To set the stage, Aravo shared with Spend Matters that their monthly recurring revenue from subscription fees will increase over +150% from April '10 to April '11, and is projected to grow another +150% again by April '12. Their customer retention rate is 100% with renewals at about 120% for 2011 and they expect bookings to double from 2010 to 2011, and again from 2011 to 2012, enabling the R&D heavy vendor (with significant backing) to reach GAAP profitability by end of 2012. Interestingly, supply risk-related transactions represented 6% of Aravo's business "as measure in monthly recurring revenue" shortly after the Risk solution was launched last year, and today "represent more than 28%, and growing." Spend Matters would add that Aravo appears to be executing in an increasingly competitive market segment that now includes larger competitors such as GXS, which recently acquired Rollstream.
Now that we've done a level-set on Aravo's core business, let's turn to the focus of this post -- my interview with Tim. I first was curious to ask Tim, in his view, what the origins of the supplier management were. Here's how he responded:
"SIM arose out of the need for large enterprises to both rationalize and dramatically improve the accuracy, timeliness and breadth of supplier information across departments and functional disciplines. In fact, a perfect storm of internal and external factors made SIM a required discipline. Among these factors was the growth in regulatory requirements and government mandates. From FCPA to corporate social responsibility, global organizations must demonstrate compliance across their supply relationships or face penalties from fines and brand equity damage to executive prison terms."
"In addition, the increasing complexity of global supply chains due to off-shoring and contract manufacturing [drove SIM growth as well]. As supply chains lengthen and more products are outsourced, even minor disruptions in the supply chain presents huge risk to the enterprise. Moreover, the proliferation of enterprise transaction systems also contributed to development of the market. Over the past decade, organizations have invested hundreds of millions of dollars in sourcing, procurement, payables, risk management and related software solutions. Indeed, many Global 1000 companies have deployed or acquired multiple instances of these systems. Yet despite years of implementation efforts, most have failed to deliver all of the promised or anticipated ROI. What's missing has been a single source of truth for supplier information that supports the entire infrastructure of solutions, regardless of geography, technology or process complexity. A SIM solution that combines data, workflows, and insight from internal systems, suppliers themselves, and third party sources enables enterprises to successfully leverage the investments they have already made."
I next asked Tim to comment on the importance of eProcurement/P2P enablement in Aravo's earlier years and how this impacted the ultimate design/architecture of the solution. He told us, "the implementation of enterprise eProcurement and SRM systems created the tipping point in the need for SIM solutions and Aravo's early growth. While there were a number of other drivers, the immediate need created by these packaged software implementations for large volumes of accurate supplier information to manage automated SRM processes demanded a new solution. Electronic PO's, ASN's, Invoices, and product catalogues all required an effective centralized means to manage the avalanche of ever-changing data that was maintained in many different systems and supporting structures."
"As a result, Aravo's SIM architecture was designed with these enterprise-class systems, data volumes and business processes in mind. It was clear early on that only a SaaS model could effectively combine and manage data from the combination of enterprise systems, suppliers and third party sources. By understanding the needs of multiple constituencies across purchasing, finance and corporate governance, Aravo was able to build the foundation that has supported our rapid growth and industry leadership. In addition, SaaS prevented Aravo from getting lost in the IT implementation bottleneck, and allowed us to drive fast time to value for our first customers."
Stay tuned for our next post in the series.