Beyond Spend Visibility — Zycus Takes a Broader Solution Path (Part 2)

In the first post in this series yesterday, I examined some of the factors driving Zycus' impressive growth numbers, drilling specifically into their recent traction with both legacy (e.g., spend classification) and new (e.g., spend analysis, sourcing and contract management) solutions. Today, we'll continue this analysis, examining how professional services and a mini-me offshore version of their competitors' onshore sourcing factory delivery capabilities are fueling an important part of Zycus' overall market ascent. But before getting into professional services, specifically, it's worth pointing out that Zycus has focused as much on global opportunities as those within North America as it has looked for markets and customers to contribute to their growth equation. In fact, Zycus' presence in Europe and Asia is in strong disproportion to the typical focus and size of vendors going after these markets. But this has always been the case with Zycus, which has truly sold a world-product since the early days of its spend classification tool.

Contributing to Zycus' overall growth has been what I previously referred to as a tenacious sales and marketing effort. It seems that just about every other Purchasing or ISM webinar these days is sponsored by Zycus. But if you talk to Zycus customers, it becomes clear that their sales approach represents anything but old world pushy enterprise software salesmen. In fact, purchasing people, who love nothing more than playing vendors off each other, seem to appreciate how much Zycus will dance to win a deal, from market-driven flexibility on price to a sales approach that places special emphasis on showing what it will mean to operate their solutions in a specific customer environment. This approach appears to be holding across industries, as Zycus has seen material traction in a range of manufacturing and non-manufacturing areas of late (including the not-for-profit world of education, tossing a monkey wrench in SciQuest's plans to capture every software deal in that market).

Given Zycus' flexibility and overall sales approach across industries, it's no surprise that they would aggressively move into professional services in the sourcing arena. In fact, I'd argue that a significant percentage of their new revenue growth appears tied to services versus software. However, Zycus is not pursuing a model of on-shore -- or even hybrid on-shore / off-shore -- delivery for these services. Rather, they're servicing all of their sourcing customers from India in a similar way to how Ariba manages their sourcing back-office for certain categories from Pittsburgh. This holds for two relatively new components of Zycus' strategic sourcing offering -- "zero risk services" and "technology and domain expertise services".

The first is essentially a contingency-based sourcing model requiring no upfront customer investment. It includes software, services and support to identify sourcing savings. This offering puts Zycus in competition with a range of consultancies that offer similar models (not to mention other full-service sourcing software providers who do the same).

Zycus' second strategic sourcing offering, "technology and domain expertise services," provides, in their words, "exposure to best-of-breed solutions, best practice sourcing strategies and hands-on experience/knowledge transfer of Zycus Strategic Sourcing". When it comes to carrying out sourcing events on behalf of customers from both outsourced and knowledge-transfer-based perspectives, Zycus appears to have lifted and refined a five-step sourcing methodology which includes significant up-front supply markets and data analysis that leverages both software and commodity/supply markets knowledge. None of it is rocket science, but if Zycus is able to conduct this type of work entirely in India -- which I believe they are doing -- it represents a more advanced use of off-shore expertise for what are often higher-value and complicated sourcing categories.

Today, Zycus has 15 people fully engaged in strategic sourcing work on behalf of clients on a full-time basis (with additional resources available to scale-up as needed). These consultants are supporting a material number of Zycus' 30 software customers using their sourcing product (which they claim has supported over 35,000+ sourcing events to date, a number which is probably owing to the B2eMarkets solution legacy). Many of the sourcing events that Zycus is supporting are not run-of-the-mill. They involve significant internal demand aggregation and advanced sourcing/bidding strategies that are par for the course in many of Zycus' more established competitors, but impressive for a relative upstart in the area. However, Zycus has not yet deployed a services-driven optimization capability, providing in my view what is a significant gap in their offering for transportation, make/buy, split of business and related event areas.

In summary, from a sourcing services capability perspective, it feels that they are where FreeMarkets was circa 1998 services-wise (minus a few negotiation/reverse auction mechanisms). This is not a bad place to be, but they have some major work to catch up to the more advanced sourcing services capabilities of CombineNet, Emptoris, Ariba, AT Kearney Procurement Solutions, BravoSolution and others if they opt to go down this path.

In the coming weeks, I hope to share some details around what one of Zycus' sourcing customers is doing on the lean procurement transformation side, using reverse auctions as an initial step to developing closer relationships with its supply base (yes, you read that correctly). It's a fascinating story. And one that I hope will silence the lean-obsessed, anti-reverse auction bigots once and for all, proving that lean and strategic sourcing do not have to be in conflict.

Jason Busch

Discuss this:

Your email address will not be published. Required fields are marked *