An Emptoris Summer Update: Customer Intimacy, Growth and Partnering Driving Strategy (Part 2)

Even though many industry observers had written off Emptoris' momentum coming out of the Ariba patent litigation at the end of 2008, the vendor has put forth some pretty significant growth numbers in recent quarters from an employee perspective. Earlier in May, Emptoris crossed the 500-employee mark. At the start of the year, Emptoris had 478 employees, and is targeting 581 by year-end (representing 22% YOY growth). Over 60% of Emptoris's headcount is in R&D, products and operations today and a substantial number of the development team is located offshore. Emptoris' organization appears, from a structure and size standpoint, to represent a quintessential enterprise software company focused on R&D, direct sales and channel / SI development.

During the briefing call I had with the Vice President of Marketing and Product Management, Kevin Potts, I learned quite a bit about their overall operating philosophy moving forward. For one, Emptoris is positioning itself as a premium provider, albeit one that is keenly aware that it must justify its pricing given the competitive marketplace. On the call, Kevin noted that "we know we're not the cheapest software out there, and there has to be sufficient value to get a substantial ROI from it." It's clear that part of this philosophy extends into an operating model predicated as much on delivering customer-specific solutions as ones that require customers to re-engineer processes based on a specific, configured set of SaaS capabilities.

This is not an inexpensive approach -- in any way. From a customer perspective, enterprise software deployments tend to carry a higher TCO and a longer ROI than true SaaS-based solutions sold through Emptoris competitors (including Ariba). Yet there must be a reason that Emptoris has decided to head down a more traditional enterprise software path to growth, both organizationally and solution-wise, compared with the competition. Perhaps this is because there will always be a segment of the market that values customization over configuration, especially in complicated solution deployments for contract management and even sourcing. Moreover, it's clear from Emptoris's growth strategy in China and other world markets that it is selling to organizations -- both regional players and large multinationals -- that are still more comfortable with behind-the-firewall deployment models than SaaS approaches, in terms of data security.

Now, this is not to say that Emptoris has written off SaaS and hosting as a delivery model. But when we see 100% growth numbers on a year-over-year basis for a company of Emptoris's size, it's fairly clear that SaaS is not fueling the rise. Moreover, given Emptoris' focus on channels and partnerships, including hiring a high-powered EVP of alliances and services last year and having an open headcount for a VP of worldwide alliances position which they intend to fill shortly, it would seem that traditional SI partners are going to be a major contributor to growth going forward, both on the consulting and BPO sides.

So far, it's been difficult for SaaS-oriented solution providers to penetrate large SIs as deployment, process change and configuration partners on a consistent basis. Unless things change in this regard -- which they should, in my view, from a customer perspective -- I suspect Emptoris will continue to be the legacy beneficiary of the traditional SI bias to installed software.

- Jason Busch

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