Friday Rant: Don't Knock All Indian Firms

Satym's high profile financial collapse in recent weeks has captured much of the press coming out of the Indian business world. Are there more Satym's to follow? Absolutely. India is going through a day of reckoning just as the US has on many occasions, realizing that tighter financial and process controls are critical to create accounting transparency. But even in this period, we should remember that most Indian firms remain highly viable businesses that can compete with many of the best organizations in the world. In a time a when global trade -- even global trade for virtual goods such as software and services -- is declining, I think it is all the more important to get past some of the stereotypes that have come to represent the way many in the West view global sources. Just as 99.99% of Chinese companies are not waiting in the shadows to slip lead paint or melamine into your products, a vast majority of Indian firms are completely above board from an accounting perspective. So when it comes to considering global options for Spend Management software and services, don't write off the other procurement outsourcing firms by association (at least not yet, even though some have argued that they, too, will get caught up in scandals soon) -- Infosys, Genpact, Wipro, and Corbus, just to name a few. And certainly don't write off Zycus, a provider that has chosen the road less travelled by only selectively branching out past its core over the years, doing so in a rather unique way.

Zycus is a provider that has quietly built out a global niche for itself, initially as a spend analysis provider and more recently as a broader suite vendor offering sourcing software and commodity markets research services, among other capabilities. In their early years, Zycus excelled more at developing and selling products than marketing (just like many Indian providers). But they're increasingly building a reputation for themselves in a range of markets -- North America, Europe and even Asia (a nascent market for Spend Management solutions by all accounts). They're up to over 250 employees worldwide. Granted, Zycus is still only a fraction of the size of SAP’s and Oracle’s SRM/procurement business -- not to mention Ariba -- but they are rapidly emerging as a contender for one of the top slots from a revenue and growth perspective. I spoke to Zycus in December and learned that for Q208 (ending September 2008) they signed 28 new deals. This includes 15 new accounts and 5 new sourcing deals (although I suspect the sourcing deals were all rather small).

Still, sourcing is still accounting for only a tiny percent of their overall business based on revenue numbers. From an overall deal-size perspective, Zycus, in their words, "saw a growth of more than 150% based on the deal sizes in the 2nd quarter 2008" as compared to the same quarter the year before. Where is Zycus seeing traction? Insurance and financial services (surprising, given the melt down) appear to be two promising sectors. But manufacturing was also a core area of strength -- including automotive OEMs and component manufacturers as well as the A&D market.

Zycus is not sitting still on the product development front either. For one, they have added a new supplier registration and portal capability which while simple relative to vendors such as Aravo, D&B, CVM Solutions and AECSoft who attack the same problem from a broader supplier information management perspective, is still useful to identify and vet potential suppliers. They've added a number of new features to their sourcing product including greater flexibility in setting up terms and conditions at the event level as well as expanded capabilities to attach files (e.g., engineering data) on the item level. In other areas of the sourcing product, they have also engineered in new capabilities that enable suppliers to provide fill-out pricing and other information request details in a more flexible and streamlined manner. The flip side of this is greater flexibility when it comes to bid analysis (although optimization is still lacking in the product).

Looking forward, Zycus is in the process of introducing a beta version of a contract management application that they plan to launch as an integrated version of the suite. They appear to have copied many of the better elements of the Ariba and Emptoris products here by in their words, providing contract management "integration with spend analysis" to "help measure contract compliance with e-sourcing to flip a contract into RFQ and vice versa". I will withhold judgement on this capability until I see the product, but from the way they're talking, it sounds like a logical and practical extension of the entire suite rather than simply low-level bolt-on contract management. Zycus also has plans for additional products that will show their commitment to "cover the entire sourcing and procurement spectrum". What might these be? I suspect expanding into supplier information management from spend analysis is a logical place to go. I would also surmise that we might begin to see a performance, risk and related supplier management product as well. However, whether or not Zycus gets into the P2P market is still a question.

In today's market, Zycus is proof that the global trade of virtual goods is alive and well and that leading providers continue to grow, despite the economic flu that's swept across every continent. They're also a success story that proves the recent scandal-plagued global headlines are not representative of the business practices, innovation and commitment to customers of top-notch global suppliers. Whether they're from India, China, Mexico, Brazil, Central Europe or other developing nations, high quality global suppliers can continue to provide a competitive advantage to our businesses. And they also insure that local suppliers do not rest on their past laurels.

Jason Busch

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