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
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.
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.
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.
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.
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.