Event
Summary
Financial announcements from the end of their most recent quarters had
a number of e-procurement vendors singing happily. Figures 1 and 2 both
show the revenues for four leading pure-play companies:
- Ariba
(NASDAQ: ARBA)
- Clarus
Corporation (NASDAQ: CLRS)
- Commerce
One (NASDAQ: CMRC)
- Purchase
Pro (NASDAQ: PPRO)
Figure 1
also shows the percentage increase over the revenues for the previous
quarter; Figure 2 shows the increase over the same quarter a year ago.
These are fourth quarter results for Ariba and third quarter results for
the others.
The two Figures
indicate that the same growth is happening for both the largest companies
in the space and the less well-known ones. Behind these summary numbers
are lists of individual successes for each company. These are discussed
in the next section.
Market
Impact
Each of these four leading e-procurement companies has reason to crow.
Commerce
One which in July predicted that it would be profitable in the fourth
quarter of 2001 has moved that prediction up to point to the second quarter.
During the third quarter of 2000 the company added 96 new customers, and
expanded its Global Trading Web to include a total of 107 e-marketplaces
of which 47 are operational. The company made huge strides in its major
relationships: it rolled out joint products with SAPMarkets and expanded
its relationships with Microsoft, GE Global eXchange Services, Sterling
Commerce and others (see GE
and Commerce One Turn on the Lights - But You Ain't Seen Nothin' Yet
).
Ariba
had a fourth quarter in which the net loss was only $1.1 million - effectively
zero on a per-share basis. Net loss for the year was $0.15 per share ($29.5
million). Ariba added 114 customers, making a total of 435. It says that
150 of these customers are up and running, and that half of its marketplace
customers are already conducting live transactions. Ariba also announced
major steps forward - in the form of alliances with such global financial
leaders as Bank of America, U.S. Bancorp, and Visa International - toward
its goal of delivering integrated financial services through a single
global platform.
Both
Ariba and Commerce One seem to have weathered the storm that hit Internet
companies particularly hard earlier in the year. Not to say that the future
will be smooth sailing. Even barring downturns in the overall economy
neither company has yet validated the model of reaping the lion's share
of its revenues from transactions. However, it seems a safe bet that these
two companies will dominate the market, especially at the enterprise level,
for some time to come. While the two certainly compete with each other,
each continues to carve out its own niche - Ariba with the supply chain
orientation it inherits from its i2 alliance, and Commerce One with its
strong global network. Their partnerships - Ariba's with i2 and IBM, Commerce
One's with SAP and GXS - also give them playing fields that are largely
their own. While the overlap in spheres of influence and target customers
is large, we think the time will come when they don't feel the urge to
fight too terribly hard against each other.
The
two smaller companies we looked at are also tooting their horns.
PurchasePro
signed giant Computer Associates as a strategic partner, putting CA's
3,000 member sales force to work selling PurchasePro solutions. Gateway
put a connection to PurchasePro on millions of desktops shipped to small
and medium-sized business. The combination gives PurchasePro beachheads
into both the field of mid-sized and larger companies through CA and the
smaller companies through Gateway. The company also has a co-developed
business with Netscape that will provide users of all AOL brands with
PurchasePro's eCommerce solution. PurchasePro delivered 49 privately labeled
marketplaces and added 5,311 individual companies to its network during
Q3.
Clarus
Corporation signed sixteen new contracts and brought its total customer
base to 186. It demonstrated the speed with which it can build a solution
by launching four customer marketplaces at the Microsoft 2000 Enterprise
launch in September. Clarus has a new alliance with Ernst & Young, which
will be an integrator of Clarus products. Clarus expanded its non-U.S.
operations by 37 percent and generated 19 percent of its Q3 license fees
from international operations.
These
two smaller companies show that e-procurement is strong at all levels.
Purchase Pro seems to have found the right formula for continued growth.
Clarus, which is overall a smaller company, had the smallest of the growth
rates, although as Figure 2 shows its percentage increase over the same
quarter a year ago was not too different from Ariba's. Clarus had a few
bumps this quarter; its strong relationship with Microsoft was questioned
when Microsoft and Commerce One made partnership noises. (See Commerce
One: First SAP, then Microsoft. But What About Clarus?) We don't think
that the one has much to do with the other; the speculation probably had
more effect on Clarus, for the few days it was in the news, than the actual
partnership will.
Both
PurchasePro and Clarus do have to watch out for their larger cousins Ariba
and Commerce One. Not that either cares to compete directly for their
target customers, but because there are other e-procurement companies
that do intend to compete, and that will partner with a larger company
to avoid the costs of setting up their own marketplace.
User
Recommendations
Larger enterprises should feel quite comfortable about working with either
Commerce One or Ariba. There are other others vendors to consider - Oracle
for one - but both of these companies should be on your e-procurement
short list.
Smaller
and mid-size companies have a good deal more choice. The financial results
for Clarus and PurchasePro both of which belong on your long list of initial
candidates, show that skittishness about the viability of e-procurement
is almost certainly misplaced. However, as there is inherently less certainty
about the long-term prospects of any of the companies in this space -
and because we expect quite a few new entries, some of which will have
very interesting stories, over the next nine months - we strongly recommend
considering the ASP model for your first foray into e-procurement, whether
as a buyer or a market maker.