Larger Loss, New Leadership at FreeMarkets

Revenues down at e-sourcing pioneer; eBreviate veteran Pfaff to head supply management consulting business

Pittsburgh  January 30, 2003  e-Sourcing specialist FreeMarkets has completed a management reshuffling even as it posted a fourth quarter loss, finally succumbing to the bear market that has already bitten so many other tech sector companies.

FreeMarkets, which earlier this month launched an effort to expand beyond its reverse auction roots into the supply management field, reported a lost of $3 million on sales of $45.1 million in the fourth quarter, compared to a loss of $2.8 million on sales of $49.5 million for the year-ago period.

"The economy in general, and the spending environment for technology solutions in particular, remain extremely difficult," acknowledged Joan Hooper, FreeMarkets' executive vice president and chief financial officer, in a company statement.

FreeMarkets has been a bright spot in an otherwise grim technology field littered with the bones of failed dot-coms and anemic solution providers struggling to stay alive amidst the tech sector's three-year downturn. The company has generally earned good marks for actually saving money for customers like United Technologies through its online reverse auctions.

Even as the company reported the loss, it also announced that it had completed a management reshuffling that began last year. As a result of the transition, FreeMarkets President Dave McCormick has assumed the additional role of CEO, taking over from company founder Glen Meakem, who will remain on as chairman of the board.

In addition, Sarah Pfaff, co-founder of e-sourcing rival eBreviate who left that company when it was refolded back into consultancy A.T. Kearney, has joined FreeMarkets as senior vice president to spearhead the development and growth of FreeMarkets' new global supply management consulting business.

McCormick has served in several executive roles since he joined FreeMarkets in 1999, including executive vice president in charge of sales and customer service and, since October 2002, president, responsible for the day-to-day operations of the company. Prior to joining FreeMarkets, McCormick was a senior engagement manager with consulting firm McKinsey & Co.

Pfaff, a former principal at A.T. Kearney, co-founded eBreviate as a separate unit of the consulting firm in 1999. A.T. Kearney re-integrated eBreviate back into the firm at the end of 2001, and Pfaff left the company to found Variante, a provider of strategic procurement consulting services. Pfaff was named as one of iSource Business' Supply Chain Pros to Know in 2001 and 2002.

"FreeMarkets has fundamentally altered the way that business is done globally through its broad set of supply management solutions," said Pfaff. "The company clearly understands that technology alone cannot solve the complex challenges involved in global supply management. In order to successfully lower their costs and reduce supply risk, companies need a combination of technology, information and services."

Earlier this month, FreeMarkets launched an effort to expand beyond its reverse auction roots into the supply management field with the release of a suite of applications targeting supply chain collaboration, knowledge management and process flow. FreeMarkets said the suite, which is called ES and includes various software modules built on a core platform, is intended to let companies perform key supply management activities. The solution includes modules for requirements management, supply relationship management, sourcing process and decision management and contract management.

For more on Sarah Pfaff's views on e-sourcing, read parts one and two of an exclusive iSourceonline interview with her following her departure from eBreviate.