Earlier today, IQNavigator, one of the leading vendor management system (VMS) providers, announced it was selling off its managed services provider (MSP) business to MSX International. IQNavigator was, by spend volume, one of the top dozen MSPs in North America. In earlier coverage of the story today, IQNavigator’s MSP ranked third largest in terms of statement-of-work spend under management among firms taking part in last year’s VMS/MSP competitive landscape report.

We’ll be covering the latest from IQNavigator in more detail after speaking to the team, but our initial (pre-briefing) take is that we are not surprised by the move. In reality, the exiting of the MSP business for IQNavigator marks the latest VMS provider to get out of providing related consulting and outsourcing services. Following in Beeline’s footsteps, which folded its own MSP division into Pontoon, IQNavigator is now free to focus 100-percent on developing (and potentially acquiring) technology to bring to market.

Spend Matters believes that getting out of the MSP business makes a lot of sense for IQNavigator. On a high level, there are numerous reasons for this.

First off, it will allow the firm to focus entirely on developing solutions to power self-managed and MSP-led contingent workforce and broader services procurement programs. The flip side of the same point is that it will provide greater assurance to the MSP and broader staffing ecosystem that IQNavigator is singularly focused on the developing of technology versus potentially offering competing services.

The move will enable IQNavigator to focus additional resources on becoming a consolidator in the VMS market (a trend it started with its acquisition of ProcureStaff Technologies) as it attempts to migrate users from smaller VMS providers onto its own platform both organically and through M&A strategies. In the case of M&A, we suspect that IQNavigator will likely provide customers with the choice to stay on legacy technologies as well, at least for a period of time.

In addition, it cleans up IQNavigator for a potential exit (either a sale or IPO) by avoiding the mixing of software and services revenue streams. Following the high valuation afforded Fieldglass by SAP, such a move is no surprise. Just as Ariba exited the services business it gained through the acquisition of FreeMarkets (selling that business to Accenture), such a move will simplify the positioning of IQNavigator to potential new investors and will increase the valuation multiple versus a combined software/services portfolio.

We will analyze IQNavigator’s strategic direction and this particular transaction in depth on Spend Matters Plus and PRO later this week. Most important, we will consider the customer angle on where this leaves IQNavigator and how it plans to lead with technology to build marketshare and create new solution-driven services procurement value propositions going forward. – See more at: http://spendmatters.com/2014/08/04/iqnavigator-to-sell-msp-division-and-focus-on-technology/#sthash.cQ4Nr80T.dpuf