Mountain View, CA August 20, 2002 MarketMile, the American Express-backed e-procurement services provider, wants to be your low-cost e-procurement provider.
The company today threw down the gauntlet to providers of "behind-the-firewall" enterprise e-procurement solutions, launching what it is calling the first enterprise spend management solution delivered online as a managed Web service in an effort to offer low-cost e-procurement for large and midsize enterprises.
MarketMile also announced it had changed its name to Ketera Technologies.
Ketera, which, as MarketMile, had specialized in online procurement and electronic payment and reconciliation, rolled out new spend analysis and sourcing solutions, building on technologies acquired earlier this year when it bought solution provider Aentropy. Along with a new supplier enablement solution, Ketera is billing the suite of applications as a spend management platform.
The focus on spend management reflects a wider trend in the electronic procurement space, in which providers have moved to position their solutions as being more strategic focused, with a nod to chief financial officers (CFOs), on controlling spend throughout an enterprise rather than mere tactical applications for processing transactions. e-Procurement pioneer Ariba late last year began offering what it called an "enterprise spend management solution."
"For too long CFOs and purchasing executives haven't had the tools to effectively control and reduce corporate spending," said Rudy Sahiwal, Ketera's new chief operating officer and former CEO of Aentropy. "Companies lack visibility into corporate spending, they don't have the resources to negotiate improved contracts with suppliers and they don't have the enterprise-wide tools needed to effectively control spending. It's really an unacceptable situation in this day and age."
The newly announced spend management platform from Ketera, Sahiwal continued, addresses those business problems and meets a growing demand for solutions that can provide rapid bottom-line savings without the high cost associated with enterprise software.
Ketera said its Spend Analysis solution, delivered as a managed Web-service, enables companies to conduct an extensive up-front analysis of their baseline spend as the first step in a spend management project. The solution uses what Sahiwal calls "inferencing technology" to automatically cleanse and categorize data, and then it breaks down spending by supplier and category, analyzes spending behaviors across the organization and identifies opportunities for savings.
The provider's Sourcing solution provides a hosted tool set for reverse auction and request for quote (RFQ) processes. Ketera has also partnered with IBM Global Services to provide companies with access to a range of sourcing expertise and services, from opportunity assessment to supplier selection and event management.
The new Network Connect solution provides a suite of services to enable and maintain suppliers as part of "behind-the-firewall" systems such as Ariba Buyer, Oracle iProcure and SAP Enterprise Buyer. Network Connect links a company's e-procurement application to the hosted catalogs of its suppliers using real-time XML adapters. Ketera said it is able to use its technology, processes and domain expertise to rapidly enable a company's suppliers, even if they've never previously interacted with an e-procurement system. A subscription to Ketera's service includes a certain number of connections to suppliers.
Ketera's move to relaunch itself comes at a time when issues of supplier enablement, lengthy implementation times, application integration difficulties and ongoing maintenance costs, along with the bursting of the dot-com bubble and a sluggish economy, have cooled enterprise buyers to the idea of investing in e-procurement technologies.
Ketera clearly is hoping to ride a wave of disenchantment with the current slate of e-procurement offerings. The provider is positioning its spend management platform as a low-cost alternative to current enterprise-class e-procurement solutions, arguing that Ketera's Web-services model and subscription-based fees make the total cost of ownership for its offerings significantly less than the cost of competing solutions offered as installed software or through an application service provider (ASP) model.
"Our point of view is that it is very ironic that companies (in the industry) are investing in spend management solutions that carry a very high cost of ownership," said Brian Desmond, marketing director for Ketera.
Ketera's argument? Installed software and solutions accessed through an ASP can require additional hardware investments and typically come with software licensing fees and installation costs attached, and installed applications may require ongoing maintenance by corporate information technology staff. Ketera's offering, on the other hand, is based on a subscription model, the annual fee being based on the amount of spend a company expects to put through the system in a given year, with the only additional costs relating to the enablement of suppliers.
