This spring, I had the chance to meet dozens of Zycus customers and prospects as their "Experience" tour criss-crossed the country. These discussions with both existing and potential customers considering a range of Zycus solutions further solidified my view that Zycus has been successful in expanding outside of just the spend analysis area. They may not yet have as broad of a suite as Ariba or as deep of capabilities in non-spend areas (e.g., sourcing, optimization, performance, contracts) as providers like Emptoris and BravoSolution, but they're banking on a superior user experience, rapid development and a highly customer intimate sales and proof of concept process to keep them in the game.
Last week, Zycus presented an update to Spend Matters on their progress throughout the year. In a series of installments in the coming weeks, I'll share with Spend Matters readers what I learned as well as also provide some feedback I'm hearing from the market on Zycus. On this first update today, I'll feature the highlights of Zycus' recent progress. In Parts 2 and 3, I'll provide additional insight and commentary on how I'm seeing Zycus stack up in the market and the overall space they're trying to carve out for themselves. Let's begin.
Based on the numbers they shared, Zycus is growing at a rapid clip in 2010. The most recent complete quarter saw a quarter-over-quarter growth rate of 30%. This is especially significant because Zycus is selling a range of SaaS tools (in addition to CD versions of their spend capabilities for those that want it). SaaS revenue recognition approaches typically slow perceived growth rates because vendors must recognize the revenue over the life of the contract. Even if SaaS only accounted for 33% of this percentage increase in quarterly revenues (I suspect it was more) it's still a very significant growth rate, exceeding that of Ariba. Still, Emptoris also recently saw a very high quarterly growth rate as well (over 100% on a yearly basis for Q1), so the results Zycus is seeing are clearly due to both their competitive position as well as overall market strength (in Emptoris' case, it is important to point out that the revenue mix most likely came from a combined installed / on-demand deployment and booking model).
Zycus has added over 140 new employees in recent quarters, primarily in the sales and marketing area. By the end of the year, this will bring them to between 350-400 employees, including approximately 40 new headcount added to R&D (currently, Zycus has around 100 employees focused on development, architecture, product management, etc.). From a customer perspective, the most recent quarter saw Zycus win 27 new deals, of which 17 were new customers. A number of these deals were suite-driven, including both spend analysis and sourcing. Zycus continues to differentiate in the sales process, owning to a strong proof of concept / pilot approach, a strength they've had for years in the spend analysis area that is now carrying over to other solution components as well. Interestingly, they also saw a number of new strategic sourcing services deals. Zycus, unlike their on-shore competition, staffs these engagements from India.
From a pricing standpoint in the sourcing area, the ballpark Zycus sees is very similar to the price ranges we track from other competitors like BravoSolution, Emptoris and Iasta (Ariba tends to be less expensive these days) for a non-license yearly subscription model. With deal sizes ranging between $65-$200K per year based on size of company, complexity, support, etc., Zycus is right in the typical e-sourcing ballpark, and seeing significant competition in the market in most of its deals, winning its fair share of head-to-head matches. Perhaps the biggest surprise here is that Zycus suggests that Emptoris, which few competitors saw in new deals last year, is showing up with greater frequency and regularity (our own research confirms this as well). Zycus also sees Ariba "in almost every deal in the US and some parts of Europe" but does not find them as aggressive in India and the rest of Asia.
What is next for Zycus? Stay tuned for additional analysis and commentary as well as a preview of their solution direction.