Spend Matters Future 5 2024: Why we chose COVALYZE

Spend Matters is delighted to announce the 2024 roster for our ‘Future 5’ list. For the sixth year in a row, our analysts have highlighted five start-ups that excited them the most. This year, the five companies that have proven themselves as potential future trend setters are BlueBean, COVALYZE, Halo Ai, ivoflow and True ValueHub.

To warrant such attention, these vendors must have a product that is ideally 2 to 5 years old, is used by more than five customers and displays an innovative application of technology. Moreover, these vendors must have less than $10 million in revenue and our analysts must find them both sustainable and growing with a clear momentum. In this series of articles, we explain what these vendors offer, why they are likely to become future members of our ‘50 Procurement Providers to Watch’’ and ‘50 Procurement Providers to Know’ lists and what challenges they may face.

Get to know all the procurement tech providers that made our lists this year.

Today we are sharing the rationale behind our selection of COVALYZE.

Read also our interview: An Introduction to COVALYZE.

What is COVALYZE

COVALYZE offers deep parts analysis (price/cost-focused) for direct materials.

It uses its AI-backed cost analytics to support direct materials management and category management. COVALYZE provides ETL software to transform data into a usable format, can connect data from multiple ERPs and automates all data connections. More importantly, it can automatically extract and process data from technical drawings to enrich the information at the part level.

For target price calculations, COVALYZE uses machine learning and historical data from clients. Additionally, it also uses a third-party data provider to bolster inflationary data and materials data.

Why we chose COVALYZE

We numbered COVALYZE among the Future 5 for 2024 because it can save category managers and buyers significant time and money, as it takes away many of the manual processes historically required of these roles. While it is only four years old, it has some impressive customer names on its roster, such as Deutsche Bahn, Dyson and Siemens, and over 150 active users.

Typical end users are strategic procurement experts, cost engineers, buyers and category managers. Its sweet-spot customer is located in the DACH region and works in manufacturing, mechanical and/or electrical products.

COVALYZE has relatively unique capabilities. Its ability to extract data from technical specifications and make that data available for detailed analysis is the greatest strength of the solution. In addition, the data that is extracted can be used for multiple analysis and use cases covering new (NPI/NPD) parts and existing parts to identify opportunities and test various design and sourcing options. It can also help tremendously in value engineering and optimization.

It also provides multiple tools and visualizations to support should-costing, design-for-supply and value engineering with a pricing model that fosters usage of the solution in organizations as costing is often approached with a CoE model.

Threats or challenges ahead

COVALYZE operates in the niche market of costing solutions, but it has several and distinct competitors when looking at the overall or individual capabilities. We mention this because COVALYZE does not fit neatly into a broader market. This could be a boon in that it can market itself as a unique solution, but it could also be a hindrance in that potential buyers may struggle to define the value proposition of such a focused tool.

Below, we will explain what we mean by noting some of its potential competitors:

• From a cost modeling (structure) and an analytical cost perspective, GEP, SAP Ariba and LevaData support analytical cost.
• From a pricing intelligence perspective, its capability to use raw materials data via a partner (ChAI) makes companies in the market/category intelligence market.
• The Smart Cube, Beroe and Mintec overlap with COVALYZE, as they provide raw material and cost model data for several categories.
• From a costing and should-costing perspective, companies like What’s The Price and Makersite can be considered competitors.

As shown above, COVALYZE cannot present itself as a direct competitor to any of the aforementioned providers, as it competes with only parts of its product. That being said, COVALYZE has a unique value proposition in that it supports all of the aforementioned capabilities as well as capabilities the others don’t have. To what degree it succeeds will largely depend on its ability to appropriately convey its value proposition against well-established players in a variety of markets.

It is also worth mentioning that some critical capabilities (like OCR and metadata extraction) are delivered via a partner, i.e., not natively. This represents a risk for customers depending on the evolution of the partnerships and for COVALYZE as other solution providers could leverage the same partner for the same purpose.

Look out for more coverage of the Spend Matters Future 5 next week.