Emptoris Tones Down the Rhetoric and Turns Up the Numbers

Yesterday afternoon, I chatted with a couple folks from Emptoris to discuss their recent set of announcements which you can read here and here. Among other areas, I was interested in drilling down on the source of their 68% growth, as Emptoris has not exactly had the best reputation in the past for disclosing numbers. The good news for the sector is that even though it would appear that Emptoris is still playing the numbers game to some degree -- disclosing growth without breaking out organic vs. inorganic percentages, and avoiding specific revenue numbers -- that they are doing very well in the market indeed. The provider has doubled its sales team in the past year and is now up to 380 people and has open headcount for 60 more. Given this, all signs point in the right direction for Emptoris. In addition, they are funneling 35% of their revenue back into R&D which is a number that is higher than the industry norm and bodes well for future application revenue.

Perhaps most important of all, I believe that the news out of Emptoris signals good times ahead for the entire Spend Management market, and is a sign that companies are getting serious about building sustainable approaches to procurement. Just yesterday, an "old timer" who has been around procurement and sourcing technology even longer than me asked if I could refer to any vendors with material revenue who were actually growing organically. While just yesterday I did not have a solid answer for him, now I can say yes to that question.

The fact that Emptoris' numbers are up signals to me that select companies are increasingly willing to invest seven figures for a broad and deep platform. What's even more telling about Emptoris' traction is that their customer count only stands at 160 (compared with a claimed 300+ sourcing customers each at Ariba and Procuri). Given a revenue run-rate estimate in the $70-$80 million range, it's clear to me that Emptoris' average deal size is at least 3X to 4X the average deal size for many other vendors. Emptoris backed this up on the call by telling me that 5-6 of the 64 new transactions in the past quarter were "very large deals" which I take as code for multiple millions of dollars over contract length. And increasingly, more customers are shelling out for the complete suite at one time. During our conversation I also learned that 55% of Emptoris' deals are comprehensive deals for the complete platform.

Numbers aside, perhaps the best sign of all that Emptoris is doing well is that they are talking about products and customers -- not about the competition. In all the years I've known Emptoris starting when Avner Schneur originally tried to pimp some vaporware, a powerpoint and a couple of PhDs to us at FreeMarkets for what I believe was $100 million at the time, Emptoris has excelled as much at trash talking its competitors as at sourcing. In one call with them not too long ago, I chalked up a rise in global warming to amount of hot air coming out of the phone. But in the conversation yesterday, the competition did not come up once. Not once! I take this as a great sign, and one that Emptoris is finally settling into a leadership role in the market (albeit one that is shared with SAP, Oracle and Ariba and potentially others in the not-to-distant future). Interestingly, in my talks with smaller platform vendors in the sector, Emptoris now often comes up as the one they're gunning for.

Jason Busch

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