ServiceSource buys Scout Analytics in $32 million deal

scoutanalyServiceSource, a San Francisco-based publicly-traded company that specializes in cloud-based recurring revenue management technologies, has acquired Issaquah-based Scout Analytics. All 42 employees at Scout plan to join ServiceSource as part of the deal, with the company looking to nearly double in employment size in the coming months. It plans to continue to operate as a standalone business out of the Seattle area.

UPDATE: Scout Analytics, which was founded in 2009 as a spin out of BioPassword, was sold for $32 million in cash, the same amount that it raised in venture funding.

Matt Shanahan, co-founder and senior vice president of strategy at Scout, said that the company was in the midst of fundraising when the ServiceSource deal came together.

ServiceSource plans to accelerate the Scout Analytics growth path, taking the offering to new markets overseas. “We all of a sudden create immediate scale,” said Shanahan, adding that the two companies are very much complementary in their product offerings. “All of the top (software-as-a-service) companies are using them, so we have direct access now to the key decision makers, so for us it was really how do we accelerate market dominance as quickly as possible.”

ServiceSource sells a workflow automation service which helps companies manage the renewal process, while Scout Analytics sells a business intelligence and analytics service that “informs that workflow,” he said.

Scout is led by Mark Upson, who prior to joining the company served as CEO of PureEdge. Before that, he worked at Onyx Software and Wall Data. Like ServiceSource, Scout Analytics helps enterprises better run and manage recurring revenue models. Customers include the Financial Times, Penton, CQ Roll Call and others. In the case of the Financial Times, the media company uses Scout Analytics to determine which customers are receiving value through the product, predicting customer satisfaction and whether they may renew.

ServiceSource, whose stock is up 42 percent in the past year, has a market value of $700 million. Scout Analytics raised $32 million in venture financing from RRE, Ignition Partners, Benaroya and others, which means investors will just get their money back in the deal.

Follow-upEarly stakeholders in Scout Analytics claim venture capitalists engaged in ‘self dealing, corporate waste’ prior to $32M acquisition

Here’s the full press release.

ServiceSource® (NASDAQ: SREV), the global leader in recurring revenue management, today announced that it has acquired Scout Analytics®, a leading provider of predictive analytics for subscription businesses. With more than $3.5 billion of recurring revenue under management, Scout Analytics extends ServiceSource’s reach into new markets while increasing its footprint to now $14 billion under management across more than 200 customer engagements. Together, the two companies offer a comprehensive recurring revenue solution for both subscription and traditional businesses. The transaction closed today and is expected to be accretive to non-GAAP EPS in 2015.

Recurring revenue is fast becoming a critical function for every company, spanning new subscription and cloud-based businesses, as well as established industries such as hardware, software, healthcare and industrials. As the “Internet of Things” connects businesses and people to a range of technology-enabled devices and cloud-based services, recurring revenue will play a pivotal role. As such, understanding how customers are using products and services is vital to today’s businesses, not just for customer success and retention, but also for accelerating recurring revenue growth and profits.

Scout from Scout Analytics analyzes customers’ subscription usage, spending, and other behaviors to align product and account management strategies and drive recurring revenue activities. With Scout, ServiceSource expands its customer success management capabilities to include actionable analytics based on actual customer usage. This enhances the ServiceSource solution for subscription customers through insights that support streamlined onboarding and adoption, and increased revenues through targeted upsells and cross-sells. ServiceSource plans to significantly invest in Scout Analytics’ business with additional R&D, sales and customer support resources.

The deal enables ServiceSource to deliver real financial benefits to current and prospective customers. Scout brings powerful capabilities for software-as-a-service (SaaS) customers to proactively identify at-risk customers, optimize pricing and packaging, and increase up-sell, cross sell and renewal rates. ServiceSource will also incorporate Scout within its customer success management services for onboarding, adoption and retention. Finally, Scout Analytics customers can leverage ServiceSource’s Customer Success Management and Renewals Management software and services to increase customer retention and renewal rates.

Currently, Scout Analytics analyzes usage from more than 25 million subscription users on more than 400 million devices daily for customers across the SaaS, information services and digital media industries. By expanding into these vertical industries, ServiceSource roughly doubles its addressable market to now over $600 billion in recurring revenue opportunities. Scout Analytics’ customers include the Financial Times and Reed Elsevier, as well as joint ServiceSource and Scout Analytics customer Wolters Kluwer.

“Wolters Kluwer CCH is focused on understanding our customers and the value they are getting from their subscriptions so that we can provide the best products and customer experience in the market,” said Paul Loftus, Vice President, Sales, Wolters Kluwer CCH Tax & Accounting US. “Our partnership with ServiceSource has helped us consistently deliver on our promise. We are pleased to learn that ServiceSource is complementing their recurring revenue solution with predictive analytics focused on usage across the customer lifecycle.”

“With $14 billion under management, ServiceSource is powering the Recurring Revenue Economy,” said Mike Smerklo, Chairman and CEO of ServiceSource. “From working with 7 of the top 10 SaaS companies, we know how difficult it is for customers to collect, analyze and leverage their usage data. Our acquisition of Scout Analytics addresses this challenge. Scout Analytics significantly expands our reach into the fast-growing SaaS market, while creating new opportunities in B2B subscriptions for information services and digital media. And, with the addition of sophisticated predictive analytics, we can give companies the required top-to-bottom view of their customers’ data to grow through recurring revenue.”

“We are excited to join the ServiceSource family,” said Mark Upson, President and CEO of Scout Analytics. “Today, measuring customer return on investment through usage data enables companies to proactively create value for customers and build long-lasting relationships. The combination of Scout Analytics with ServiceSource will drive new levels of actionable insight that will help customer success, sales, marketing, finance and product management teams to win customers for life.”

About ServiceSource

ServiceSource International, Inc. (NASDAQ: SREV) is the global leader in recurring revenue management. Renew OnDemand™, the only cloud application built specifically to grow recurring revenue, automates a highly valuable but typically manual business process. By leveraging big data to give companies a complete view of their customers, Renew OnDemand and our proven services drive higher subscription, maintenance, and support revenue, improved customer retention, and increased business predictability.

With over a decade of experience focused exclusively on growing recurring revenue, ServiceSource’s products and services are based on proven best practices and global benchmarks. Headquartered in the Cloud Corridor of San Francisco, ServiceSource® manages over $11 billion in recurring revenue for the world’s largest and most respected technology companies. ServiceSource renews a customer contract every 47 seconds through engagements in more than 150 countries and 40 languages. For more information, please go to www.servicesource.com.

About Scout Analytics™

Scout Analytics is the leading provider of cloud-based recurring revenue management solutions. The Scout Analytics platform transforms usage data into predictive analytics for customer renewal behavior and trial conversions. Our solutions are designed to reduce customer and revenue churn, increase renewal revenue yield, optimize rate plan performance, and maximize trial conversions. Scout Analytics can increase annual recurring revenues by up to 10-15%. Scout Analytics is currently delivering recurring revenue management solutions across multiple industries including information services, SaaS, and digital media. The company is based in Issaquah, Washington. To learn more about Scout Analytics, visit www.scoutanalytics.com or call 425.649.1100.

  • Kevin Mansel

    Did you mean to say “ServiceNow” or “ServiceSource”?

    All 42 employees at Scout plan to join ServiceNow as part of the deal.

    • johnhcook

      Yes, that’s right. Apologies for the error. I have corrected above.

  • Jim Masterson

    VCs are very good at getting their money back. Not as good as making profit.