What’s Really Behind The Numbers

Nearly everyone involved in the enterprise software sector has had a rough few weeks. Many vendors failed to reach inflated analysts’ expectations in those two infamous categories, revenue and earnings. I’ve even spoken to a few industry observers who won’t stop talking about further consolidation and the return of the anguish of 2000. To those curmudgeons and naysayers I say: quit complaining and get back to work. What’s ten times more interesting than a penny or two miss is that Spend Management and earnings are deeply interrelated concepts, and the former is deeply impacting the later across many of the largest global companies. In fact, many large organizations are saving more thanks to Spend Management initiatives than the revenue that vendors assisting in the efforts pull in throughout the course of the year. Now that’s fascinating. Take the case of Tyco. In the January 13th issue of Purchasing Magazine there’s a short “Buyline” titled “Who’s Got Strategic on the Brain”. I’ll reprint this little piece below: "Tyco International reported that the company "made significant progress in its Six Sigma and strategic sourcing programs, exceeding $550 million of combined net savings in 2004." The savings helped drive the improved operating margins that the company reported in the fourth quarter and fiscal 2004." $550 million is more than the combined revenue of nearly all of the Spend Management vendors in the market, public and private. And that savings is for one organization. Those Wall Street types obsessed over the revenue and profitability of Ariba, I2, Manugistics, Verticalnet, SAP, Oracle and others should look at the actual impact those organizations are having with their clients to gauge how relevant they’ll be in the future. -Jason Busch

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