Today we welcome guest commentary from Chirag Shah, a founder of TradingPartners and the firm's former CEO. Chirag is currently Chairman of MarketMaker 4, an e-sourcing and market intelligence specialist.
Founded in 2000, TradingPartners was amongst the pioneers in the eSourcing movement. The company focused on providing "Fully Managed eAuction Services." This combination of capabilities represented a hybrid combination of eSourcing and consultancy support. With many large corporations struggling with understanding the role of eSourcing and lacking in-house expertise to operate such technology, the company found itself in an attractive niche and grew very quickly, twice garnering accolades in the Sunday Times TechTrack 100 league table of UK's fastest-growing technology companies.
The company took on venture capital funding from Kennet Venture Capital in 2005 and rapidly expanded into the USA and China. By 2006, revenues exceeded $10m with limited revenue concentration across geographies. It was a global, viable successful business.
Yet by 2007, I noticed as the CEO that we were starting to suffer from 'leaky bucket syndrome', where a company's growth starts to stall as it loses customers almost as fast as it gains new ones. Having familiarized and internalized the skills required to conduct eSourcing activities, many TradingPartners clients were seeking a commercial model that gave them more self-sufficiency and a lower cost per auction.
At the time, I proposed to the board that we needed to focus development efforts on a lower-cost, more flexible subscription-type service for the customers who were further ahead on the learning curve. The rest of the board did not share such concerns and our relationship soured. Marc Halpin took over as CEO, although as a principal shareholder, I remained on the board.
Through 2007-2010, the company experienced very little growth and by 2011, keen to find an exit for the business, Kennet brought in a new CEO, Mark Barnekow, to find another way to create value for the company. Frustrated by the board's unwillingness to simply recalibrate the business in response to customer (and staff) feedback, I left to start a new eSourcing company, MarketMaker4 with the aim of addressing those customer requests.
New CEO Mark Barnekow shunned the eAuction business that TradingPartners operated and bet the company on being able to develop a capability in spend analysis. The plan was always ambitious, considering there was no 'corporate DNA' in spend analytics and development budget was limited. In the meantime, eAuction revenues declined through 2011 and 2012 and started to impact the company's working capital position. In August 2012, an unexpected customer withdrawal left the company unable to meet payroll and with still no material revenues from Spend Science (their spend analytics product) the board put the company into administration (bankruptcy, in the US vernacular).
TradingPartners' initial strategy to use a managed services model to generate cash flow and scale the business enabled it to become a top 10 vendor in the eSourcing arena. But its failure to listen to customers meant that it did not see the "second bounce of the ball," which caused it to lose ground to new competitors with newer technology and more relevant commercial models.
Chirag Shah, Chairman of MarketMaker 4, an e-sourcing and market intelligence specialist, co-founded TradingPartners and formerly served as its CEO.