Trade Extensions – 2013 was a great year for sourcing software provider

Trade Extensions announced their latest corporate results this week. As a private company they do not have to disclose all the details, but they released enough information to give a pretty good idea of how they are doing. I also had the chance to meet Garry Mansell, their chief executive for a coffee the other day, and he shared some further insight into some of the publicly available information.

Basically the firm had a stellar year in 2013, with revenues that grew 53%. The growth can be analysed in different ways and one interesting and perhaps surprising point was how strong growth was for them in the Nordic countries. Surprising because the company's foundations are in Sweden and we might have thought those local markets would have been exploited years ago.

But Mansell explained that much of their focus for the last few years has been in the USA, and it was only last year that they went back to looking hard at more local Nordic markets, with great success. The USA actually was quite flat last year but with the recruitment of a sales director for North America the outlook for 2014 is better. (And 2014 is already looking very promising, Mansell says – first quarter growth is 27% year on year so far).

$1 billion of their clients’ spend goes through their TESS™  sourcing platform each week now.  But last year saw growth in both services and software, with services growth actually the stronger. That was driven by a clear move from clients engaging the firm on an individual project basis to more ‘general consulting’ as Trade Extensions classify it. Much of that is actually their consultants embedded with clients, usually to drive adoption of the software and skills transfer for the first 3 to 12 months of a new relationship.

Other highlights included a growth in customer numbers (to 46) and sales value per customer also increasing. And the Trade Extensions customer list, which unfortunately they don’t share widely for reasons of confidentiality, is absolutely top class.  Speaking as someone who has managed to get a glimpse of it, I would reckon 75% of their clients are global Fortune 500 type companies (P&G, Cargill, BP etc.) It really is a very impressive list. Retail (20% of sales) and manufacturing (50%) sectors are very strong for the firm but there are also clients in sectors such as logistics, pharmaceuticals, consulting and business services.

I asked Mansell  whether the acquisition of Combinenet, probably their closest rival in terms of capability, and bought by SciQuest last year, had made much difference?

‘Not significantly’ was the answer although ‘some clients inevitably after an acquisition will take the opportunity to look at market alternatives’.  But in any case, ‘we’re still seeing plenty of opportunities both to grow existing clients and to convert more organisations to the benefits of our offering’.

So what is the Trade Extension strategy going forward? They want to take clients into what they call ‘beyond sourcing’ (see here for an example) whilst at the same time showing that their platform is more than capable of carrying out more standard sourcing exercises. Of course moving into that sector brings them into more direct competition with a greater range of providers – Iasta, IBM,SAP/Ariba  and many others, as well as SciQuest and BravoSolution, who are probably the strongest alternatives in what we call Market Informed Sourcing (optimisation, advanced sourcing, whatever...)

The other point for the future is of course how long the firm will stay independent. Their capability,  growth last year, the superb client list and the scarcity of competitors who can actually do what they do all makes them a valuable property. But there is no great rush - the majority of the equity is held by the Swedish founders and the directors (like Mansell) who bought in a few years back. As long as they see good prospects and positive growth they don't appear to have any real need to sell.

However, everybody has a price, as they say. So equally we would not be too shocked to see somebody making the shareholders the proverbial offer that they just could not refuse!

 

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