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Simplexis Says 'Watch Our (Chalk) Dust'

Written By: D. Geller
Published On: September 1 2000

Simplexis Says 'Watch Our (Chalk) Dust'
D. Geller - September 1, 2000

Event Summary

The Department of Education estimates that a single requisition costs a school district between $100 and $175 to process. With 16,000 school districts (serving 100,000 schools) writing a total 0f 25 million requisitions each year, there's a lot of money to be saved by converting to electronic purchasing. Simplexis believes that it can cut the cost of a requisition to about $25. Furthermore, with savings through aggregation on the annual purchases of $70 billion at the K-12 level, Simplexis predicts it will be responsible for saving schools a total of $10 billion over the next five years.

Other people believe them. One is their Chairman, former Secretary of Education Lamar Alexander. Recruited for his extensive contacts, Mr. Alexander is an active participant devoting a few days a week solely to Simplexis. Another is their CEO Amar Singh, formerly of i2. Also on the company's side are such investors as GE Equity, the Internet Capital Group, and Commerce One. Among the early adopters are more than 400 school districts that have signed with Simplex since mid-February.

Simplex offers a hosted solution through ASP partner Corio (see "E&Y+ASP=BSP: It's Not Algebra, But It Adds Up To Something Big"). Simplexis will also offer the product on a licensed basis to the largest school districts. Except for installation costs that might be required for licensed sales, Simplexis offers its solution at no cost to school districts. The company earns revenue from transaction fees of 1% to 5%. Suppliers - more than 1,200 have been signed so far, in addition to those who are available by being members of the Commerce One network - gain from order management and aggregation. Despite the overall aggregated value of transactions, the typical individual requisition is for less than $500. Having aggregated and automated purchases come via the Simplexis network makes up for most or all of the transaction fees. Automatic eligibility for participation in the Commerce One network is an added bonus for these suppliers.

Market Impact

Simplexis' strategy and execution should assure them a continuing leadership position even after the inevitable influx of competitors. They've done their homework and have a good understanding of their target market. The money is there, but school districts are enmeshed in regulations that few self-respecting private organizations would tolerate. They are also behind the technology wave in terms of their ability to acquire software or training. Simplexis addresses these issues with the alacrity of a new student shooting for the honor role.

Their user interface, which sits on top of Commerce One's BuySite, was designed and tested by educational administrators. Their offerings include support for bid documents and other requirements. Down the road they will offer supplier performance ratings, financing, and warehousing. There will in time be content - news, case studies and best practice write-ups - for educational administrators. They also see opportunities to extend their services to other kinds of local government bodies.

User Recommendations

It is obvious that Simplexis is making an attractive offer to school districts. We think that there's also an interesting message to potential vertical market creators in other industries. Simplexis' founders made the early decision that they should not attempt to become a software or systems company. Thus they have leveraged partnerships and the existing capabilities of Commerce One's BuySite to hit the ground running.

 
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