A Guest Post from Ketera (Part 2)

This afternoon I'd like to once again welcome Mike Gardner, Ketera's Vice President of Products, to Spend Matters. Please join me in welcoming Mike to Spend Matters.

In my first post this past Monday, I discussed our strategy for meeting the market's evolving need for ubiquitous and inexpensive sourcing, and put it into the context of Web 3.0 easy access to information and the benefits of being part of a social network. In this post I'll cover more about how the market wants to use Web 3.0 info, and how we think we can win in meeting those needs.

I'm showing my age by admitting that I remember Bill Gate's early 90's Comdex speech in which he famously proclaimed the advent of "information at your fingertips". In a sense, Web 3.0 is about better sources of that information (including social networking), better integration and more ubiquity, and better structuring to make it more digestible. This gnawing and insatiable hunger for better ... richer ... faster ... has found its way into the P2P and source-to-pay food chain just like every other aspect of computing. One way we can see this is in the need to show budget constraints within the procurement workflow so that a req initiator or approver will know how close to the redline she is. This is an obvious feature in hindsight, and we weren't the first to introduce it, but it's a good example of doing a better job of making information readily available. It is also worth noting that this capability is useful to any type of user, whether they're in the largest enterprise, or a very small midmarket firm. (And so is an example of my principle #3 in our product strategy as described in my prior post, so that we can remain competitive against big competition.)

Ketera's procurement application allowing initiators and approvers within a requisition workflow to see the remaining cost center's budget.

Although this is a simple feature, it illustrates a key point -- the purpose of this info is so people can do something with it. Make better decisions. Amend or deny a req. Find a better price, and so forth. A corollary of Web 3.0 that you'll start seeing everywhere when you start looking, is enabling users to be self empowered. We've been getting feedback from some of our smaller customers and prospects (in the $10M - $1B revenue range) that they want to take control of their own user administration. Noting that these organizations typically do not have complex workflow needs, and that they have fewer users in general, Ketera has been able to come up with some standard workflow patterns that users can choose from during organization configuration and administration along with some easier flows for defining and managing users. The result is our recently released inexpensive midmarket procurement application, that allows a company or user to "walk up" to Ketera,"self serve" themselves into registering and obtaining login credentials (with a credit card if they'd like), self configuring their organization using straightforward wizards, and within a few minutes be using a product that runs on the robust transactional infrastructure proven across millions of transactions for our enterprise customers.

And this leads us to where we can see an important aspect of why we think Ketera can win in this game: Balance between buyer and supplier revenue. To make our supplier network business model work, we need buy-side demand so we can deliver value to the suppliers. And so we are introducing capabilities that deliver real and deep value to buyers and dramatically lower the TCO (including costs of entry) of source-to-pay. Or really, it's the full cycle of sourcing-procurement-pay-analyze and manage. (Our buyer side product line by Q4 will include free strategic shopping, quick easy and robust requisitioning and purchase orders, inexpensive market-based pricing insights and community based supplier insights.) By democratizing the market we bring demand to our suppliers, and we also created a balanced revenue stance for Ketera, with one foot in Buyerland and one in Supplierland.

This dual business model is significant because it straddles both sides of a teeter-totter market hovering over a tipping point. The buyer-pays monetization strategy that P2P companies have used historically is now brittle due to economic factors. One of our customers is a nearly bankrupt government entity, and of economic necessity that entity needs to introduce a supplier pays per issued invoice model, for any suppliers that want to do business with them and still get paid. And virtually every buying organization we talk to is eager to find a way to follow suit. (Which suppliers may not like, but there's no reason the per-invoice fee has to be large and, if it's the cost of additional demand, it's just a harsh reality.) Though we would be foolish to ignore Jason's adage that "Suppliers never pay". This is a huge lesson to be learned from the last ten years -- which was all about the building out of some very large supplier networks that were hollow in terms of monetization opportunity for the builder. So while we think we can monetize the supplier side, we have to be very careful to ensure big payback for little expenditures on the part of suppliers, and we have to look for innovative new ways to deliver that value. We also have to ensure that our business model is aligned -- these supplier products have to be delivered through a low cost-of-sale for Ketera, and through a "self serve" on-demand subscription model. Much of what we've been working on for the last 9 months has been this muscle. (But which we can use for various Buyer products, too.)

Ketera is developing a couple of supplier products that we think are very innovative and compelling, but I can't talk about them yet due to competitive disclosure reasons(though stay tuned to Spend Matters later this year). But I can in closing talk about a couple other products and how we see them fitting into the Web 3.0 market trends I've been discussing. The first is something that we've been in close consultation with customers on, about how they can better manage their supplier communities. A crucial aspect of this is making it cost effective for buyers to both maintain their supplier information and be able to consistently communicate with suppliers. The statistics illustrating the need for this are somewhat amazing -- we know of buying organizations that don't even have current contact info for up to 70% of their suppliers. This issue is the basis for a project we have underway called Supplier Connect to allow management of public and private (e.g., buyer hosted) discussion forums, and of campaigns so suppliers self-cleanse and self-enrich their data. Just as we have in other areas, we can use web technologies to democratize these business processes and make them accessible and affordable to any buying organization. Ketera's new Supplier Connect allows a secure and private means for buyers to publish and archive new policies, regulations, and news, as well as discuss topics with the entire supplier base.

But it isn't sufficient to merely have the means to manage your supplier database and keep it up to date, another aspect of having a great SIM product is allowing people to visualize a supply chain or a given supplier in context. Which of my suppliers are not financially healthy? How diversified is my supply? Am I using the same suppliers my competitors are? To allow Buyers to answer these questions for themselves, our Analytics team has developed a product giving new insights into suppliers.Ketera’s SIMS offering gives visibility into many aspects of a company's supply chain and also offers insights into actionable patterns,such as the % of off-catalog spend against a given supplier.

Note that in addition to knowing whom you're buying from, you also need as many insights as possible into what you're buying from them. We're not the only vendor to offer enterprise Spend Analysis, but we're "democratizing" this too, and will soon offer a walkup, self-serve model. There are several challenges we've had to overcome, including developing a better approach to item cluster condensing that yields better accuracy in master and instance determination, better usability when perusing item clusters, and, better insights into such things as price spread. And for self-serve, it has to be killer fast since turnaround time on the crunch will be an important aspect of the user's experience. Our algorithms, honed over years of providing SA to enterprise customers, allow us to dedupe a million suppliers with very high accuracy in ten minutes on commodity hardware, and we are now applying those algorithms to the item master challenge. The result will be embodied in our midmarket Spend Analysis products, which will enable "walk-up" visitors to glean useful pricing and other insights from market data and in comparison to their own self-uploaded spend data.

This is again a case where our core "Enterprise" technology can be offered to a different type of customer with relatively low incremental "offer costs" to Ketera, and no conflict of usability between our Enterprise customers and our newer self-serve customers. And to summarize, this epitomizes our challenge and our strategy overall. We believe Spend Management vendors increasingly will need to succeed by leveraging and adding value to C2C (company to company) networks, with network growth premised on very low entry cost and participation. Ketera is focused on succeeding in this context, by leveraging common infrastructure to deliver differentiated products into segmented submarkets. Ketera should be assessed and valued based on our execution of this strategy, and the growth curve of participation on the network.

Spend Matters would like to thank Mike Gardner for sharing his thoughts.

Jason Busch

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