Accelerating Activity Across the Supply Chain Sector

Across the board, the supply chain software industry is seeing a resurgence of activity as the sentiments for investing in SCM solutions for 2012 and beyond are strong and mirror what we were seeing in 2008 before the economic downturn. WNS, a middle market India-based BPO recently announced an alliance with GT Nexus, a supply chain software business to provide an outsourced solution to the shipping and logistics industries. This announcement reinforces a key theme we are seeing – BPOs continue to look to software as the means to differentiate their service offerings.

This reinforces previous efforts by offshore BPO firms to utilize proprietary software technology that has historically been sold as a license and use it as the core of a more comprehensive services offering. We have seen a number of domestic services companies acquire software to embed in their services offerings like Accenture, Deloitte and IBM, but we have seen very few off shore BPOs successfully acquire meaningful software assets thus far. We believe this announcement is WNS’ way to test the waters before making a full acquisition. We expect other offshore BPOs to follow and continue to see a significant pickup in M&A discussion activity from the offshore BPO providers.

This also adds credence to our expectation of increased activity in the Supply Chain software sector. We are seeing heightened activity in particular around supply chain analytics and risk management. Companies are all focused on trying to do more with less and understanding and managing spend is becoming more of a priority. Corporations are seeking a comprehensive solution and one which is economically attractive thereby driving both BPO and SaaS offerings. We expect to continue to see more announcements from Supply Chain Software companies similar to the just announced Francisco Partners acquisition of Kewill for $145 million, 8.6x EBITDA and 1.2x Revenue.