I forgot to mention in an earlier post that Ariba is holding their Virtual Ariba LIVE event today and tomorrow. Since the sessions will be available on an archived basis, you can either listen in as they're presented or just check back later. I plan to be online for a good portion of the event today and tomorrow and I'll also be at the Chicago LIVE in May (Ariba is taking the event on the road to a number of different cities). But Emptoris is not sitting still during the festivities this week. Instead, they opted to present a pre-emptive strike against Ariba with a new guaranteed savings program, combining elements of spend analysis, sourcing and contract management.
As part of the announcement, Emptoris is offering, "guaranteed returns," in their words. But what does this mean? I asked Kevin Potts, Emptoris' VP of Marketing and Product Management to provide more details and he suggested what I wanted to hear -- that the guaranteed return was based on implemented -- not just identified savings. In his words, "The guarantee is based on actual 'annualized' savings achieved. This means we ensure the customer gets a new memorandum of understanding or contract in place for a set of categories, and buying can then take place. Working with the customer, we estimate a forecast of the total buying for the year off that MOU/contract and the savings that will be achieved (i.e., (old contract price minus new contract price) * expected volume for twelve months). We conduct a savings assessment up-front to 'prove out' the opportunity, and then set a specific savings goal and timeline up front. We guarantee that we will provide a 2X ROI -- but the reality for many companies is their ROI is more like 5-6X or greater."
As a follow-up to this question, I was curious about related models to guaranteed ROI, such as gain share pricing -- something common in the services-driven sourcing and supply chain world. In this regard, Kevin remarked that "We have and continue to offer a variety of options for sharing the risk and the value with customers. Some of those can get pretty complex and rely heavily on a highly skilled procurement organization... However, we felt a large, untapped opportunity lie in reaching out to a new audience -- the CFO -- with a simple message. No other company was capitalizing on this type of offer -- a simple, straightforward, money-back guarantee for improving a company's EBITDA and cash generation in the next 90 to 240 days." Sounds clear enough to me.
But how necessary is such a guarantee? After all, I'd reckon that 90%+ of Emptoris and Ariba spend visibility, sourcing and contract management customers achieve ROI in 12 months or less, provided they actually use the applications -- in some cases 5x, 10x, or 20x times their actual investment. In other words, it's a good marketing move, but in my view, what is most remarkable about the announcement is the language Emptoris is using in between the lines to describe the program.
Moving away from the terminology of just supply management, Emptoris' President and CEO, Avner Schneur, uses the term "guaranteed spend savings" in the press release to describe the results. But it does not stop there. Later in the press release, Emptoris refers directly to Spend Management to describe what it does: "The Emptoris Guaranteed Savings Program combines industry-leading spend management expertise and Emptoris' award-winning spend analysis, sourcing and contract management technologies, to deliver guaranteed, hard savings" (emphasis added).
I’m sure that many Spend Matters readers could care less whether or not Emptoris calls what they do supply management, sourcing, procurement or spend management. But believe me, this marketing shift matters in both their orientation to the market and their overall competitive position. To me, this announcement is a positive for customers and prospects, and I hope it brings Emptoris new business from companies who might be wary of pulling the trigger on Spend Management programs without a guarantee. I also like their embrace of "Spend Management" on a personal level. But the news signals quietly -- at least in my view -- that Emptoris is adopting language that it has fought hard to avoid over the years because of its association with competitors.
I asked Kevin his view about Spend Management terminology and this is what he had to say: "We are being opportunistic with the use of this terminology for this program. We are targeting the financial executive audience with this program, and we think they are more likely to resonate with this... We continue to use 'Supply and Contract Management' as the primary descriptor for the space Emptoris is in. We see that the category term "spend management" tends to connote themes that focus overly on price and not performance, contract or supply value." Fair enough, but at least they're trying, showing a logical first step to embracing Spend Management religion. Maybe they've not been baptized yet, but at least they've walked into the church.
Check back for Part 2 of this post later today, when I'll provide an update on how Emptoris is fairing in the market based on some recent personal observations (the good and the bad), as well my own reflections on the timing and subterfuge behind the announcement yesterday. And stay tuned for Ariba LIVE coverage this week as well!