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.
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.
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.
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