(NASDAQ: CLRS) used to be a peach of an ERP (Enterprise Resource Planning) vendor
with a product line containing financial and human resources applications. It
had revenues of $17 million in 1998, up from $12.3 million in 1997. However,
the company threw off its old friends and lifestyle by selling its ERP business
to Geac Computer Systems, Inc. and Geac Canada Limited for $14.5 million in
has recast itself as an E-procurement player and is now seeking approximately
$120 million in a secondary stock offering.
stock market is certainly happy with Clarus, at least for now. Its stock had
reached a high of $8.63 in 4Q 1998, but since the sale of its ERP business and
its transformation to an Internet company (i.e., one that has no plans to be
profitable in the foreseeable future) the stock price jumped to $88. Success
in the E-procurement market is quite a different thing.
start is neither impressive nor discouraging, with 28 licensed customers, of
which eight customers were making purchases with the product, by January 1,2000.
Initial customers include First Data Corporation, MasterCard International,
MetLife, Parsons Brinckerhoff, Perot Systems, and The Container Store.
Clarus' product is available on a subscription fee basis through application
service providers. In addition to supporting individual companies, Clarus also
offers its product as a base for markets built by third parties. Clarus does
not intend to operate and own digital marketplaces.
is aiming itself at the mid-market, where they will be competing with such vendors
as Concur, Remedy, and Peregrine. This market is still largely untouched, so
Clarus could succeed financially without significantly impinging on its competitors.
Where a large success on Clarus' part would be significant is in a market redefinition.
Clarus' approach eschews the by-now-common model of a centralized market through
which all transactions pass. Instead, Clarus offers a model that relies on suppliers
to maintain web-based catalogs, indexing services, and other content aggregation
tools. It provides a direct connection between buyer and supplier without requiring
transactions to be executed through a centralized trading portal.
trading network, SupplierUniverse, performs the value-added trading services
delivered by centralized trading portals, including content management and auction
capabilities, while eliminating the transaction fees of those portals. The company
claims that this avoids scalability limitations, which they believe are inherent
in the centralized trading portal approach. If Clarus can succeed, either by
wooing buyers and suppliers with their model or by demonstrating significant
operational advantages to their model, there is always the possibility that
they could be seen as an industry leader and force others to play catch up.
Clarus is trying to break out of the mold that has proven successful for companies
like Ariba and Commerce One, as well as most smaller competitors in the mid-market.
It takes a certain special forward thinking (and courageous) nature to be an
early adopter. It is too early to know whether Clarus has an approach that will
make a difference. They have to make a compelling case, based on experiences,
that they can attract suppliers, and meet the other needs of customers well.
do offer integration with ERP systems, which is a minimal requirement, but are
competing with vendors who offer application suites that may include asset management,
human resources, and travel and expense tracking. The suite approach is also
unproven as a definite advantage for the buyer of E-procurement software, but
has been having its successes.
seems clear that user who is not comfortable being an early adopter will have
to take a wait-and-see attitude toward Clarus.
who are comfortable moving ahead will of course evaluate the product carefully
against their needs. And, an advantage of being an early customer is that the
vendor may be willing to alter the product to meet your needs. Beyond that,
users need to ask about how their needs will change and how the product will
be likely to change. In particular, look hard at the rate at which Clarus can
attract suppliers to its model.
you represent a company looking to solve its own procurement problems or plan
to be a market maker, you want to be sure that Clarus can easily sign a large
number of suppliers. In many industries, suppliers are not the most technically
advanced companies, and these in particular are likely to be confused by the
differences between the Clarus model and the more common one. To win wide acceptance,
Clarus will have to persuade them not that the Clarus approach is better but
that taking both the Clarus approach and one offered by a powerhouse like Ariba
is not too complicated, too costly, or too confusing. So, any potential customer
should press hard on Clarus to undersign both its tactical and strategic approaches
to signing and supporting suppliers.