Earlier this morning, Aravo announced a $27 million funding round led by Cisco. While you can read the details of the funding round in the above-linked Spend Matters column -- along with some thoughts from the transaction's lead engineer, Aravo's CEO Tim Albinson -- I thought I'd take a few minutes in this post to share my analysis of what the funding round means for this sector. Perhaps most interesting on a superficial level is how with this round, Aravo appears to be migrating away from their supplier information management (SIM) positioning to what they describe as a broader approach to supplier collaboration that encompasses basic vendor management and vendor information management. Of course they summarize this in a three letter acronym -- it must always be three letters, mustn't it -- as enterprise supplier collaboration. Or ESC for short. While this may have a certain branding ring to it, I'm not so sure that moving away from the concept of managing supplier information and leading with the notion of collaboration is the right approach in selling what Aravo does for procurement organizations.
In procurement's mind, supplier collaboration, at least historically, has only been a single element of managing supplier interactions and information. I understand that Aravo is looking to distance itself from competitors that have also jumped on the SIM bandwagon, but I question whether or not it will be worth selling procurement and extended supplier management stakeholders (e.g., finance, legal, etc.) on the concept of collaboration given that 95%+ of what Aravo has done historically really has been information management and workflow related. Moreover, collaboration strikes me as something you do after putting your basic supplier management house in order. Tim Albinson thinks differently, of course. Yesterday, he suggested to me that the "old Aravo" was viewed by customers as a solution to help with vendor/supplier information gathering, credentialing and management.
But in the future, Aravo is hoping to become the global glue between different internal functions (including direct materials, operations and engineering) and suppliers. Tim gave me an example of how an R&D engineer in Berlin might be working on developing a new product. This gentleman might want to identify a list of potential suppliers and collaborate and communicate with both internal stakeholders and his likely supply chain partners. In the future with Aravo, said R&D staff member could collect information and collaborate around product specifications and even production and supply chain requirements and planning. Moreover, combined with Cisco's WebEx and Telepresence, such a total solution would drive a range of supplier collaboration possibilities never seen in an integrated enterprise application and connectivity offering before.
Now, this is a great vision. Don't get me wrong. But in looking so far forward, I think Aravo might be attempting to preach to a cardiac arrest patient how easy it is to complete a marathon. Of course before even getting to the starting line of such a race, there are dozens of intermediate steps and training routines required along the way (many of which could kill said patient without the proper medication and hand-holding). Which is precisely why the more basic concept of supplier information management, I still believe, is more appropriate for most companies today. Moreover, "collaboration" in and of itself has a squishy feel to it -- it's hard to get your arms around. Should Tiger and his wife have been more "collaborative" in working out their issues? You get the point. It's an imprecise phrase that would make Orwell roll in his literary grave -- or go ballistic and break his car's windows with a three wood (drivers did not exist back then).
Still, I won't knock foresight for any length of time. Innovation has been lacking in the product visions of too many companies in our sector for the longest time, perhaps owing to the fact that many solution provider introduced tools were far ahead of their times in the past five years and the market is finally catching up. Still, I do believe the more basic concept of managing supplier information has got legs. And I suspect that before all the ink was dry on Aravo's latest financing round, that their investors saw it this way as well.
As a final aside, it's worth sharing a quick anecdote that it was Cisco who reached out to Aravo (vs. Aravo contacting Cisco) when the original discussions between the two started. Moreover, Cisco's investment arm had no idea Cisco was an Aravo customer at the time. It's a small world for sure, but when two independent groups inside a forward thinking company act separately yet arrive at the same conclusion, it says something, now doesn't it? This alone gives me reason to believe that if I were a betting man, I'd have a hard time placing my chips on anyone but Aravo to ultimately emerge as the product and revenue leader of this sector -- SIM, ESC or whatever the heck you want to call it.