2008 Proves a Solid Year for Emptoris

A couple weeks back, Emptoris attempted to steal a bit of thunder from Ariba's earnings, choosing to selectively disclose 2008 information about its overall customer and financial performance immediately following Ariba's quarterly report. Despite the timing, the "20%" revenue growth claims in the press release suggest a very solid degree of growth in the market and should assure customers and prospects that Emptoris remains a highly viable vendor choice. By my own calculations based on court filings, Emptoris' 2008 revenue clocked in at just around $50 million. While this is shy of the $100+ million suggested by at least one analyst firm in their own report last year, it's still a healthy number in this market. In the sourcing, spend and performance management sectors (software and services included), I reckon that this makes them the fourth largest best of breed provider in the market behind Ariba, BravoSolution, and AT Kearney Procurement solutions.

Relative size matters, but relative growth and momentum is as, or more, important. Also of note is Emptoris' claim to have actually built revenue momentum as overall market conditions declined, suggesting their growth "accelerated in the fourth quarter" which "highlight[s] the fact that Global 2000 companies are increasingly seeking to employ and expand solutions that enable them to better manage and control spending" as the need to cut costs and better manage working capital accelerates. Surfacing from the Ariba litigation saga, it will be interesting to note whether this acceleration trend continues in Q109. From an anecdotal perspective, I continue to see Emptoris in many deals in the market, although they do miss out on quite a number that get seized by their larger competitors.

Also of note in the release is Emptoris' claims that 145 companies "invested in or expanded their investment in Emptoris solutions over the past year". Customer retention exceeded 90%. In addition, "37% of its business was driven by new customer contracts in 2008 and that number increased to 43% in the fourth quarter". Companies are also opting to adopt multiple elements of the Emptoris solution. In this regard, the "number of companies buying a suite of solutions from Emptoris doubled in 2008" and "the number of customers expanding their solutions with Emptoris in 2008 grew by 18%".

I won't get into the details of the late Q4 investment by Marlin Equity Partners, but it suffices to say that, at least in my view, the cash infusion should alleviate any viability concerns that customers or prospects might have had. As we storm ahead in 2009, I count Emptoris as a vendor that I often put on the top of my short list in the spend visibility, contracts, sourcing and supplier performance management areas (and this despite the fact I think the Forrester Wave comparisons that Emptoris is so quick to tout aren't necessarily a reflection of how companies actually use and value products in the real world -- and on this note, don't get me started on the Forrester Wave that's coming out for sourcing).

What's the bottom line regarding Emptoris and third-party validation? In my view, the fact that Emptoris continues to have a strong showing from year-to-year in analyst reports should help more conservative companies that like to buy only from perceived industry leaders get over any concerns they might have about working with a provider that is approximately 1/6th the size of the vendor it likes to compare itself to the most. But in my view, companies should skip these comparisons and look at products and solutions based on their own needs. And in this regard, Emptoris still, in most cases, comes out towards the top of the market and holds its own in many of the deals it gets invited to.

- Jason Busch

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