Mountain View, CA August 2, 2001 Mid-market companies this week got a new potential ally in the battle to cut costs for indirect goods and services procurement with the official launch of MarketMile, a hosted e-procurement service backed by American Express.
MarketMile, a joint venture whose founders also include Ventro, opened its doors in August 2000. The company has spent the past year assembling a network of suppliers, developing its e-procurement solution and piloting its service with a select group of clients. Supported by the sales and marketing efforts of American Express, the company is now making its service broadly available, with a coming-out press event held in New York on Wednesday.
The hosted service allows customers to manage the procurement process for indirect goods and services from multiple suppliers through a Web interface. The services offered through MarketMile include a supplier network that connects buyers and sellers; business intelligence and other reporting; some indirect expense categories that MarketMile is managing (including office supplies, information technology, MRO and office equipment); payment and reconciliation; and the attendant services, such as implementation, training, supplier integration, customer support and end-user adoption. MarketMile's services were designed to work in conjunction with American Express Corporate Services' expense management tools, which could allow businesses to automate such procurement-related tasks as electronically reconciling purchases and transferring data into back-end financial systems.
MarketMile's network of 30 suppliers, representing some 750,000 SKUs, include such indirect materials stalwarts as Boise Cascade, CDW Computer Centers, Compaq Computer, CompUSA, Corporate Express, IKON Office Solutions, Jannus Group, Micro Warehouse, Motion Industries, Newark Electronics, Office Depot and Software Spectrum. MarketMile says it can also bring onboard specific suppliers when so requested by one of its buying customers.
Commenting on the suppliers available through the purchasing portal, Theodore Garcia, director of e-procurement for early MarketMile client Universal Studios, said: "From a corporate purchasing point of view, MarketMile's strategic supplier network enabled ready access to the product catalogs of many of our existing suppliers. We did not have to invest time or resources to entice these suppliers to join a custom e-procurement solution or assist them with catalog development, as they were already a part of MarketMile's supplier network."
MarketMile has signed up seven clients, including four that were included in the company's early availability program: besides Universal Studios, Ciba Speciality Chemicals, Excel Communications and a petroleum company that has yet to be announced.
In an interview on the eve of the official launch event in New York today, Gayle Sheppard, MarketMile's president and CEO, asserted that the portal's debut at a time of economic uncertainty made sense since companies are now focusing less on growing top-line revenues and more on cutting costs. With indirect expenses constituting anywhere from 35 to 65 percent of a company's revenues, the past year has seen the mid-market turn its focus to controlling these costs. "There is a lot of interest in indirect expenses at this point," she said, citing a recent American Express study showing that roughly 80 percent of the companies in the mid-market are looking at, considering or in the process of implementing some form of e-procurement in the near term.
Sheppard also said that the low initial investment required to begin using MarketMile would make it attractive to mid-market customers focused on obtaining a rapid return on investment (ROI) on their technology spending. Start-up costs for a buying organization linking to MarketMile range from $40,000 to $100,000, and ongoing costs include a monthly subscription fee and transaction fees. Costs vary depending on the number of users and the volume put through the system.
"MarketMile's pricing model was ... a very attractive incentive to us," said Universal Studio's Garcia. He cited the relatively low implementation costs for a hosted solution versus a software installation inside the company's firewall. "In fact, we expect a positive return on our investment in MarketMile's service within a very short time frame."
In addition, MarketMile says its implementation methodology can have clients up and running within 30 days of contracting for the service.
Tim Minahan, vice president of supply chain research at consulting firm Aberdeen Group, agreed that the low start-up costs and rapid implementation times were a plus for MarketMile. "Many businesses were dissatisfied with early e-procurement deployments because supplier enablement burdens were greater than expected and implementation cycles took longer than projected," he said. "Learning from the early missteps of other suppliers, MarketMile has composed a fully hosted, Web-based procurement service that minimizes deployment burdens and speeds implementation cycles."
MarketMile will further benefit from the traditional paucity of solutions targeting the mid-market, Sheppard said. "The mid-market has been vastly underserved by solutions overall," she asserted. "And they're often fed repackaged, large-market solutions. They're kind of tired of that, number one. And, number two, there's a better way to serve the mid-market. It's a tremendous opportunity to bring solutions to the mid-market that are designed for them not only from the functionality [point of view] but also the way they're delivered, the way they're priced and the way they're serviced."
MarketMile's relationship with American Express won't hurt either. AmEx owns more than 40 percent of the company (the remainder is split between Ventro, eVolution Global Partners and management), and Sheppard said that MarketMile is able to leverage both the credit card company's sales channels and its expertise in managing indirect expenses and promoting adoption of a solution within a customer's organization, as they have done with the AmEx purchasing card.
In addition, the relationship gives MarketMile access to American Express' current customer base for its p-card. "It's a great beachhead for us to start as we're penetrating the middle market," said Steve Levine, vice president of marketing for MarketMile.
Looking ahead, Sheppard said that MarketMile will be looking at opportunities on the services side of indirect expenses, such as travel and contract labor, as well as continuing to refine its capabilities for supplier connectivity and integration with backend systems. The company is also examining ways to leverage the aggregated spend of its customers to achieve cost savings and to move into strategic sourcing on the front end of the procurement process.
With the company's debut behind it, its CEO said that MarketMile would be moving into a revenue-generation mode, with profitability currently projected for late 2002. Sheppard tied the company's ultimate success to the fact that it had spent a year developing its offering and working with a subset of buying customers and suppliers in pilot mode. "We wanted to be credible when we launched, and that credibility could only be earned by getting the solution ready to go and testing it with customers and suppliers," she said.