While MarketMile went after the largely ignored market for midsize companies, Ketera's focus on larger enterprises is likely to bring the provider into direct competition with purveyors of traditional e-procurement solutions, as Ketera's CEO, Steve Savignano, acknowledged in a statement accompanying the announcements today. "We're eager to challenge Commerce One, Oracle, PeopleSoft and Ariba in the spend management space," Savignano said. "Ketera's Web-services model gives us a leg up and lets customers bypass all the hassles and hidden costs associated with implementing expensive software solutions. 'Manage spend, not software' that's our mantra."
Will Ketera be able to make inroads against the established players in the e-procurement solutions space? Possibly, according to Tim Minahan, vice president of supply chain research at technology consultancy The Aberdeen Group. "Ketera's Web-based services offering comes at a time when enterprises are wary of big technology investments and are looking for low-risk solutions that can enhance core business processes and deliver quick and sustainable cost savings and performance improvements," said Minahan. "By combining its existing procurement automation and enabling services in a Web-based solution, Ketera could overcome many of the cost, resource and skill burdens that have limited the adoption and results of spend management programs." He added: "Just as salesforce.com has challenged Oracle and Siebel in the CRM [customer relationship management] space, Ketera Technologies is ready to shake-up the incumbents in the spend management space."
Pierre Mitchell, a vice president and supply chain specialist at AMR Research, suggested that, since American Express is backing Ketera and the provider's integration with American Express' e-payment solution, the Ketera offering might make sense for companies employing an Amex purchasing card (p-card) that are looking to get into e-procurement. "If you're an Amex p-card user, it could be a good move if you're looking to do something beyond the p-card," Mitchell said.
But Mitchell expressed some doubts about the value of offering e-procurement under the Web-service model that Ketera is touting. "Throwing the apps outside the firewall isn't the key; we learned that with the ASPs," the analyst said. "Putting the service outside the firewall could lower the total cost of ownership, but it's not the technology deployment that gets rid of TCO. TCO depends on the stuff that you're trying to integrate with, for example, a legacy financial system."
Ultimately, Mitchell said, Ketera will have to compete with the enterprise e-procurement application providers on functionality, and the analyst suggested that the key for Ketera will be to use its relationships with American Express and IBM Global Services to increase its penetration of the mid-market, among companies with revenues from $250 million to $1.5 billion.
In addition to the name change and the new solutions, Ketera also announced that Latrobe, Penn.-based Kennametal, a $1.8 billion provider of tooling, metalwork and advanced materials solutions, was set to adopt Ketera's spend management solution. "After searching for 18 months, and reviewing over 40 e-procurement solutions, we selected Ketera because their solution provides the best overall value, ensures rapid implementation and, in our opinion, will be among the few Web-based e-procurement solutions to stand the test of time," said James Cebula, director of global purchasing, travel purchasing and supply management for Kennametal.
"Ketera has the added benefit of working in concert with and leveraging our previously implemented American Express Corporate Purchasing Card and AccountingLink programs," concluded Cebula.
Within 18 months, Ketera is to enable 550 end-users and up to 30 key suppliers for Kennametal's e-procurement program. Within 60 days, the first 50 users and 10 suppliers are to be enabled. Kennametal said it expects to drive approximately $25 million in spending through the system in the first-year, after an initial ramp-up period.
August has traditionally been a month of great changes for Ketera, nee MarketMile. The company opened its doors in August 2000 and a year later, in August 2001, launched its hosted procurement service for mid-market companies.
But why the name change? "We are neither a marketplace nor a miles program, and this name [MarketMile] was a legacy of where we came from, not where we're going," explained Sahiwal. "We wanted a name that was neutral enough that we could imbue it with what we wanted to imbue it with."
And why now? "We are getting a lot of more traction, and we are anticipating that six months from now there will be a lot more people who will know us, so it's easier for us to do it now than six months from now when we will have made a significant investment in marketing," Sahiwal said.
