Emptoris, Inc., a privately-held provider of e-sourcing solutions that support the strategic sourcing needs of global 5000 companies, early in 2003 announced the completion of financing from new and existing investors totaling $20.5 million. Menlo Ventures led the third funding round, with participation from new investor HarbourVest Partners and all existing investors, including NETinvest, from previous two funding rounds. Emptoris then pledged to use the funds to finance further expansion of the company in a number of areas, including sales, marketing, product development and penetration into new global markets.
In September, Emptoris announced the acquisition of Zeborg, one of the world's leading spend analytics firms. As a result of the acquisition, Emptoris, with more than 50 global 5000 customers, and notable sourcing applications and services, believes it is now positioned as the leading strategic sourcing software provider in the procurement and sourcing applications market. In addition to acquiring Zeborg's software and services offerings, Emptoris will inherit the company's sales team as well as global 1000 clients from a wide range of industries, including seven of the world's largest banking and financial services companies. Zeborg's customers include American Express, Cigna, Fleet Boston Financial Corporation, KeySpan, and Owens Corning. Zeborg has reportedly processed over $480 billion in corporate spend data and over 350 million transactions from over 100 data systems. On the other hand, Emptoris customers include Boeing, GlaxoSmithKline, Motorola, and Samsung America.
However, despite a good fit at first glance, the enlarged install base, and improved cross-selling opportunity, some challenges and product gaps are yet to be overcome. One is to conduct possible product rationalization and integration, to orchestrate sales forces, and organize services strategies, given the constituents' different expertise and culture in the past. In addition to the above-mentioned army of direct and indirect competitors, the combined company's possibly biggest challenge remains a still ongoing lack of awareness of the need for sourcing/spend management. While many people have realized the power of e-commerce on the consumer side, there is still plenty of education to be conducted by all the SRM vendors as to prove how much leverage their applications can bring to corporate buyers.
The combined company will also need to bolster its design and engineering/PLM functionality either natively or through strategic alliances, and provide flexibility of its product to accommodate the changing business practices, integration and standards. Manufacturing companies that fail to coordinate engineering with strategic sourcing and procurement will likely underachieve the potential benefits, given that only by enlisting suppliers, engineers, manufacturing, and procurement into a concurrent design process of early interactions can the best results be achieved. A good example of realizing the need for letting suppliers provide design improvement ideas rather than a stock-keeping unit (SKU) item is Agile's recent acquisition of sourcing vendor Tradec. To meet more collaborative, diverse, and dynamic relationship capabilities, the future product will have to support a distributed application architecture that enables business process flows based on intricate business logic and roles of participants and their trading organizations. Although the Emptoris product offers distributed application architecture today, some product development rationalization will have to take place to maintain this philosophy as the company moves forward.
The competition is not to be neglected either, given a bevy of competitors is trying to stand out with their value proposition of niche functionality or low-cost pilot deployments. Particularly Frictionless Commerce, which has made a slew of similar announcements recently, including $14 million in third-round funding, a new optimization module called Frictionless Sourcing Optimizer, and most importantly, a number of new large customers.
As mentioned earlier, Emptoris will have many large enterprise suite providers on its heels too, which will at least result with the price reduction pressure, which is likely to hurt smaller pure-play vendors than large diverse enterprise players. To that end, while Oracle, SAP, and PeopleSoft might have been remiss to deliver deeper SRM applications, they have nonetheless been closing the gap with many SRM functions, which may be enough to convince their existing customers to at least postpone decisions and wait for more capability from their principal enterprise applications provider. The fact is that even many SRM vendors have yet to expand far beyond simpler capabilities like spending analysis, RFQ, bidding analysis, negotiation, contract development, category management, cost savings tracking, specification management, and supplier performance management. More intricate capabilities like cost estimation and target costing, knowledge management (KM), market analysis, the make versus buy analysis, value engineering, supplier design collaboration, buyer-supplier joint cost reduction projects, etc. are still mainly provided through complex not-automated, once-off consulting engagements.
The future of e-sourcing involves greater integration between sourcing systems and other important systems, such as financials, PLM/product data management (PDM), and SCM. Thus, we believe that Emptoris, and all its SRM peers alike, must continue to provide flashy and functional portal user interfaces, connectors to other enterprise systems (e.g., portlets, applets, etc.) and Internet exchanges connectivity through partnerships or acquisitions. Further, in the SRM specialists' favor might be the fact that IT-wary resellers will not always be amenable to dealing with heavy-footprint large enterprise systems, and will prefer lighter and more agile albeit deeper point solutions.
