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Deal Radar 2010: Fieldglass

Posted on Tuesday, Mar 2nd 2010

Deal Radar continues its coverage of the changing labor landscape with Fieldglass, which provides a SaaS platform, InSite, that helps global 2000 corporations acquire and manage contingent or contract workers, outsourced services, and direct hires so that firms can better understand and use their workforces.

Chicago-based Fieldglass was founded in 1999 by CEO Jai Shekhawat, who moved to the United States after completing his undergraduate studies in India. He was a programmer for Burroughs (now Unisys) before joining Syntel, where he oversaw operations and business development and developed expertise as a provider of technology services to large firms. He was also a strategy consultant at McKinsey & Company in Chicago, where he advised large clients on matters ranging from procurement to technology. These experiences were to prove critical in understanding buyer-supplier issues in the current venture. Prior to starting Fieldglass, Shekhawat co-founded Quinnox, an IT and business process outsourcing (BPO) firm located in Naperville, Illinois.

The idea for Fieldglass goes back to major shift in workforce dynamics was underway in large corporations in the mid to late 1990s. Corporations were moving from an operational model wherein they relied primarily on a talent pool of full-time employees to a model where they engaged a combination of permanent workers, contingent workers, and outsourced services.

The procurement of contingent labor and project services had traditionally been a decentralized process that a company handled at the divisional level. Rates and buying procedures were not standardized, and there was generally no effective vendor management and no established business model for it. The only platforms available in 2000 were controlled by staffing suppliers and offered as part of bundled staffing agreements rather than independent procurement platforms. Sherkhawat believed that venture made sense after the Internet had gained acceptance as medium of procurement and corporations began to use SaaS models as an alternative to traditional behind-the-firewall deployments.

Such models have become more common, but not necessarily easier to manage. The latest stage in the evolution of is the automation of many business processes, contractors, and this, as Jason Busch points out, says is where Fieldglass sees that companies find it “easy to get lost in all of the activity.” Clients can use elements of Fieldglass’s platform, such as the analytics suite introduced in November, to see how efficient their workforce spending is and how it compares to peers. Fieldglass is different from competitors in that it handles all types of workers: SOW (Statement of Work) consultants, 1099 workers (IRS term for independent professionals under contract), alumni pools, and direct hires, a capability that it believes is especially useful as each company’s workforce mix becomes more complex and global in nature.

The firm decided to focus its efforts on the eventual target customer, the large corporation, rather than create artificial wins with small firms. Fieldglass sold to senior executives in IT and procurement with the message that the system would pay for itself in four months or less. The first three customers were Verizon Wireless, AIG, and GlaxoSmithKline. All are still major customers of Fieldglass after nearly eight years. Fieldglass has over 100 large customers, over 60 of which have been added in the past two years. These include Johnson & Johnson, Waste Management, Monsanto, Salesforce.com, and Wyeth.

The target market consists of the more than 6,000 firms with over $1 billion in annual revenue as well as a variety of government entities. Shekhawat describes the domain as a “horizontal play.” The top target segment constitutes companies that spend over $100 million annually on contingent labor. Close to half of the global 2000 corporations meet this criterion. The mid-market consists of firms that spend more than $20 million and is also a target segment for Fieldglass.

Fieldglass sells either directly to corporations or through a partner-led (managed service provider) channel. These MSPs are typically large staffing firms that will operate the program with on-site personnel. Pricing is a function of the amount of spending a company manages through the tool.

Niche competitors include PeopleClick, Beeline, and IQNavigator. All three were recently purchased, leaving Fieldglass as the largest and only standalone VMS (vendor management software) platform. Brian Sommer of Software & Services Safari points out that this area of SaaS is just one more that is in “consolidation mode.”

Fieldglass has raised a total of $38 million, primarily venture investment, in four rounds of funding: a $750,000 angel investment from Prism Opportunity Fund; $8 million in December 2000 from an unspecified investor; $17 million in June 2003 from Bluestream Ventures, Starvest Partners, and HLM Venture Partners; and $11 million from Grotech Ventures in June 2005. It also received seed investments from Udai Kumar and Anil Kumar, who were operating Quinnox at the time.  The company has been profitable and cash flow positive since the most recent round. It has over $8 billion a year in annual spending being managed or under deployment. Revenue grew over 30% in 2009 and EBITDA grew more than fivefold. Fieldglass will consider raising more money with institutional investors who can help with acquisitions and expansion into other geographies.

Acquisitions are one part of the company’s growth strategy, which includes cementing leadership positions in the United States, expanding in Europe in 2010, and beginning to explore Asia. Fieldglass wants to take advantage of what it believes are long-term secular growth trends in the VMS market and has no current plans for an exit.

Recommended Readings
Deal Radar 2010: Guru.com
Indian IT Services: Globalization and Products
Deal Radar 2009: Simply Hired

This segment is a part in the series : Deal Radar 2010

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