Method to the (Expansion) Madness: Some Common Threads
Written By: Predrag Jakovljevic
Published On: November 15 2006
Click Commerce, a thriving provider of on-demand supply chain management (SCM) solutions for a variety of worldwide industries, has been impressively active in its expansion efforts. Its product offerings now include quite a few solutions outside its traditional demand channel management (DCM) and extranet realm. While each of these solutions has a unique focus and its own traditional customer base, the company's target market of large multinational businesses often requires solutions from several of these categories. Each of the vendor's disparate solutions is designed to assist customers with various key business processes:
- coordination and optimization of business processes by providing visibility into partner activities and the tools for improved management of tasks and processes;
- standardization of sales and order management processes, and facilitation of collaborative commerce among trading partners to shorten revenue cycles;
- lowering of costs through reduction of manual touch points and processing times;
- provision of assistance to partners to provide better service (to increase brand loyalty);
- compliance with regulatory requirements by speeding application preparation, eliminating routine errors, and notifying research teams of approaching deadlines; and
- enhancement of collaboration with customers and prospective customers.
Part Three of the series Will a Tool Manufacturer and a Supply Chain Software Vendor "Click" in Matrimony?
For background information, see Will a Tool Manufacturer and a Supply Chain Software Vendor "Click" in Matrimony? and A Supply Chain Applications Vendor Expands Beyond Its Roots.
Click Commerce believes that the quality, depth, and scope of its diverse product offerings should create opportunities for integrating and cross-selling its solutions from one product offering to existing and future customers of other product offerings. The products also have a few common, underlying themes. For instance, regulatory and compliance issues have lately been mushrooming, such as those highlighted by the US National Institutes of Health (NIH), as well as the US Automotive Right to Repair Bill, the Robinson-Patman Act (anti-price discrimination act), the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (also known as The Bioterrorism Act of 2002), and the Sarbanes-Oxley Act (SOX) (see Using Business Intelligence Infrastructure to Ensure Compliancy with the Sarbanes-Oxley Act). There are a growing number of regulatory and compliance opportunities in the market, and these are just a few. Accordingly, Click Commerce has lately been structuring its business as it continues to look for acquisition targets to take advantage of these compelling possibilities. For instance, former Webridge had solutions to take advantage of the market created by the NIH, and had already captured five of the top ten research institutions, whereas erstwhile ChannelWave had solutions to take advantage of the automotive right-to-repair mandate.
Furthermore, as application service provider (ASP) hosting technology matured (meaning that ASP is not a "dirty word" any more—see Trends in Delivery and Pricing Models for Enterprise Applications: Pricing Options for more information), Click Commerce saw this trend and recognized the benefit of the former Allegis business model when it acquired the company in 2003. Historically, the vendor had realized most of its revenues from licensing its software on-premise, and related implementation and maintenance services. The software was usually installed on customer-owned hardware at the customer's facility, and was operated and maintained by the customer's personnel. This software license model generally resulted in lengthy sales cycles, significant integration and implementation challenges and expenses, and relatively large (but one-time) revenue recognition events for the vendor.
Today, while still selling some products under the license model, Click Commerce offers all of its products either on a software as a service (SaaS) basis, or on a hosted ASP basis. Under the SaaS model, the software is installed, operated, and maintained on the vendor-owned servers, which are monitored and maintained by vendor personnel. While the software is still configured and integrated to the customers' needs, implementation and integration challenges are substantially reduced (see Software as a Service beyond Customer Relationship Management and Sales). Under this approach, a customer's monthly subscription and hosting fee is substantially less than the typical one-time license fee, but over the life of the subscription equivalent or greater revenue is generally produced for Click Commerce. The lower up-front costs and integration hurdles tend to reduce customer approval requirements and shorten sales cycles. All revenues associated with subscriptions are recognized ratably over the life of the arrangement, including software licenses, set-up services, and implementation services. This results in more stable and predictable (albeit deferred) revenue for Click Commerce.
Also, through several of its acquisitions, the vendor has assembled a suite of products and services that enterprises can use to implement radio frequency identification (RFID)-enabled SCM solutions. The emergence of RFID has created market momentum for Click Commerce's global data synchronization (GDS) solutions, and was one of the reasons why the vendor looked at SCM companies during its most recent acquisition binge. The vendor views the RFID market as important because major, industry-leading retail chains (channel masters), including The Home Depot, SUPERVALU, Tesco, and Wal-Mart, in addition to the US Department of Defense (DoD) have announced initiatives that will require their suppliers to become RFID-enabled. The idea is to thereby reduce product shrinkage, reduce stock-outs, and reduce inventory costs within the supply chain, while concurrently improving product time-to-market.
