everything I have written about SciQuest – for that matter every post on every topic I write – is based on research, experience, expertise, and a rapidly expanding base of information sources.

These are the sources who have provided the needed insights that have helped me to construct a more complete picture, resulting in the commentary that you find within the virtual pages of this blog.

With this understanding, consider the following:

Point 1

In August 2013, SciQuest announced that the company expected two state customers (Colorado and Oregon) to stop paying, and it had adjusted its second-half guidance accordingly.

While assurances were given that implementation issues were not part of the reason for the states’ decision, my sources informed me that this is not the complete story.

Colorado’s procurement people wanted to use SciQuest, but the finance people vetoed the initiative because they could not justify the investment in terms of what was being provided.

They then went on to say, that issues with Oregon were in fact due – at least in part, to implementation challenges. I will get into the specifics of what these challenges were, a little later in this post.

The Triangle Business Journal article was published on August 2nd, 2013, and around that time (August 9th) the stock price was at $19.97

Point 2

On March 21st, 2014, SciQuest’s stock price hit its highest point at $30.41 per share.

Point 3

On August 27th, 2014, The Hartford Courant In The News Auditor section posted an article under the heading “State Audit: UConn Spent $902,000 On Software Licensing Fees It Didn’t Use” (refer to image below.)

The article found that the university had “paid more than $900,000 in licensing fees on SciQuest software for three years, but did not use the software for most of the time.” Pay close attention to this last statement in the context of the Oregon implementation.

UConn Audit

By August 29th, 2014, SciQuest shares had dropped to $15.97

Point 4

Included as part of the list of posts that SciQuest contends are  libelous and/or slanderous, was my November 26th, 2014 post SciQuest “Sales” Execution Troubles?

While I will address all of the listed points of contention in a future post, today I want to focus on point “d.”

Regarding point “d”, the company claims that the statements that “SciQuest’s clients are going to cancel contracts with SciQuest and that the CEO is “dumping shares” are false, and portray SciQuest as a company losing its customers and being abandoned by its leadership.”

Remember, this post was published on November 26th, 2014.

Since then, and as announced in my June 11th, 2015 post The Beginning of the end for SciQuest?, Dartmouth College has stopped using SciQuest.

In that post, I provided a copy of the actual text from a Dartmouth internal e-mail announcing the transition, effective May 31st, 2015. Procurement Insights was the only blog – or for that matter any form of media or otherwise – to share the story.

As an aside, I will address CEO Wiehe’s sale of shares in a separate post.

What wasn’t reported at that same time however, was the fact that Stanford had also made the decision to stop using SciQuest (refer to image below).

Stanford Transitions from SciQuest . . . click to read

Stanford Transitions from SciQuest . . . click to read full document

Then in my August 7th, 2015 post The Ohio Effect: Why SciQuest’s condition may be terminal – which by the way has also been challenged by SciQuest as being libelous and/or slanderous – I indicated that sources informed me that this state was also planning to stop using the vendor’s solution.

So, is the above November 26th post’s assertion based on the information provided by my sources regarding clients cancelling contracts, true or false?

By the way, SciQuest’s share price the day following my June 11th Dartmouth post was sitting at $15.82.

Point 5

As referenced in Point 4, in my August 7th, 2015 post The Ohio Effect: Why SciQuest’s condition may be terminal, sources informed me that Ohio is actively looking to make a move away from the vendor’s solution.

In that post, I had highlighted what the sources described as being several issues behind the decision to seek an alternative to SciQuest.

It should be noted that the vendor is also challenging this post, citing similar points of contention to those related to my November 26th, 2014 post SciQuest “Sales” Execution Troubles?

This includes, but is not limited to, the references to an “implement and walk” model, catalog creation and maintenance being complicated and costly, as well as the suggestion that Ohio is in any way dissatisfied with SciQuest’s services.

On August 7th, when this post was published, SciQuest’s share price was at $11.93

A week after this post was published, SciQuest’s lawyers sent me a letter demanding that I “immediately retract and remove all statements concerning SciQuest and its officers” from my website, and that I “cease and desist from making any further statements regarding SciQuest and its officers.”

My response was to immediately publish the SciQuest Fights Back: A Case of David and Goliath? post.

Besides asking yourself why the Ohio post appears to have been the straw that broke the proverbial camel’s back, the bigger question for today is simply this . . . are the concerns raised by Stifel, Nicolaus & Co, Inc’s Tom Roderick regarding implementation issues warranted?

According to my sources, the answer would be yes.

So what are the issues?

Here they are:

  1. The SciQuest pricing model is a major problem. Specifically, and has explained to me, the need to buy and pay an annual licensing fee for what is known has catalog packs and, the annual fees associated with implementing and using the Spend Director, Order Management and Multi-biz rule engine. This last point is a particular issue for states as opposed to higher ed institutions given the size and diversity of a state’s infrastructure.
  2. Implementation problems – especially at the state level. According to my sources, implementation of the solution within the higher ed sector is not nearly as complex as it is with a state. The problem as described to me, is that SciQuest doesn’t seem to grasp or, is unwilling to grasp, the challenges associated with implementing its solution at the state level. When I was told about these implementation problems, both Oregon and even UConn came to mind.
  3. The third issue as described to me, centers around what was referred to as being “relationship rollover.” Based on what my sources are telling me, the people who may have been originally involved with selecting SciQuest, or those who would be inclined to stay the course, are moving on. The problem occurs when new or different people within the organization step in and question the SciQuest model regarding cost and functionality.

Beyond these three issues, my sources tell me that there seems to be an underlying sentiment that the company’s leadership is arrogant. While I can only go by my reaction to Stephen Wiehe’s request that Roderick take his word regarding implementation problems – I personally would never ask someone to simply take my word on something, this is obviously a discussion for another day.

What I can tell you, is that in the same August 2nd, 2013 Triangle Business Journal article, SciQuest CEO Stephen Wiehe was quoted as saying; “while “challenges” are anticipated in the second half, “we expect the negative impacts to be short-lived and these changes do not impact our long-term growth trajectory.”

As of this moment, a little more than 2 years later, his company’s stock is hovering around it’s lowest point ever at $11.00.

While this post will explain why I continue to write despite the threats of legal action from SciQuest, it is perhaps this last point as well as the revelations brought forth in this blog that explains why SciQuest is seeking to – for lack of a better term, shut me up.

As always, I stand by both my research and my sources. However, you should do your own homework and make your own decisions regarding SciQuest, or for that matter any service provider.

Of course, my invitation to Stephen Wiehe to do an interview on my radio show to address the above three issues in particular, remains open.

You can follow my coverage of this story on Twitter using the hashtag #SQSLAPP.

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Posted in: Commentary