Emptoris: Opening a New Chapter of Prosperity - Part 2

Part 1 of this blog series talked about my impressions following an upbeat and constructive business update meeting at Emptoris’ headquarters. Under its new investors’ wing, with a new customer-focused CEO, and with the former Click Commerce's contract and service management (CSM) business as a new major capability, Emptoris has charted a new course recently.

Results Are Telling

The company had two back-to-back record quarters, whereby year-over-year bookings grew by 24 percent in Q4 2009. Bookings came from both brand new customers (including the very first service procurement sale under Emptoris to Bell Canada) and many existing customers with cross-sale deals of over US$ 300,000. The backlog is reportedly at an all-time high.

There have been strong contributions from all products and regions, where strategic sourcing contributes 42 percent of total revenues, followed by contract management (28 percent), spend analysis (21 percent), and service procurement, just added to the solution suite (9 percent). With regards to the various geographical regions, North America generates 48 percent; Europe, the Middle East, and Africa (EMEA) 45 percent; and Asia Pacific (APAC) the remaining 7 percent.

Not surprisingly, Emptoris has put forth some pretty significant growth numbers in 2010 in terms of headcount. Namely, in May Emptoris crossed the 500-employee mark. At the start of the year, the company had 478 employees (a 5 percent growth year-to-date), and is targeting 581 by year-end (representing 22 percent year-over-year growth). There are currently 60 open positions to be filled at the company, which is rarely heard of in these days of non-hiring.

Global Expansion

Emptoris is a global company and its solutions are used by the largest global companies across their businesses on six continents. These companies have consolidated their sourcing and procurement operations to better negotiate supply chain contracts and achieve competitive advantage. Many of them have also created a single, integrated cross-functional Shared Service Center for the disciplined execution of best-in-class purchasing processes.

The Emptoris suite is available in 16 languages, and also enables global functions such as multi-currency bidding in auctions, real-time currency conversion, and reporting in multiple currencies. Product support is also available in 12 languages globally. Emptoris currently has significant operations in Burlington, Massachusetts (headquarters); Silicon Valley, California; London, United Kingdom (UK); Paris, France; Munich, Germany; Singapore (covering the APAC Region); and Pune, India.

Most recently, the company opened a new office in Shanghai, China, with 10 full time employees in sales, professional services, product development, and customer support. China National Offshore Oil Corporation (CNOOC), the third largest national oil company in China, was the very first customer of Emptoris’ suite of solutions designed to support the Chinese market.

To enable procurement transparency in emerging markets in China and India, so that this regions’ companies can rise to world-class standards and adopt western contract award practices (in contrast to traditional shady bidding practices), Emptoris has recently enabled the so-called two-envelope bidding procedure. Namely, the two sealed envelopes have separate technical and pricing proposals for evaluators.

The Win/Loss Analysis

In summary, Emptoris is the leader in handling large-scale electronic request for something (eRFx) evaluations, forward and reverse auctions, sourcing bid award optimization, spend analysis, and contract management solutions. On a down note, that is not necessarily the case with Emptoris' supply base management functionality. As mentioned in Part 1, the vendor is deliberately targeting Global 2000 companies and its sophisticated solution might be overkill (both in terms of functionality and price) for simple and low dollar requests for bids that are typical for small and mid-size enterprises (for more information, see my related 2009 blog series).

Emptoris typically wins a new customer over competitive solutions because of its track record of success with Global 2000 companies that need extensive sourcing, contract, and spend management functionality. The vendor offers the widest coverage in terms of the entire corporate spend (direct and indirect materials), all contracts (on both the buy and sell side), and all product categories.

The Emptoris suite offers flexible, creative, and bundled bidding features, with the evaluation of thousands of cost and non-cost variables and scenarios to drive to the optimal total cost of ownership (TCO) or “Best Value” bid award recommendation. Companies can also cherry-pick categories for multi-wave sourcing with optimization.

