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Technology Evaluation Centers’ (TEC’s) series on business-to-business (B2B) pricing segmentation benefits (see Know Thy Market Segment's Price Response) and on upbeat news from one such solution provider, Zilliant (see How One Provider's Solution Covers the Bases of Price Optimization and Management), have prompted a great deal of interest and feedback from readers. The articles have also prompted Vendavo (www.vendavo.com), another prominent, privately held provider of price management and optimization software to B2B companies worldwide, to have an update briefing with TEC.
This briefing was done for two reasons. First, the vendor concurs that the market for such applications has been flourishing lately, as price management is receiving greater attention at the highest executive levels in B2B companies. Secondly, Vendavo wanted to point out its many recent developments in order to further inform the market about its offerings and capabilities, as well as dispel the lingering misperception that the vendor does not offer price optimization capabilities.
Life Is Good at Vendavo
Most recently, Vendavo—founded in 2000 and based in Palo Alto, California (US), with European headquarters in London (UK), and employing about 200—announced record results for 2007, following solid results the year before. According to a press release issued in February 2008, the vendor continued its aggressive growth and increased bookings by 65 percent in 2007 compared to 2006. Vendavo added 18 new customers in 2007, continuing the company’s rapid growth.
In 2007, the same press release reports, Vendavo customer deployments grew significantly in number: the company’s enterprise solution is now deployed (or in progress of being deployed) in more than 40 multibillion-dollar companies globally. Vendavo Enterprise Pricing Suite prices revenues in excess of $500 billion (USD) and manages tens of millions of price points.
Thanks to growth in new customer acquisitions and through continued investment by existing customers, Vendavo now has customers spread across multiple industries, including high technology, chemicals, industrial manufacturing, consumer products, mill products, oil and gas, and distribution. Some of the clients’ divisions include the following:
- two of the top five computer manufacturers around the world
- three of the top 10 Fortune 500 manufacturers of semiconductor
- five of the globe’s largest industrial manufacturing corporations
- six of the top 20 chemical companies according to Fortune 500
The SAP Factor
Vendavo attributes its success to both direct and indirect channel sales. The latter has seen a strong momentum as a result of Vendavo’s reseller partnership with SAP, the world’s leading provider of business software, with more than 33,200 customers in over 120 countries. SAP sources its SAP Price and Margin Management (PMM) application from Vendavo to complement and extend its SAP CRM (for customer relationship management) and SAP ERP (for enterprise resource planning) suites.
Geographically close to SAP’s North American research and development (R&D) center, Vendavo has worked with the enterprise applications giant for several years. Vendavo takes great pride in the seamless integration of its solutions and in the strength of its Powered by SAP NetWeaver certification and partnership. This distinction means Vendavo uses SAP’s Web Application Server, Business Intelligence (BI), Enterprise Portal, and Exchange Infrastructure (XI) components of SAP NetWeaver (see Multipurpose SAP NetWeaver). But now, with the reseller relationship in place, customers have been able to license a comprehensive, fully-integrated PMM software solution from a single source: SAP (see Applications Giants Bolster Their Pricing Management Capabilities). SAP has only a handful of strategic resellers compared to its large number of partners that carry the Powered by SAP NetWeaver certification. Vendavo is the only price management solution that is resold by SAP.
SAP worked closely with Vendavo for more than a year in reselling the pricing solution to SAP’s customers. Then in late 2006, Vendavo announced that it received an equity investment from SAP Ventures, a division of SAP. As stated in another press release posted by Vendavo in November 2006, it was intended that the investment would “help fund Vendavo’s product development, extending and deepening the links between its pricing solution and critical enterprise systems.” SAP Ventures then joined Vendavo’s existing investors, including Doll Capital Management (DCM), InterWest Partners, Mesirow Financial, Sigma Partners, and Split Rock Partners.
The same press release additionally clarifies the company’s hopes and intentions, as expressed by Nino Marakovic, investment partner with SAP Ventures: “By more tightly linking Vendavo’s pricing applications with all of the systems that support operations, sales, marketing, and finance, decision makers across the entire enterprise will have real-time access to the data they need to make effective pricing decisions.” For instance, Vendavo’s price management solutions, when combined with SAP ERP’s inventory availability, item costing, or available capacity and utilization data, could enable the creation of highly refined pricing solutions. In keeping with the plan to execute a joint product development road map over the next several years, integration is being built with SAP engineering resources on site. To that end, Vendavo has completed the SAP Solution Validation requirement, which is an exhaustive quality assurance process that all SAP applications go through prior to being generally available.
Vendavo’s partnership with SAP (wherein SAP sources its SAP PMM solution from Vendavo, the two companies sharing long-term goals for the product and working closely together to provide integration that is based on SAP NetWeaver XI and is extensible to other middleware platforms) has apparently delivered impressive results for both parties concerned. An enterprise-level pricing solution that is tightly integrated with other SAP applications, combined with superior global support (see No Yawn Intended: Enterprise Applications Giant Introduces a Mid-tier Support Choice), and the peace of mind that comes from purchasing from a global leader, has proved to be compelling for many SAP customers. A significant number of large deals have been signed, with SAP helping Vendavo expand more quickly into new vertical sectors (oil and gas, for example).
