Dive Brief:

• Workday will acquire Scout RFP, a sourcing solutions provider, for $540 million in cash, according to a blog post written earlier this week by Workday Chief Products Officer ​Petros Dermetzis.
• The deal is expected to close during Workday's 2020 fourth quarter, which ends Jan. 31, 2020, if it meets the required conditions, including regulatory approval.
• Additional details on the acquisition will be provided on Workday's third-quarter earnings call scheduled for Dec. 3, 2019, according to a press release filed with the Securities and Exchange Commission.

Dive Insight:

Workday's cloud-based ERP technology is specifically designed for finance, HR and workforce management. It allows users to create and manage plans, forecasts, payroll, invoices and other business processes. The acquisition of Scout RFP will allow it to create a more end-to-end offering, the company said.

"Together, we will deliver a modern source-to-pay solution that accelerates our momentum in the spend management market and expands how customers can plan, execute, analyze, and extend in one system," Workday CEO Aneel Bhusri said in a statement.

Scout's technology is a cloud-based solution that allows customers to build RFPs, RFQs or RFIs, onboard suppliers and monitor compliance with company standards with contract management and reporting options, according to Scout's website.

A 2016 survey conducted by the Harvard Business Review and sponsored by Scout found 60% of respondents were using digital technology to improve non-customer facing processes including procurement. In the paper Scout listed some of its customers, which included Airbnb, Adobe and Zebra Technologies.

"Many companies interested in supporting sourcing and procurement activity through technology find themselves presented with a choice: in broad terms, either an integrated, end-to-end software application suite that addresses most or all components of the source-to-settle process, or a combination of best-in-breed point solutions and custom-built or legacy systems," the whitepaper reads.

A report published earlier this year by The Hackett Group found digitization and automation of the procurement process leads to a reduction in cost and errors. It concluded that investment resulted in higher technology cost, but a 17% reduction in overall cost.

Workday has already taken steps to provide procurement solutions as part of its technology with Workday Procurement. This offers the ability to build RFQs, create contracts and manage supplier invoices. It also offers Workday Inventory to track inventory and replenishment.

Still, Ray Wang, the founder and principal analyst at Constellation Research, told Tech Crunch one of Workday's "big gaps has been in procurement."

"With increased importance around the supplier as a strategic asset, the acquisition of Scout RFP will help accelerate Workday’s ability to deliver a comprehensive source-to-pay solution with a best-in-class strategic sourcing offering, elevating the office of procurement in strategic importance and transforming the procurement function," a Workday spokesperson told Supply Chain Dive.

With the addition of Scout RFP, Workforce will add the company's 160 employees across North America and Europe to its company.