Emptoris: Opening a New Chapter of Prosperity - Part 1

Good news is scarce these days across the board, and I am always keen on reporting on rare bullish enterprise applications businesses, especially if the company is in my neck of woods. Recently, I had an upbeat and constructive business update meeting in person at Emptoris’ headquarters.

The Burlington, Massachusetts, US-based company was founded in 1999 as a strategic sourcing software company, pioneering the use of optimization in strategic sourcing of both direct and indirect materials. 

Emptoris still has leading capabilities for soliciting and evaluating complex bids beyond the mere price factor. Its sourcing optimization technology includes non-price factor scoring and total-cost-of-ownership (TCO) modeling, among many other features.

Emptoris Background

Since its founding, based on the market success of its solutions the company has grown steadily (and sometimes dramatically) both through organic growth and acquisition. Key footprint-expanding acquisitions have included diCarta, the contract management provider, in early 2006 and Zeborg, the spend analytics company in 2003. The 2006 acquisition of MINDFLOW Technologies was largely a play for the install base of a former sourcing competitor.

The most recent acquisition, under new financial backer Marlin Equity Partners, was the mid-2009 acquisition of former Click Commerce's contract and service management (CSM) business, which has meanwhile become the Emptoris Services Procurement solution for contingent and professional services procurement . More than 200,000 employees at about 20 leading global companies use the solution to find, evaluate, purchase, manage, and pay for all types of services including business process outsourcing (BPO), facilities management, temporary labor, and IT consulting. Overall, more than 200 of the Fortune 1000 companies use Emptoris' Supply and Contract Management solutions including American Express, Anheuser-Busch InBev, Boeing, ConocoPhillips, Deutsche Post , GlaxoSmithKline, Heinz, Kraft, Royal Dutch Shell, and the US Postal Service (USPS).

The CSM acquisition also sheds some light on the differing philosophies between Emptoris and its archrival Ariba. Namely, Emptoris has always stayed away from offering routine and structured e-procurement of catalog-based items, supplier connectivity and networks (online trading communities), purchasing and accounting transactions, electronic invoice presentment & payment (EIPP), and cash management capabilities.

Emptoris Philosophy

Neither is Emptoris in a major consulting business when it comes to spend management and sourcing categories (which Ariba has been via its Freemarkets acquisition), rather the company remains focused on delivering a suite of best-of-breed software solutions. For consulting services, Emptoris works closely with a number of consulting partners, including Accenture, Capgemini, and IBM. Further information on the company’s consulting partners is available here.

While Jason Busch of Spend Matters had his initial doubts about potential synergies between Emptoris’ traditional sourcing offerings and Click Commerce's services procurement, the merger has shown the true nature of Emptoris’ interest: complex and tricky (non-repeatable) sourcing activities. Emptoris claims to be the only solutions provider with a suite of solutions to address the "High Value but Hard to Manage" spend categories such as statement of work (SOW)-based services, contingent labor, management consulting, IT outsourcing, and other third-party services. There is also the obvious synergy between services procurement and Emptoris’ other capabilities: sourcing, contract management, and spend analysis.

Emptoris has steadily invested up to one third of its revenues back into research and development (R&D). About two thirds of Emptoris' employees are in R&D, product management, and operations, and a substantial number of the product development team is located offshore. Emptoris' organization represents an archetypal enterprise software company focused on product development, direct sales, and nurturing consulting partners (rather than competing with them for professional services dollars).

Today, the company provides a suite of supply and contract management software solutions, from spend analysis and sourcing to contract management and supplier performance management. Further corporate information is available here, while further information on the Emptoris Supply and Contract Management solution suite is available here.

Emptoris Customers

The company's spend analysis, sourcing, services procurement, supplier risk analysis, and contract management solutions are used by about 220 Fortune 1000 and Global 2000 companies in more than 90 countries. Key vertical markets for the company include Consumer Packaged Goods (CPG), Financial Services, Life Sciences & Pharmaceutical, Healthcare, Telecommunications, Technology, and Oil & Gas, among others.

Some other marquee customers include Kraft, Motorola, Owens Corning, Syngenta, and Vodafone. Many of Emptoris’ customers have received coveted awards by industry magazines and associations, such as those from the Baseline Magazine, InfoWorld, Franz Edelman, the Chartered Institute for Purchasing Supply (CIPS), and Aberdeen Group for best practices and return on investment (ROI)-proven use of technology. Further information on Emptoris’ customers is available here.

New CEO’s Modus Operandi

After some hiccups in 2007 and 2008 that involved layoffs and litigation by Ariba for patent infringement, some market observers were perhaps ready to relegate the vendor to the pack in the long term. On the contrary, 2009 was a great turnaround year for Emptoris in terms of outgrowing the market predictions in a bad economy.

As soon as Emptoris noticed a downturn in 2007/2008, the company started surveying its customers to see what capabilities they would need in such tight times. Simplification, doing more with less and a number of “A” words came to light at the time (e.g., accessible, amendable, adoptable, analysis, automated, agile, anytime, anyone, anywhere, alerts, etc.).