In addition, Emptoris is that rare vendor that consistently supports auctions on a very large scale. Namely, Emptoris’ customers report participation in 1,000 to 5,000 major sourcing events per years vs. 50-250 in Ariba’s case (and many fewer in the case of SAP or Oracle). The vendor is on track to grow from US$2 billion in value sourced in 2009 to US$3 billion in 2010.

Make no mistake, Ariba covers a much wider functional footprint in the spend management and supplier relationship management (SRM) space, as pointed out in Part 1. By covering many more functional bases as well as by catering to smaller enterprises (via the Procuri acquisition), Ariba has a much stronger brand name and is many times larger than Emptoris.

Still, Emptoris believes in having plenty of “arable land” remaining in its Global 2000 target market. The vendor has noticed a trend in its target market towards having a broader sourcing and contract management suite on the same data model. Indeed, there are many customers with multiple Emptoris products.

Some customers have first deployed the spend visibility solution to gain spend control and identify opportunities. Then, they might go for sourcing to achieve corporate-level efficiency and transparency and contract management to drive further savings to the bottom line.

Emptoris tends to win when an empowered strategic procurement line of business (LoB) cares about strategic value, when the prospective customer seeks enterprise-class solution capabilities, intends to do something worthy, and has an approved budget. Emptoris especially wins when the requirements are narrower and deeper, e.g., spend visibility, contract management, optimization, etc. Also helpful can be when a renowned channel partner re-sells the solution as part of a broader services offering such as consulting and business process outsourcing (BPO).

The reasons why Emptoris loses are pretty generic to all best-of-breed software providers. Namely, if a corporate-wide procurement department is not driving the decision, the company cares more about unified IT tools then on the earnings per share (EPS) impact, has limited intentions to do something worthwhile, and has little appetite to pay, Emptoris chances of winning are slim. Moreover, if the prospective company’s global vision is to implement a departmental solution, then the field opens much wider to pure-play specialists, such as BravoSolution, Zycus, FieldGlass, Iasta, IQNavigator, Selectica, A.T. Kearney, and so on and so forth.

Sticking to a Private Cloud

The philosophical differences between Emptoris and Ariba also come to light in the case of software delivery. Namely, with its multi-tenant public Commerce Cloud push, Ariba is into a commoditized “one size fits all” economy of scale play. While it is a good move for Ariba in terms of transactional volume potential, this model might not lend itself well to tricky direct material sourcing and contract management (i.e., companies might not yet be comfortable with keeping their confidential contract terms info in a public cloud).

Emptoris solutions are available either as traditional installed on-premises software, hosted, or through partners as a service, depending on customer preference. Emptoris uses a single software platform and code base to deliver its software either as a service or installed on site at a customer’s premise. As a result, Emptoris is able to provide customers with a clear growth path as they start with a simple cost-effective service offering and then can add additional capabilities to the service later.

In other words, companies in the cloud can run the exact same capabilities as those with an in-house solution. Competitor solutions do not necessarily offer a clear or smooth migration path if a company is planning to scale up or expand their program over time. Thus, rather than opting for a sexier multi-tenant software as a service (SaaS) delivery, Emptoris’ focus has been on the scalability and security of its single-tenant private cloud hosting. These actions have been taken to prevent reports of occasional server load-based downtimes, which have resulted in event disruptions, although not recently.

In addition to its data centersin Boston, new state-of-the-art data centers in the UK and Canada feature the fastest servers in the industry, most redundant networks, newest storage technologies, and data replication to an alternate site. Emptoris talks about a few ex-Ariba customers that recently switched to Emptoris after not wanting to switch to SaaS from their on-premise installations (which is what Ariba has been gradually imposing onto its existing customers).

Emptoris will be hosting its annual Empower 2010 International User Conference in Boston in mid-September and I look forward to speaking directly with customers and partners on their impressions and thoughts on Emptoris’ direction. Look for my report some time after the multi-day event.

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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