Sphera Signals Its Focus On Operational Risk With sparesFinder Acquisition In The UK
Sphera Solutions today announced the acquisition of UK-headquartered sparesFinder a cloud software provider focused on data management for maintenance, repair and operation (MRO). This is the second acquisition that Sphera has made in the UK market following its purchase of another cloud-based software provider Rivo Software in April 2017. Whilst many market participants are waiting with bated breath for an impending consolidation of the $1.2 billion EHS software market, this deal indicates that a roll up may not be on the cards quite yet. SparesFinder competed directly with Sphera’s existing MRO software, centred round the Struxure product, which represents approximately 10% of Sphera’s total revenues. Regulatory filings indicate sparesFinder was founded in 1998 and had revenues of between £4 million and £5 million in the last financial year.
The logic for the deal is three-fold. Firstly, Sphera will have a bigger share of the niche MRO data management market which will enhance its pricing power with customers. Secondly, by acquiring sparesFinder, Sphera increases its non-US revenues and strengthens its presence in the UK and European markets. Thirdly, adding the sparesFinder cloud software to its portfolio improves its offerings for asset integrity and maintenance management which is a critical part of emerging platforms for operational risk management software. Other EHS software vendors do not have MRO data management capabilities.
The sparesFinder product portfolio has four applications. The Masterpiece application standardizes and enriches material master data to improve MRO effectiveness. The Insight application aggregates and analyses spending on MRO, spare part stocks and usage. The Gatekeeper application provides oversight and governance of material master data. The Finder application helps operations teams to spot the MRO master data they need to make decisions. Despite its relatively small size, sparesFinder is used by industry titans like Baxter and BHP Billiton.
Whether to double-down on the EHS market opportunity or push hard into the operational risk management market is the big strategic dilemma facing large EHS software vendors. The former strategy offers faster short-term financial upside through continuity in commercial focus and cross-selling but price competition is tough and 80% of customers prefer integrated EHS platforms. The latter strategy holds out the promise of faster growth in 3 to 5 years due to deal sizes for operational risk software being on average 5x those in EHS. However, winners in the operational risk software market will need to build or acquire products with dynamic, near real-time risk models. This will be a costly product development initiative.