Yet SAP Is Not the Only Key to Success
Other important reasons for Vendavo’s success include the swift increase in the use of its products at various divisions across its client base around the world; several new and maturing global partnerships; and the expansion of its European operations. In early 2006, Vendavo announced in another press release that it would expand its European operations to keep up with that region’s increasing demand for the company’s pricing solutions. The company then opened its European headquarters (HQ) in Zurich, Switzerland, as well as an office in London (UK), which has subsequently become the European HQ. At the end of 2006, Vendavo announced additional expansion of its operations in Europe and North America, as well as its global management team, so that the company can continue in its aim to meet increased demand from customers around the world. Vendavo’s European operations have been quite successful, with new customers signed in 2007, and a number of existing customers expanding their European deployments of the Vendavo suite.
To meet and maintain the highest implementation standards as the company continues to serve its growing global customer base, Vendavo then expanded its Global Solutions Delivery organization. This group, comprised of professionals in the US, Asia, and Europe, aims to ensure that each client’s deployment is reliable, fast, and cost-efficient, and that Vendavo’s wide base of implementation partners have access to extensive support resources.
There are already strong indications that relationships between leading enterprise applications and consulting firms drive client adoption and market maturity in the price management domain. Another fact about Vendavo supports this: in 2006, the company formalized partnerships with Accenture and Deloitte Consulting (a subsidiary of Deloitte & Touche USA LLP), two of the world’s leading professional services firms. The experience of these consultants in pricing strategy and implementation, combined with the functionalities of Vendavo’s enterprise pricing suite, enables the alliances to work together to provide products and services that can help customers in various industries improve their revenues and profitability. In mid 2007, the consulting partnerships’ conglomeration was joined by Hitachi Consulting (www.hitachiconsulting.com), the global consulting company of Hitachi, Ltd. (NYSE: HIT), whose client base consists of nearly 35 percent of the Fortune 100 companies, 25 percent of the Global 100 companies, and a number of leading mid-market companies.
Vendavo has grown its sales team in both North America and Europe, which focuses on selling to both SAP and non-SAP accounts. Vendavo has a diverse customer base across multiple industries, including high-tech, manufacturing, chemicals, mill products, consumer goods, and distribution. Its customers include such high-tech companies as Dell and Lenovo; industrial manufacturing companies such as Freescale, Xilinx, and Sylvania; and chemical companies such as Dow and DuPont. A number of non-SAP ERP accounts can be found too—Emerson, Michelin, and Qualcomm—all running on Oracle or other non-SAP applications.
Broadening Functional Horizons
Possibly even more important than these expansions is that some customers are adopting Vendavo’s newly added segmentation, price-setting, and optimization capabilities, which should now make the vendor competitive in deals that focus on these areas. Vendavo’s traditional stronghold has been in real-time pricing analytics, and price-setting and policy management frameworks. Also, Vendavo has long provided interactive negotiation capabilities for recommending, negotiating, and evaluating sales agreement prices and terms. Vendavo’s and SAP’s strong partnership has been supported by a growing number of Fortune 500 customers willing to testify about their experiences, thereby giving the vendor and the pricing execution concept a much-needed “shot in the arm.”
As mentioned above, Vendavo currently claims over 40 customers; more than two-thirds are in common with SAP. Many of these have, according to a Vendavo press release, reported significant increases in their net margins as a result of solving a wide range of pricing challenges that include managing strategic pricing initiatives (for example, creating and performing custom pricing that is based on a customer’s purchase history), setting list prices, managing price lists, controlling margin leakage, negotiating and managing contracts, tracking pricing performance and customer compliance, and communicating prices throughout the organization.
Vendavo has traditionally impressed customers with graphical and interactive price execution and enforcement capabilities. The Vendavo Profit Analyzer module provides real-time pricing analytics, enabling decision makers to understand every element driving pricing performance. The module features such capabilities as price waterfalls, price and margin bands, scatter plots, comparisons, indexing, time series and trending, statistical analyses and regressions, and performance driver analyses, to name but a few. Such analytics deliver insights into where and how profit margins are achieved or not.
To illustrate, the module breaks prices down into their most important components, considering not only the product’s price, but also the terms for shipping and payment, the time of delivery, customized engineering, and so on. When a template is filled in with the specific terms of a new deal, the module flags the responsible salesperson of any anomalies (for example, that free shipping is only applicable on orders with a value of more than $10,000). In contrast, managers can set up workflow-based approvals of these situations, all with the purpose of stopping profit leakages.
The Vendavo Price Manager module offers price setting and policy guidance to enable more profitable decision making, with the aim of consistent direction and control of prices and policies across the entire business (including business units, product lines, market segments, geographies, channels, and so on). The goal may be price maximization, but nonetheless, enterprises must first focus on establishing a clearer rationale as to why price elements are set in particular ways. Consequently, equality is the name of the game, and any outliers are eliminated. With that goal in mind, the module can handle multiple price lists, establish analysis-driven prices and policies, produce mass price updates, keep up pricing policies, export prices to ERP systems, and generate Microsoft Excel-based price books, among other functionalities. Such a unified environment allows business managers to analyze, simulate, set, and communicate prices, price lists, and related policies.
Finally, the Vendavo Deal Manager module offers functionalities for price negotiation that can make every transaction more profitable across all phases of a deal (price, volume, terms of sale, and so on). The module can compare multiple pricing scenarios and analyze these against benchmarks; and it can create win-win proposals with substitutions and suggestions. Additionally, it can trace commitments to contracts and purchase deliveries; provide competitive win or loss information; get target and floor prices that are specific to context; organize pricing based on configuration and formula; and route proposals by means of relevant workflow approvals. All three of the above modules can also handle multiple currencies and units of measure (UOMs).
This is part one of the two-part series Provider of B2B Price Management and Optimization Speaks Out. In the next part of this series, Vendavo’s PPM modules will be given a closer look.