Emptoris' Empower (Take One)

When I speak to procurement leaders at certain types of manufacturing organizations (e.g., medical device companies) where global IP protection is a major concern, few consider China a safe country to source from, given the utter disregard for patent and copyright protection. The same could be said for the conference circuit for supply management providers in North America, given that both Emptoris and Procuri decided to use the same name for their annual conference: Empower. Now, I don't want to get into a "he said, she said" argument here, but all the sources that I've spoken with point to Procuri using the name first, at least in an external public forum. I suppose Emptoris could claim they came up with self-service optimization first, and Procuri -- along with the rest of the market -- ripped that off, so perhaps everyone's even. Still, the naming is circumspect, in my book. Perhaps Emptoris should relocate from Burlington to Suzhou, where they would be afforded the right to rip off such names without recourse (and with the full support of the government) ...

On a more serious note, what's far more important than the name is that Emptoris is holding their event this week and things are looking up for the provider on many fronts. Even though I did not attend the show, I had the chance to catch up for an hour on the phone yesterday with Avner and his team to learn a bit more about the announcements and updates to come out of Empower. I thought it was a great discussion -- much of which was unscripted -- and while many of the more interesting tidbits were off the record, I still learned quite a bit that I can share on Spend Matters.

First, the basics. About 250 people are at the event, including attendees from 71 companies. 25% of the attendees came from other countries. This year's event marks the fifth year of Empower and the overall attendance is double last year's size. Emptoris is also expanding rapidly as well, and now has 400 employees, and counts 150+ customers (and is tracking at 68% year over year growth through Q306 relative to Q305). Emptoris defines customers as those in a long-term implementation (versus a pilot or shorter-term deal). What's interesting is that while many peg Emptoris as a classic installed software vendor, 96% of its implementations were hosted prior to its acquisition of Dicarta. Now, the number still stands a very respectable 86% post-acquisition.

Emptoris is still aggressively pushing the hosted model by offering a new managed services capability for event monitoring and support on top of its core sourcing platform. In fact, Avner claims that Emptoris has spent $2,000,000 building out a new data center to support its hosting and services capabilities (and also a new market operations center as well). Incidentally, while I've not yet been to their new facility, I have to say that the photos make it out to look like FreeMarket's market operations center circa 2000, before the infamous post-IPO build out, which led to a facility which was replete with teak, birch and maple woods and leather banquets (not to mention giant flat screen displays before the cost of such plasma screens dropped). In other words, Emptoris appears to have adopted the functional side of what FreeMarkets ended up with, while eschewing the unnecessary aesthetic trappings.

On a different but very important note, the 2 largest sponsors of Empower this year were Accenture and IBM. In my view, this support is critical to consider for 3 reasons.

First, it signals the degree to which Emptoris has successfully embedded itself with large channel partners, hands down beating Ariba, SAP and others in this regard in the sourcing and supply management market. Ever since Kevin Costello built out a solid management consulting services capability at Ariba, his company alienated larger channel partners from upping the ante with their relationships with the provider (for fear of losing revenue). Emptoris, in contrast, embraced the channel, and now enjoys approximately 35-40% of its revenue from channel deals (much of which, I would wager, is coming from the names above). That's tens of millions of dollars going Emptoris' way each year through the channel.

Second, the sponsorship is important because IBM and Accenture have begun to build traction in the procurement BPO market in the past year, and Emptoris is their preferred platform for such deals. Emptoris' move to power these BPO providers is a smart one, given them a high margin, services agnostic BPO play. Contrast this with Ariba, which is duking it out in hand to hand combat on the services front. Even if Ariba has a better managed services mousetrap than the big guys from a solution and category perspective -- a case I could probably make -- one could argue that Emptoris' BPO strategy is better for EPS and shareholder value over the long term. After all, there's a far bigger market if you're an arms dealer rather than a mercenary army.

Third, the sponsorship is important because it signals the SIs' commitment to standardizing on the Emptoris platform for sourcing and related activities on the consulting and implementation front. According to Avner -- I did not verify this with his partners -- IBM and Accenture have over 3,500 consultants trained and certified on the Emptoris platform. I would argue that's a number which is a leading indicator of future channel deals, as the traditional SIs do not ramp such large teams without big expectations for future growth.

Stay tuned for further Spend Matters coverage of Emptoris' Empower in the coming days.

Jason Busch

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