Eight Years of Procurement Software Part 2 – Fantasies and Failures

In part 1 of our look back at the procurement software market over the 8 years I’ve been here at Spend Matters UK/Europe, we looked in the main at the positive stories.  But there have been more “interesting” stories too.

We mentioned Determine and Rosslyn Analytics in part 1 as two firms that had destroyed (or lost, at the very least) shareholder value. There are more.

City financier Edi Truell created Tungsten from e-invoicing firm OB10, plus a bank and some other bits and pieces, but ended up being forced out from his own creation as the firm floated then saw its share price crash. It continues to be loss-making, although every announcement seems to suggest that profit and growth is just around the corner. (The share price has halved again since February). Is there a market for such a narrowly based businesses when the “suite” approach, including e-invoicing, (see our last article) seems to be winning the argument? We’ll see.

Achilles is an interesting case-study too. After a private equity firm became major investors, Colin Maund, who had done much to build the firm, “decided to leave”, as they say, in 2011. He went off and formed Hellios, which has grown steadily, doing much the same sort of supplier management activities as Achilles. In the meantime, Achilles has had a succession of senior managers and strategies, without getting back to anything like the growth they saw under Maund. That’s not principally because of Hellios, we suspect, but this is the nearest we’ve come to finding a plot for a decent business-related TV drama in our industry! Incidentally, Achilles does still have sleeping giant potential, operating in some pretty sexy areas (CSR, supplier accreditation, etc), but needs to show signs its top team actually understands the procurement world.

Then we have the fantasists. Do you remember Philip Letts and the Blur Group? The firm was briefly “worth” some £400 million back in 2014 according to its hyped share price and was going to be the Amazon or eBay of the services world, according to Letts.  Three years later he was out and the firm required life-support, before re-emerging as Maistro. That may yet have a happy ending – as we reported here, a sensible new top team has a chance to create something with more lasting value!

And what about the firm that was going to be bigger than Google? Yes, that was Cloudbuy and Ronald Duncan, another man whose vision was not quite matched by business performance. Every few years he seems to find a way of extracting more money from new shareholders, on the promise of future profits, which to date have never emerged.  This is perhaps the most notable (and deluded) quote I’ve seen in the past 8 years, from Duncan in a 2014 Daily Telegraph interview.  “Cloudbuy could become the biggest technology business in the world, beating Apple, Google and Microsoft. We started the cloud wars, and we’re going to win them”.  

So, the current market capitalisation of Cloudbuy? Just under £3 million.  (Yes, million, not billion). That is just a shade less than Google’s $700 billion, it should be said.  Roughly 0.000546 as much, to be precise.

But arguably the biggest destruction of shareholder value wasn’t any of these, but was hidden within a huge corporation. When we started here in 2010, Emptoris was one of our first sponsors, and was a very good firm to work with. An innovator in the sector, the firm had a good core product (sourcing, analytics, contract management etc.) and then made some interesting acquisitions, including Xcitec, a very good supplier and risk management tool. As Jason Busch said in 2011, “Emptoris has always topped our shortlist for organizations wanting to make a proper investment in many of the procurement software markets where they compete”. Then, in late 2011, IBM bought the firm for a rumoured $600 million.

The innovation seemed to falter, IBM never appeared to either really understand Emptoris or be willing to invest, and we saw the name disappearing from shortlists for firms investing in procurement tech. And in 2017, after a slow decline, IBM announced that is was "sunsetting” the Emptoris product, and encouraging clients to migrate to SAP Ariba, as part of a partnership between those two giant firms. You can read a great piece from Jason Busch here; and the reasons for this failure on IBM’s part will make a good business school case study one day, perhaps. (Maybe investors getting excited by IBM’s recent purchase of Red Hat might want to ask a few questions about lessons learned too!)

But rather than leave on that unhappy note, let’s celebrate the fact that in our industry, for every Emptoris there is a Coupa, for every big firm that struggles there’s an SAP Ariba that doesn’t, for every deluded CEO there is a top team like those at Wax Digital or Ivalua that just quietly gets on with growing the firm and satisfying customers. For every look-alike analytics firm there are innovators like Trade Extensions or riskmethods.

So, even though I’ve never claimed to be a technologist myself, it’s been a fascinating industry to observe and work with for 8 years, and I suspect I will keep a keen interest in it even from outside Spend Matters!


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