In order to thrive, companies needed actionable visibility and agile contract management from Emptoris. To that end, within the Emptoris 7 suite, the vendor delivered the following features:

  • Drillable Dashboard,

  • Spend Enrichment Manager,

  • Sourcing Desktop Intelligence, and

  • Supplier Performance Visibility within Contract Management

In its first decade, Emptoris reached about US$50 million in revenues, and the time came for the company to be elevated a level higher. Thus, the new investors brought in a new professional CEO, Patrick D. Quirk, with who I’d met briefly during his tenure at PeopleSoft in the early 2000s.

The level of transformation in the organization since Quirk took the helm last fall has been noteworthy. It is indicative of the fact that in recent years software executives presiding over a change of management have found that they need to do much more than send circular letters to customers.

Emptoris has done a 180-degree turn from its past focus on the product per se: functional innovation, ease-of-use, fast-track implementations, and flexible deployment options. Currently, its strategy now places the customer requirements at the forefront of everything the company does, from solution planning to partnering. This is a real change in philosophy and anew level of commitment in getting to know its existing customers. Quirk and his lieutenants did a lot of heavy in-person slogging to make sure that they dealt with every major customer issue.

What are Emptoris’ Customers Looking for Now?

The economic downturn has forced companies to change how they operate, as virtually everyone is looking to reduce costs more then ever. For their part, the largest companies with heavy acquisition activity have some kind of consolidation of processes or a “One Company” shared services initiative. With the availability of mature supply chain management (SCM) technologies, demand has lately shifted to more strategic supplier risk management and globalization.

With some tepid recovery in the offing, Emptoris recently surveyed its customers again to sense out their current needs. They reportedly said that they would like to be able to do the following:

  • Integrate corporate-wide systems and processes and centralize sourcing, spend, supplier, and contract information to better manage risk and realize savings opportunities

  • Have real-time information delivered to their desktops on changes in major categories or with their suppliers

  • Have better utilization of demand forecasts or demand indicators to plan capacity and project budgets

  • See the proof of value (demonstrated value) that the software they have deployed is better enabling their objectives

The first request is logical since a centralized sourcing strategy can leverage synergies across business units and common spend categories. The ability to more broadly and deeply analyze data to identify savings opportunities is needed to realize working capital efficiencies. In terms of automation of tasks, Emptoris offers reusable event templates for electronic requests for something (eRFx) and reverse auctions (e-Auction) events.

The ability to monitor contract utilization, prices, and payment terms as well as astute reporting and analysis capabilities are additional drivers of productivity and savings. Risk can be significantly reduced by the ability to automatically manage commercial liabilities via proactive event triggers that generate workflow tasks to manage contract deliverables. In this case, compliance forms are automatically generated and assigned to their respective departments.

As in any relationship, living with a sub-optimal supplier is painful, but switching partners can be worse, so any company must choose wisely if it wants to enjoy profitable supplier relationships. Emptoris’ customers have been leveraging meaningful key performance indicators (KPIs), beyond the mere price factor, that are measured with accuracy to have credible supplier evaluation scorecards.

Show Me the Money!

In a risk- and cost-averse environment that is anathema to big-bang implementations, Emptoris has recently mapped out a five-stage business release methodology to help customers get the maximum benefits from their technology investments. Each milestone in the business case-based methodology is tied to specific KPIs with regards to actual benefits (value) targets. The five major project milestones are as follow:

  1. Categorized Demand Aggregation – This phase targets early wins on apparent high-value items (low hanging fruit) that typically represent 10 to 15 percent of the total spend.  Estimated savings range between 5 and 15 percent, and this process should be repeated (reviewed) every 1 to 2 years

  2. Indirect and Selected Direct Materials – This phase targets supplier rationalization across geographic regions and sourcing categories. Estimated savings range between 10 and 20 percent, and this process should be repeated (reviewed) every 3 to 5 years

  3. Strategic Category Rationalization – This phase targets all geographic regions and business units to cover about 90 percent of the total spend (including the items under numbers 1 and 2). Estimated savings range between 3 and 7 percent, and this process should be repeated (reviewed) every 3 to 5 years

  4. Supplier Collaboration on Savings Realization Programs – This phase targets remaining direct and indirect materials. Estimated savings range between 5 and 10 percent, and this process should be repeated (reviewed) every 1 to 3 years

  5. Strategy, Program, Compliance, and Supplier Measurement & Tracking – Once achieved, this phase becomes an ongoing sustainable program for additional 1 to 2 percent savings.

I concur with Bob Ferrari’s view that mapping overall technology deployment from the customer value viewpoint is a win-win proposition, and it is unfortunate that many other software providers take a more unilateral view in this regard. Part 2 of this series will analyze Emptoris’ current state of affairs.

Until then, what are your views, comments, opinions, etc. about the current economic climate in your region/industry and about your approach to controlling spend via sourcing and contract management? What are your best sourcing and procurement practices as well as experiences with particular SRM/spend management applications? If you are an Emptoris user, I would appreciate you sharing your experiences with the product and the company.
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