I've only spent just over 24 hours at Emptoris Empower, but so far I've got to say I'm slowly being won over that the Marlin investment ended up being a good thing (for an ironic reason I'll get to in a minute). But first, I'll state my bias upfront. In general, I believe the goals of private equity firms and the goals of high growth, innovative software companies -- and more specifically their customers' goals -- in non-mature markets are often hard to reconcile. I believe private equity investments -- which by nature, are almost always hands-on from a management or at least a management direction standpoint -- are often better suited to slower growth mature markets or when a company has clear fundamental operational issues and needs an outside party to come in and fix the underlying problem. We can all agree Emptoris was never perfect, but it certainly never fit the previous description either. So in this case, why might a private equity infusion actually help Emptoris' cause?
It comes down to a couple of key reasons in my view. First, Emptoris desperately needed new leadership. I was not convinced of this before, but I am now, especially after talking to customers at the event. Avner Schneur was a great entrepreneur but in the latter years of running the company he founded, he did not do a good enough job of listening to customers. This is a classic entrepreneurial challenge, and it's rare that any CEO can transition from launching a venture to growing into a nine-figure business, especially in the software industry. Avner was still out there leading the charge for the heading he thought Emptoris should be on -- leading the market as they had for years in many areas -- but in doing so, he failed to step back and actually listen to some of the core challenges the customer base was facing.
This came through loud and clear in a few informal interviews I conducted with customers today. In contrast, ever since Marlin took over, and especially since Patrick Quirk began to informally interject himself in the business (yesterday was his first official day but he seems to have been hands on even before this), the company began to aggressively survey its customers about their challenges, needs and wants from both a solution perspective and also an underlying business one. Each of the customers I spoke with at the event expressed their satisfaction with a new management philosophy that embraced their requirements and wishes -- not to mention they found Patrick to be a humble leader with strong active listening skills.
The irony, of course, is without Marlin -- and without the Ariba lawsuit situation -- Avner would still be at the helm. And the very lawsuit that Ariba brought against Emptoris could ultimately come back to hurt it given Emptoris' new focus on partnering with customers around both adoption and innovation rather than simply selling solutions to organizations with a propensity to buy from more advanced providers. In other words, the Emptoris customer and solution philosophy of October 2009 is entirely different and more in line with customer needs than the Emptoris of December 2008 before Marlin entered the equation.
Now this is not to say that being owned by a private equity firm is always right for customers. In fact, the pressure for growth can often come at the expense of focus and organic solution innovation and expansion. I still don't feel, for example, that Emptoris has articulated a strong vision around the Click CSM services solution and its potential fit within the Emptoris suite (I for one, see tremendous differentiated opportunity there, especially in the areas of services contract lifecycle management and services procurement analytics). But at this point, the deal still feels more financially driven than grounded in true strategic expansion based from what's been articulated. Still, Emptoris has all the right pieces in place to create something quite unique if they can get their integrated product management act together.
In the software market, any analyst or observer worth their salt should always be a skeptic when it comes to acquisitions and forced senior management change. Whenever a company is selling a "virtual good" rather than a physical widget, a change in ownership and direction -- not to mention philosophy -- can have a rapid and seemingly disproportionate impact, often in a negative way. But in this case, even though a tremendous amount of work remains, things appear to be starting to click into place for Emptoris, paving the foundation for a very different type of customer-focused strategy in 2010 and beyond.
What do you think? Does anyone else at the event share a similar (or different) perspective?