By Sarah Fister Gale
Mar. 28, 2014
SAP is at it again.
The software giant announced March 26 that it will acquire Fieldglass, a cloud-based vendor management system for procuring and managing contingent labor and services. The acquisition will add to SAP’s cloud-based human capital management offering, which also includes SuccessFactors’ human resources applications and Ariba Inc.’s procurement network.
This deal is exciting — Fieldglass is the largest VMS in the marketplace in both total spending and global footprint — but it’s not surprising, said Chris Dwyer, vice president of operations for research firm Ardent Partners. SAP has been on a talent management buying spree for years and, like many big enterprise resource planning providers today, it lacked a contingent labor management system.
“Fieldglass will help them round out their total talent management offering,” Dwyer said. “Now all of their talent management bases will be covered.”
It’s a smart move for SAP. Contingent workforce programs are expected to grow by nearly 30 percent during the next three years, according to Ardent research, yet companies still struggle to get a handle on how to effectively manage this segment of the workforce.
Contingent labor today represents the second largest spending category for most companies, but much of that money goes unaccounted for because they lack the systems to track and manage their contingent labor resources, according to Tim Minahan, chief marketing officer for SAP Cloud. “Customers have long been asking us for a single platform to manage all of their labor,” he said. “They want a solution that will address all of the issues around finding, onboarding, maintaining and paying these resources.”
Fieldglass was the perfect fit, sources say. The Chicago-based VMS company has 350 employees and more than 250 customers, including Johnson & Johnson, Monsanto Co., Rio Tinto Group, Salesforce.com Inc. and GlaxoSmithKline, many of whom are already SAP customers. Through the acquisition, which is expected to close in the second quarter, SAP will now be able to integrate the Fieldglass system into their broader talent management offering, giving customers a way to more easily onboard talent, track labor spending and move people into open roles regardless of their employment status.
“The acquisition of Fieldglass creates a compelling advantage for SAP customers as they access, attract and manage talent via the networked economy,” said Bill McDermott and Jim Hagemann Snabe, co-CEOs and members of the executive board of SAP AG in the release. “Combining Fieldglass with SAP is a significant milestone in our strategy to help businesses simplify everything.”
In return, Fieldglass will be able to accelerate its own business strategy, Jai Shekhawat, Fieldglass CEO and co-founder, said in release about the deal. “Joining with SAP will allow us to dramatically accelerate our global growth plans and pace of innovation at the unique intersection of the human capital and procurement sectors.”
Why Should You Care?
HR leaders in companies that rely on contingent labor should be optimistic about this acquisition. Even for those who aren’t SAP or Fieldglass customers, it is an indication that talent management software providers understand that customers need a more effective and integrated way to manage their contingent labor pool, said Ray Wang, founder of Constellation Research Inc.
While SAP may be the first major software company to acquire a VMS system, it is unlikely to be the last. “I’d be surprised if SAP’s competitors give them too much of a time advantage in this space,” Wang said, noting that other vendors may choose to build rather than buy a VMS offering, but it’s likely they will head in that direction soon.
In the meantime, Fieldglass customers should inquire about which features SAP will continue to support, and how the acquisition will affect their use of the software, whether they are SAP customers or not, Wang said.
The good news is that VMS tools are designed to be ERP integration ready, so the transition shouldn’t be too rocky, Dwyer said. And the fact that SAP says Fieldglass will remain a separate entity in the SAP Cloud line suggests that it won’t lose the high-touch customer experience that’s it is known for. “It may take a while to work out the kinks,” he added, “but I don’t think they need to worry.”
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