Look Beyond The Simple Facts of the Cimpl Acquisition

(Note: This blog was co-written by Hyoun Park and Larry Foster, an Enterprise Technology Management Association Hall of Famer and an executive who has shape the Technology Expense Management industry. Please welcome Larry’s first contribution to Amalgam Insights!)

On August 22, 2019, Upland Software announced the acquisition of Cimpl (f.k.a. Etelesolv), a Montreal-based telecom expense management platform that was the market leader in the Canadian market and had expanded into the United States market. With this acquisition, Cimpl will become a part of Upland’s Project & Financial Management Solution Suite and add approximate $8 million in annual revenue.

Context for the Acquisition

The TEM (Technology Expense Management) industry has experienced a continual series of ebb-and-flow acquisitions/mergers over the past twelve years. The typical TEM acquisition/merger encompasses two or more independent entities within the realm of TEM, WEM (Wireless Expense Management) or MMS (Managed Mobility Services) merging to create a more comprehensive expense management solution portfolio with superior global delivery capabilities.

The reality is that many of these mergers are driven by economic reasons where one or both entities can reduce overhead by eliminating duplicate services. Overhead is eliminated by unifying back-office operations and amalgamating technology platforms. These types of consolidation mergers are typical in a maturing industry that is eventually dominated by a few leading solution providers representing the majority of market share. All of the leading TEM solution providers including Tangoe, MDSL and Calero encompass a long history of multiple “like-minded mergers”.

Cimpl as an outlier in the TEM market

Until this recent acquisition, Cimpl has maintained the persona of the independent dark horse of the TEM industry quietly residing in Quebec, Canada refining its multi-tenant cloud platform and progressively building its market share.

Unlike most TEM managed service solution providers, Cimpl has decided to focus on being mainly a pure software company and providing a white-label technology platform for its delivery partners. In early 2018 CIMPL stealthily started to expand its physical presence into the United States. Since its inception, Cimpl has continued to progressively achieve conservative incremental success and stay profitable in contrast to a number of TEM vendors that have gone through boom-or-bust cycles driven by external funding (or the lack thereof).

The Challenge for TEM

The traditional acquisition playbook is preventing the TEM industry from being recognized as a strategic asset by organizations. Nonetheless, the TEM industry is experiencing a dramatic paradigm shift as organizations continue to replace legacy communication services with the ever-growing spectrum of cloud-based services. Traditionally, TEM solutions have focused on validating the integrity of invoice charges across multiple vendors prior to payment and allocating expenses to the respective cost centers leveraging the leased service. Enterprises derive value from TEM solutions by enabling a centralized ICT (Information and Communications Technology) shared service to automate the lifecycle from provisioning through payment and managing the resolution of disputed invoice charges for essentially static services.

However, as organizations adopt more ephemeral cloud services that encompass multi-vendor private, public and hybrid leased environments for compute, storage, API-enabled integrations, connectivity, input/output, and telecommunications, the purpose of the centralized ICT business operation is being transformed from managing daily operations to a fiduciary broker focused on optimizing technology investments. Unlike the recurring charges that represent the majority of traditional telecom charges, cloud services are consumption-based, meaning that it’s the responsibility of the client user to deactivate and manage the appropriate configuration of contracted services based on statistical analysis and forecast of the actual usage.

In the world of cloud, the provisioning activities such as activations, changes, and deactivations are done “on-demand,” completely independent from the ICT operation. The primary focus of ITEM solutions is to manage recurring and non-recurring invoice charges in arrears. As ICT operations evolve into technology brokers, they need real-time insight underpinned by ML and AI algorithms that make cost optimization recommendations to add, consolidate, change or deactivate services based on usage trends.

Why the CIMPL acquisition will help Upland

This context brings us to the real ingenuousness of the Cimpl acquisition. In the typical quiet financial days of August when everyone is away on vacation, Upland Software announced an accretive acquisition of Cimpl with a purchase price of $23.1M in cash and a $2.6M cash holdback payable in 12 months. Upland expects the acquisition to generate annual revenue of approximately $8M, of which $7.4M is recurring. The keyword buried within all of those financial statistics is “accretive” which means their strategy is to help increase natural growth.

Upland already has an impressive complementary portfolio of profitable software solutions. A closer look at the acquisition of Cimpl shows how Upland is formulating a solution strategy to manage all aspects of the Information and Communication Technology business operations.

The strategic value of the Cimpl acquisition becomes very clear when you recognize that Upland is the first company to combine an IT Financial Management platform (ITFM), ComSci, with an IT Expense Management-based solution (ITEM), Cimpl. Upland already owns additional complementary solutions such as a document and workflow automation, a BI platform, customer engagement platform, and a knowledge-based platform. With these components, Upland is working to create an industry-leading ERP-type solution framework to automate, manage, & rationalize all aspects of ICT business operations.

Although both ITFM and ITEM support the ICT business operations, they focus on different aspects. ITFM is predominately used on the front end to manage budgets and on a monthly basis to support internal billing/chargeback activities and leveraged by the IT CFO office whereas ITEM solutions like Cimpl are used by analysts and operational managers because they focus on managing the high volumes of transactional operations and data throughout the month, including provisioning and payment of leased services such as both landline and mobile communication services and now the ever-expanding array of cloud services.

Looking Forward: Our Recommendations

In this context, take the following recommendations into account based on this acquisition.

Expect other leading TEM, ITFM, CEM/CMP (Cloud Expense Management and Cloud Management Platform) solution providers to develop competitive solution frameworks that bring multiple IT categories together from a finance and expense management perspective.

ICT managers need to evolve and transform their solution to due diligence approach beyond pursuing and leveraging independent ITFM, ITEM, CEM/CMP solutions to choosing solutions with comprehensive IT management frameworks. As IT continues to become increasingly based on subscriptions, project-based spend, and on-demand peak usage across a variety of categories, ICT managers should aim towards having a single management control plane for finance and expenses rather than depend on a variety of management solutions

Real-time management is the future of IT expense management. The next levels of operational efficacy will be underpinned by more comprehensive real-time insight that helps organizations understand the most optimal way to acquire, configure and consume inter-related cloud services and pay their invoices. This will require insights on usage, project management, service management and real-time status updates associated with expense and finance. By combining financial and operational data, ICT managers will have greater insights into the current and ongoing ROI of technology under management.

From Calero World Online: From TEM to ITEM: Leveraging TEM for Non-Traditional Expenses

On October 18th, I presented a webinar at Calero World Online on the future of IT cost and subscription management. In this presentation, I challenge existing telecom and IT expense management managers to accept their destiny as pilots and architects of enterprise digital subscriptions.

Telecom expense has traditionally been the most challenging of IT costs to manage. With the emergence of software-as-a-service, cloud computing, the Internet of Things, and software-defined networks, the rest of the IT world is quickly catching up.

In this webinar, you will learn:

  • How the latest trends and technology are driving change to enterprise management strategies
  • How the challenges of traditional TEM and cloud expense management are similar in nature (and why TEM is a good place to start)
  • How organizations are benefiting from ITEM best practices using sample use cases

To learn more about the upcoming challenges of IT expense management, aligning technology supply to digital demand, and being the shepherd for your organization’s technology sourcing, utilization, and optimization, click here to watch this webinar on-demand.