Home
 > Research and Reports > TEC Blog > With New Clothes and Hairdo, Clarus Asks for Pin Money

With New Clothes and Hairdo, Clarus Asks for Pin Money

Written By: D. Geller
Published On: March 3 2000

Event Summary

Clarus Corporation (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 1999.

Clarus has recast itself as an E-procurement player and is now seeking approximately $120 million in a secondary stock offering.

Market Impact

The 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.

Clarus' 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.

Further, 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.

Clarus 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.

Their 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.

User Recommendations

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.

They 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.

It seems clear that user who is not comfortable being an early adopter will have to take a wait-and-see attitude toward Clarus.

Those 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.

Whether 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.

 

 
comments powered by Disqus

Recent Searches
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Others

©2014 Technology Evaluation Centers Inc. All rights reserved.