According to UCCNet, there are more than one million suppliers worldwide, and more than a quarter million suppliers in North America that will eventually have to implement collaborative commerce solutions. A key trend that cuts across all Click Commerce verticals is RFID, with a huge projected $10 billion (USD) software and services market by 2010. This will revolutionize how trading partners interact with each other, and how they manage their own internal processes to serve those external partners (see As Hype Becomes Reality, a Radio Frequency Identification Ecosystem Emerges).
While the company does not supply RFID transmitting or receiving devices, its RFID-enabling software can process data from such devices, and integrate and communicate that data to and among trading partners. The key enablement software, the GDS and secure communications product, is part of the Click Commerce Master Data Management (MDM) solutions product offering. The value opportunity from RFID investments in GDS and in tags and readers comes respectively from errors reduction and labor reduction. However, even bigger value opportunities come from RFID investments in SCM, planning, and optimization. These are, respectively, cycle time reduction, improved visibility, and demand-driven execution, where Click Commerce hopes to delight its customers.
To that end, in early 2006 at the company headquarters in Chicago, Illinois (US), Click Commerce announced the opening of the RFID Competency Center to showcase how RFID enhances its solutions. The Center features the Intelligent Supply Chain, a RFID solution created by Click Commerce and Vue Technology. This demonstration tracked the movement of inventory through a multi-tier supply chain, from manufacturing through distribution to the retail store shelf, where item-, case-, and pallet-level RFID tagging was used to provide inventory visibility and management across the supply chain. This visibility and control logically increase supply chain agility and accuracy, allowing inventory to be pulled through the network based on real-time demand conditions to avoid stock-outs. Within the distribution center, RFID drives labor productivity and accuracy by automatically sensing inventory throughout the warehouse, and eliminating labor associated with check-in, bar code scans, and cycle counts. The resulting benefits of the Intelligent Supply Chain reportedly include fewer lost sales, increased customer service levels, and lower supply chain costs.
Notable Customer List
Currently, Click Commerce has about 1,500 customers with over a million individual users in 70 countries and 15 languages. Its Global 2000 clients typically have complex products and multilevel, hierarchical relationships with a broad range of channel partners. Click Commerce solutions have also been devised to support the unique business processes of a wide variety of industries, including manufacturing and distribution (Delphi, Hyundai, Jabil Global Services, Abbott Labs, Kawasaki, Lincoln Electric, Goodrich, Honeywell, BP, Solectron, Subary, Tyco, etc.) and consumer products and retail (Wal-Mart, Home Shopping Network, Ann Taylor, Procter & Gamble, Bausch & Lomb, Pier1 Imports, Sara Lee, Black & Decker, etc.). Also included are commercial aviation and A&D (American Airlines, Delta Airlines, Lockheed Martin, Alaska Airlines, GE Aircraft Engines, Air France Industries, the Canadian Department of Defence, etc.), high-tech and electronics (Motorola, Microsoft, Dell, SAP, Oracle, Intel, Nortel, Lucent, Hitachi, etc.), and financial institutions (Bank of America, JP Morgan Chase, ABN Amro, American Express, Citibank, Union Bank of California, Charles Schwab, Countrywide Financial, etc.). One should also not forget its health care and higher education clients.
The company says that its products and services enable such corporations to coordinate and optimize business processes, accelerate revenue, lower costs, and improve customer service. For instance, Microsoft, the world's largest software company, relies on the Click Commerce Demand Channel Management (DCM) solution, which is deployed in 17 countries and 8 languages to support 350,000 partners, nearly a million users, and 400,000 customer accounts. The system's primary functions are to manage leads, control the allocated marketing funds, and manage all partner communications. As another example, Nissan Motor Corporation, a leading manufacturer of commercial cars and trucks with North American sales of about $1.3 billion (USD), relies on Click Commerce SPP&O solutions. In North America, Nissan products are sold through a network of over 1,200 Nissan and Infinity dealers, and the challenge has been to reduce high inventory value while at the same time improving overall fill rate and service levels. Reportedly, Nissan reduced overall spare parts inventory by 33 percent in year one, and by 50 percent in year two, while simultaneously increasing fill rates by 10 percent.
An unnamed leading supplier of telecommunications equipment relies on the Click Commerce SCM solution suite. Since it was a make-to-stock (MTS) manufacturing environment prior to deploying the suite, management had the challenge of customarily high levels of inventory and facilities costs, and lack of visibility and control of order fulfillment process, while poor on-time delivery was negatively impacting revenue recognition. After the company was re-engineered to become make-to-order (MTO), there were reported results of reduced inventory (from $7 billion [USD] in 2001 to $632 million [USD] in 2003) and reduced numbers of company owned-warehouses (from 200 to 15 virtual outsourced warehouses), with its gross margin improving from 12 percent in early 2002 to 43 percent by the end of 2003.