In September, Emptoris announced the acquisition of Zeborg, one of the world's leading spend analytics firms. As a result of the acquisition, Emptoris, with more than 50 global 5000 customers, and notable sourcing applications and services, believes it is now positioned as the leading strategic sourcing software provider in the procurement and sourcing applications market. In addition to acquiring Zeborg's software and services offerings, Emptoris will inherit the company's sales team as well as global 1000 clients from a wide range of industries, including seven of the world's largest banking and financial services companies. Zeborg's customers include American Express, Cigna, Fleet Boston Financial Corporation, KeySpan, and Owens Corning. Zeborg has reportedly processed over $480 billion in corporate spend data and over 350 million transactions from over 100 data systems. On the other hand, Emptoris customers include Boeing, GlaxoSmithKline, Motorola, and Samsung America.
However, despite a good fit at first glance, the enlarged install base, and improved cross-selling opportunity, some challenges and product gaps are yet to be overcome. One is to conduct possible product rationalization and integration, to orchestrate sales forces, and organize services strategies, given the constituents' different expertise and culture in the past. In addition to the above-mentioned army of direct and indirect competitors, the combined company's possibly biggest challenge remains a still ongoing lack of awareness of the need for sourcing/spend management. While many people have realized the power of e-commerce on the consumer side, there is still plenty of education to be conducted by all the SRM vendors as to prove how much leverage their applications can bring to corporate buyers.
The combined company will also need to bolster its design and engineering/PLM functionality either natively or through strategic alliances, and provide flexibility of its product to accommodate the changing business practices, integration and standards. Manufacturing companies that fail to coordinate engineering with strategic sourcing and procurement will likely underachieve the potential benefits, given that only by enlisting suppliers, engineers, manufacturing, and procurement into a concurrent design process of early interactions can the best results be achieved. A good example of realizing the need for letting suppliers provide design improvement ideas rather than a stock-keeping unit (SKU) item is Agile's recent acquisition of sourcing vendor Tradec. To meet more collaborative, diverse, and dynamic relationship capabilities, the future product will have to support a distributed application architecture that enables business process flows based on intricate business logic and roles of participants and their trading organizations. Although the Emptoris product offers distributed application architecture today, some product development rationalization will have to take place to maintain this philosophy as the company moves forward.
The competition is not to be neglected either, given a bevy of competitors is trying to stand out with their value proposition of niche functionality or low-cost pilot deployments. Particularly Frictionless Commerce, which has made a slew of similar announcements recently, including $14 million in third-round funding, a new optimization module called Frictionless Sourcing Optimizer, and most importantly, a number of new large customers.
As mentioned earlier, Emptoris will have many large enterprise suite providers on its heels too, which will at least result with the price reduction pressure, which is likely to hurt smaller pure-play vendors than large diverse enterprise players. To that end, while Oracle, SAP, and PeopleSoft might have been remiss to deliver deeper SRM applications, they have nonetheless been closing the gap with many SRM functions, which may be enough to convince their existing customers to at least postpone decisions and wait for more capability from their principal enterprise applications provider. The fact is that even many SRM vendors have yet to expand far beyond simpler capabilities like spending analysis, RFQ, bidding analysis, negotiation, contract development, category management, cost savings tracking, specification management, and supplier performance management. More intricate capabilities like cost estimation and target costing, knowledge management (KM), market analysis, the make versus buy analysis, value engineering, supplier design collaboration, buyer-supplier joint cost reduction projects, etc. are still mainly provided through complex not-automated, once-off consulting engagements.
The future of e-sourcing involves greater integration between sourcing systems and other important systems, such as financials, PLM/product data management (PDM), and SCM. Thus, we believe that Emptoris, and all its SRM peers alike, must continue to provide flashy and functional portal user interfaces, connectors to other enterprise systems (e.g., portlets, applets, etc.) and Internet exchanges connectivity through partnerships or acquisitions. Further, in the SRM specialists' favor might be the fact that IT-wary resellers will not always be amenable to dealing with heavy-footprint large enterprise systems, and will prefer lighter and more agile albeit deeper point solutions.
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