Will Verticalnet's Hidden Solution Gems Have a Chance to Shine?

In the past couple of years, it's been hard for many procurement organizations that I have spoken with to get past the weaknesses of Verticalnet's balance sheet when considering them as a viable technology and solutions vendor. In fact, Verticalnet's very public financial dealings have certainly hurt them more than if they were a private company in a similar situation. I believe that this has been an unfortunate development in the market, even if Verticalnet's financial management has left some investors who frequently comment on Spend Matters angry about the firm's performance over the years (for these readers, I'd like to politely ask that you focus on any comments in this post in particular on Verticalnet's products rather than their financial history).

If you can get past Verticalnet's financials and dig into their solutions, it's clear that BravoSolution is picking up some pretty interesting pieces. Indeed, Verticalnet's XE product suite is far from being a solution that lags the market from a capability perspective. In contrast to other On Demand providers, they've been one of the few vendors to really come out with innovative features and approaches to sourcing, among other areas, in recent years.

For example, Verticalnet's approach to optimization bidding provides real-time market feedback to market participants, putting it in a similar class to some of the better known optimization vendors. And from a spend analysis perspective, Verticalnet has continued to refine the capabilities and services they picked up from Tigris a few years ago. They've also been one of only a couple of vendors to put much investment into supplier performance management and risk management as a standalone capability in recent years.

I could go on and describe the nuances of their platform and how they've managed to innovate despite their financial hurdles, but I'll save additional details for a future post. But it goes without saying that BravoSolution is buying a vendor whose products and solutions speak about as loud as they can in this sector for a company Verticalnet's size.

But that size -- and the legacy reputation -- should not handicap them for long. If the proposed deal closes, the combined organization will have 11 offices and 350 employees -- not to mention a healthy balance sheet and solid year over year revenue growth (2007 forecast numbers are nearly $50 million). That should go a long way to helping Verticalnet once again get back into the types of deals they should have had exposure to these past few years. And at that point, we'll see how competitive the solutions are against Emptoris and Ariba, among others, on a level financial playing field.

For any practitioners in the audience, I'd be curious to hear about your exposure to Verticalnet from a product perspective in the past year. How do you think they stack up? And will healthier finances enable them to capture a material portion of this market?

Jason Busch

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