Trade Extensions – bigger deals, software focus, growth in the US

I caught up recently with Garry Mansell, Chief Executive of Trade Extensions– experts in market informed sourcing, optimisation and other complex sourcing technology. They’re a fascinating blend at top management level, with a mix of brilliant Swedish Mathematics academics, who founded the business, and very business-like ex-Mars Group logisticians and commercial managers.

Mansell updated me on last year’s performance and the outlook for 2012. Following our theme yesterday of an improving economic outlook, he commented that after what was an OK rather than exceptional year, the last quarter of 2011 was a record breaking one for the firm, and that 2012 had started very positively – 30% up on last year.

Trade Extensions have seen a continuing shift in their business focus, to more of a pure software model rather than a blend of software and consulting type services. As Garry explained over the second poppadom:

“We’re continuing to reshape the business from a consulting company that used its technology, to a software business that delivers SaaS (software as a service). This was a decision we took in 2008, and we’re delivering against it. Sales revenue in 2011 is now 57% from annual and multi-year subscriptions, compared to 30% in 2008”.

They work extensively with some of the large consulting firms, who use the Trade Extensions software in major assignments, but again that work is changing somewhat in nature, to a smaller number of larger projects.

So overall, 2011 revenues were fairly flat versus 2010, but with positive cash flow and good profitability at the EDITBA level. The profile of customers changed quite significantly though, with less emphasis on consulting firms and the public sector (mainly in Scandinavia) and more on private sector businesses.

There’s also a tendency for Trade Extensions new customers to be large firms; 5 of their top 20 clients by revenue were new in 2011. The other change in focus has been towards North America; revenues are now close to 50% from the USA, and this region has grown by 70% since 2009.

In fact, some of their best customers are huge organisations; but ones who don’t particularly like being mentioned as clients, perhaps because (as we’ve pointed out in our research papers) there is real competitive advantage to be gained by using this sort of technology to its full extent and capability.

We’ve touched before on how the power of optimisation software (and the algorithms that sit behind it) is leading to these products being used well beyond conventional e-Sourcing or auctions. That’s taking Trade Extensions into areas such as production planning and scheduling, and this is probably where the most exciting growth potential lies.

Yet at the same time, many firms still see reverse auctions as a bread and butter but very successful tool, and Trade Extensions have improved their offering in that area too. It’s all about the appropriate tools and approach for different spend areas of course. But in terms of that most complex type of project, here’s a case study that Jason at Spend Matters US covered a little while ago, so you can see what we mean.

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