Sparta Systems Inc., one of the most well established and largest pure-play vendors in the Enterprise Quality Management Systems (EQMS) space, purchased 123Compliance, an EQMS vendor for the life sciences small and medium business (SMB) space developed on the Salesforce cloud platform on January 20th, 2016. What does this acquisition mean to Sparta and 123Compliance customers and to quality management as a whole?
EQMS in the Cloud
Sparta's primary product, TrackWise, is a well-established brand with a particularly strong focus on large companies in pharmaceuticals and biotech as well as other life sciences with deployments stretching back to 1994. It should come as no surprise that many of its existing deployments are on-premise or leverage managed service environments. However, Sparta saw a tremendous uptick in the interest of cloud-based deployments, and relayed that it expects companies to turn to the cloud in the next 5 years.
The 123Compliance acquisition was partially fueled by this realization, as it was one of the first to market with a cloud-based EQMS solution. 123Compliance is a life sciences-focused EQMS solution, providing quality management, compliant management and device tracking. While 123Compliance has generated some industry momentum, Sparta acquired it to leverage its cloud success, gain an SMB offering, and solve an important collaboration problem (more on that later).
LNS Research agrees that the EQMS market is quickly turning to cloud-based solutions, and as mentioned in our 2016 quality management predictions blog, has identified that the trend is already underway and accelerating. According to LNS survey data, while 29% of the market currently deploys EQMS off-premise, 46% plan to deploy EQMS off-premise, an increase of 59%.
Extra-Enterprise Collaboration and the Quality Business Network
With the acquisition of 123Compliance, Sparta launched its Quality Business Network initiative. The Quality Business Network is intended to be a platform that extends collaboration outside of a large company’s four walls to include suppliers and other partners. The first step in this direction was Sparta’s deployment of the Stratas integration layer. Stratas connects systems between customers, suppliers and manufacturers to generating visibility to provide secure data access.
The addition of 123Compliance provides an easily-deployable cloud platform for SMB. Sparta envisions its flagship TrackWise product deployed at large companies, 123Compliance deployed at the company’s suppliers and partners, Stratas connecting the organizations and permitting secure collaboration, all sharing data with each other and 3rd party solutions. A loosely coupled solution set such as this would reduce surprises, improve compliance, and reduce effort to comply without taking on the impossible task of moving all participants to a single monolithic system.
What Does This Mean for Sparta Customers?
The most obvious short term upside for many existing TrackWise customers is the addition of 123Compliance’s cloud and SaaS knowhow. Sparta plans to leverage this in future development. Former 123Compliance customers will clearly benefit from Sparta’s larger infrastructure, deployment expertise and credibility. At some point, there’s the realization of the Quality Business Network.
Another interesting longer term benefit may result from the integration of the two cultures. The Sparta team is looking to increase its responsiveness, and integrating the 123Compliance culture will likely have a positive impact on these efforts.
The biggest risk with any acquisition is a cultural or technological mismatch that slows or prevents realization of the ultimate integrated vision. While this is a very real risk, the assimilation of 123Compliance was already underway and seemed to be going well by all counts when we spoke with the Sparta/123Compliance team.
What Does This Mean for the EQMS Industry?
There are other pure play vendors who have cloud platforms, integration capabilities, and an established presence from Large to Small businesses. There are also enterprise software players (e.g. PLM and ERP) that provide quality capabilities along with broad process support, cloud and integration. However, Sparta is the unquestionable quality leader in large pharmaceuticals and biotech, industries where quality is particularly critical. While Sparta’s acquisition of 123Compliance fills some tactical technological gaps in its product line, it should continue Sparta’s leadership into the future cloud-centered world. Additionally, its Quality Business Network is strategically interesting both because of the vision and because of Sparta’s place in industry which increases it chances of realizing that vision.
Aside from the direct impact to Sparta and its customers, this is also a story of how the EQMS industry is evolving. We’ve seen the industry grow up from a cottage industry to one that is experiencing ever increasing VC and M&A activities. LNS is regularly approached by investors looking for high growth companies with good revenue, which now characterizes an appreciable part of the EQMS space. The EQMS space is evolving because there is growing recognition of benefits and importance of EQMS, and money is following, which is good news for all involved, particularly customers.
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