Earlier this fall, I had the chance to get a regular business and solutions update from Zycus. Then, a few weeks later, I caught up with the Zycus team along with one of their customers in Chicago. Zycus' reference customer, from a well-known medical device company, was using their solution to drive a hybrid procurement/lean transformation within their organization, a story I'll look forward to sharing in December. For some, all this interaction might feel like oversaturation. After all, how much is there really to come up to speed on with a single provider in the sector -- especially one without end-to-end analyze-to-pay capability? The answer, in Zycus' case, is quite a bit. In fact Zycus, like Iasta, has successfully transformed itself from a one-trick Spend Management pony into a provider with ambitions to serve all areas of the Spend Management market. And they're leveraging strong customer relationships, a tenacious sales and marketing approach and a constantly expanding product and services footprint to get there.
Today, Zycus is a provider that goes far beyond its legacy spend classification roots, offering a complete spend analysis package. But they also offer software that covers other key Spend Management processes including sourcing and contract management. Their sourcing solution, built off of the legacy B2eMarkets platform, is extremely easy to use and looks and feels different from many other providers in the sector. It's almost a zero-training tool. Granted, it's missing a few things that some of us take for granted who've done sourcing for a long-time (e.g., dynamic lot extensions/overtime, optimization), but it's succeeded in rapidly capturing a material percentage of new deals in the market thanks to both how Zycus is promoting it as well as how simple it is for both buying organizations and suppliers to use. In other words, it's become the Honda Civic of e-sourcing. But it's a Civic that's often sold at Hyundai prices.
Sourcing is playing a key role in helping Zycus drive material customer acquisition, not to mention helping them get a foot in the door to up-sell other solutions and more lucrative services (but more on this in a minute). In fact -- and whether this is primarily a result of their new sourcing toolset vs. other newly released capabilities is hard to say -- Zycus appears to be realizing a growth rate that is significantly distancing itself from larger benchmark competitors including Ariba, BravoSolution and Emptoris. In its most recent financial quarter, April-June 2009, Zycus claimed to drive over 40% revenue growth across over 40 deals. This number includes 15 net new customer wins. During the same time, Zycus added 35 new employee, suggesting that they're still a small but rapidly growing organization (and one that can take advantage of offshore labor rates).
Please note that I have not verified these numbers with an independent accounting source and since Zycus is not public, it's impossible to be sure if they're accurate. However, I have little reason to suspect Zycus would share anything that was financially circumspect with analysts or the media (as others have learned, the risks are too great, both from a negative coverage perspective as well as what developing a chronic reputation for growth misrepresentation can do for valuation). On a percentage basis, I questioned Zycus as to exactly where the growth was coming from. They responded that approximately 60% or current new deals they can attribute to the spend analysis area with the other amount owing to new products. But many Zycus customers are signing up for multiple products. A common theme in new customer wins is to see companies using Zycus for both spend analysis (including classification and analytics) as well as sourcing.
My recent customer research into how Zycus is doing in the market confirms their suggestion that software user-friendliness is a key reason for their continued customer acquisition success. But I'd also add that Zycus is extremely price competitive when they know their main rivals are also vying for a deal, so perhaps this is contributing to the software win rates as well. Last, it's worth noting that Zycus excels at developing proofs-of-concepts in the sales process, a skill-set that is also contributing to their recent deal success.
But Zycus' ability to sell software is only part of the reason for their impressive upward growth trajectory. Professional services wins are also playing a significant role. In fact, Zycus is looking more and more like a miniature offshore version of Ariba in this regard (not to mention other competitors like BravoSolution and Emptoris that have built up a full-service strategic sourcing capability). Granted, Mini-Me in this case is not looking like a full-blown Dr. Evil yet (they're still missing some key capabilities services-wise). But stay tuned for further analysis of how Zycus is building out an offshore-driven services capability in category sourcing and related areas.