Chutzpah in B2B Software Advertising

If you are not familiar with the term “chutzpah“, it is Yiddish which roughly translates into “cajones“, which is Spanish that roughly translates into “shameless audacity”,  “impudence” or “bravado”.

Lately, “chutzpah” has been showing up in, of all places, the normally staid, boring world of B2B ERP advertising.

Exhibit A.  By now, you have probably seen the NetSuite ad that takes a major swipe at SAP :

netsuite

That is a funny form of chutzpah.

On the SAP side of the coin, yesterday’s Wall Street Journal contained the full realization of SAP’s latest ad campaign:

  • The first page (not shown) ominously warns us: “Technology can save us all.  Provided it doesn’t kill us first.”
  • The second and third page are as follows:

SAP

(Sorry about the font size there.)  You will have to trust me that in the second and third pages SAP let’s us know how important it is to “Run Simple” and assures us future ads will demonstrate examples of how SAP helps clients to do just that.

This is a different kind of chutzpah.  This is the kind of chutzpah where a marketing guy decides “Let’s use “jiu-jitsu”!  That is, we will take one of our greatest perceived weaknesses and simply claim it to be one of our strengths”.  And everyone agrees.  I understand this approach.  It is a tried and true strategy.

But, I really want to meet the guy who then decides “Let’s run the “Run Simple” print campaign using a three page ad with two pages of copy explaining why simplicity is so important.” That is chutzpah.

Just one word: Plastics

So said Mr. McGuire to young Benjamin in the 1967 classic film, The Graduate. Apparently, Mr. McGuire was referring to B2B payments.

In an article in today’s online Wall Street Journal entitled,  “B2B Credit Cards Jump”, Hackett Group notes that B2B payments made by credit card (including p-card) continue to grow rapidly, albeit from a small base as a percentage of total B2B payments.

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The article notes the processing benefits, “perks”, and float buyers receive from use of the card, though the term “rebate” is not used.  The article also notes the relatively high fees that suppliers pay for accepting this form of payment relative to ACH.

The continued growth of P-cards surprised me a bit, as they have been around a long time (’90s).  P-cards play a great role in small dollar transactions, but data, control, and interchange concerns always limited their growth–even with the enticing buyer rebates.  If this data is to be believed, p-cards may be making more, though still limited, progress in higher dollar transactions.  Either that, or many more companies are adopting their use. Maybe all of the new interchange rates, improved data options, buyer-initiated payments, etc. are making a real difference in adoption.  Only Hackett knows the truth–and, alas, they will charge me for the answer.

For those of you involved in two-sided markets and supplier-pay versus buyer-pay arguments (and that is everyone in B2B invoicing and payments), please note that is a small data point in terms of share, but large in terms of total fees generated, on the side of supplier-pay schema.

At the recent and very good, PMNTS.com conference on B2B payments there was a lot of talk about p-cards, fleet cards, BIP cards, etc.–which I thought was a little outdated. Apparently, I’m the one outdated!

Workiva files to go public

Workiva?  It sounds like the love child of Workday and Kiva Systems, but it is not.  You have likely never heard of Workiva for three reasons:

  • In July of this year it changed its name from Webfilings
  • It is headquartered in Ames, Iowa, which is quite nice, but qualifies as “fly-over country” for most VC and PE firms, even for those based out of Chicago!
  • It sells to the CFOs and GRC folks at Fortune 500 companies (in fact, it is now installed at 60% of those companies.)

I’m not going to provide a complete review of the prospectus, because I am getting tired of doing those, so I will just provide the highlights my warped mind found most interesting.   (Heck, it’s a free blog.)

1.  When I first read Workiva’s description of themselves, I was not impressed:

Workiva has pioneered a cloud-based and mobile-enabled platform for enterprises to collaboratively collect, manage, report and analyze critical business data in real-time. Our secure software platform, Wdesk, allows users to integrate and control all of their business data, regardless of format or location, with innovative live-linking technology. Our proprietary, integrated word processing, spreadsheet and presentation applications, built upon our data engine, allow thousands of users to collaborate simultaneously on data-linked reports and documents.

It sounded like Google Docs or Microsoft 365 on steroids.  But as you dig into the company more, you learn that even if it is Google docs on steroids, it’s an attractive sounding offering positioned as a Governance, Risk and Compliance (GRC) application for finance.  Building on Webfiling’s legacy of helping public companies meet SEC filing requirements, Workiva has built a “single source of truth” platform for all sorts of filings, presentations, and other compliance related documents.  Very smart.

It’s a dirty little secret that CFOs hate spending money–except when it comes to their own systems!!  What CFO does not live in fear of a mistake in consolidation in Excel spreadsheets or in an investor presentation?  And if you can sell to CFOs based on fear, you can build a great company.  Just ask SAP!  CFOs and GRC folks love the “single source of truth” or “system of record” concept.

2.  The article this week that a spreadsheet error by Goldman Sachs meant a $100 million change to the valuation of Tibco probably helped sell a lot of product!

3.  Workiva’s rise has been rapid.  Check out this timeline from the company’s website:

2014-10-19_18-53-28

The company finished the latest 12 months with over $100 million in revenue and losses of $31 million.  Other than during the bubble era, you don’t see a lot of B2B companies go from $0 to $100 million in revenue is six years.  Veeva did it, and Hubspot may do it, but many take a few years longer, if they make it at all.

4.  Workiva’s prospectus provided a cohort analysis for the customers they added in 2011, their first big year.  The numbers were impressive.  They did not provide any analysis for the 2012 class, however.  For me, providing this kind of analysis has become a litmus test in looking at SaaS enterprise offerings.

5.  Workiva is the first company I have seen go public on the Google Cloud Platform.  I’m sure there are more, but it still stood out.

6.  As you’d expect, Workiva is spending like crazy on R&D and sales and marketing.

I’m not an expert in the GRC space, but it would not surprise me to see one of the big players try to short-circuit the IPO process and acquire these guys.  Workiva seems like a great fit.  (If I were one of the big GRC players, I’d be rooting for continuing volatility and perhaps a downdraft in the market to keep these guys from going public.  Though that seems unlikely.  After all, Hubspot debuted last week and has held up just fine.)

IBM, Oracle, and SAP used to have the oligopoly on the “fear factor” sale, which is a great motivator.  Maybe Workiva has found a little spot in that world for themselves.

Adult Entertainment Payment Service

Alert readers of this blog (all four of you) know that I love specialized invoice and payment companies –for freight, clinical trials, facilities management, meetings and events, temporary labor, health care, liquor, media, etc.

One alert reader, who shall remain nameless, has provided me with many examples of such companies.  As a joke, he recently introduced me to Zombaio, which specializes in payment processing for the online content and adult entertainment industry.  (My nameless source assures me that he knows of this company only for professional, not personal, reasons.)

Another alert reader, who shall also remain nameless to protect his heretofore unsullied reputation, shared with me Zombaio’s fee structure for online payments as found on their website:

zomabio

 

 

 

 

 

 

To be fair, these are rates for adult content and webcam sites; the rates for adult dating sites are much lower.

Based on these prices, I’ve come up with a great new tagline for Zombaio.  How about this: Screwing People Watching People Screwing Since 2003.  Catchy, huh?

Nobel Prizes and B2B Marketplaces

Okay, maybe the headline is a slight stretch, but the news today that Jean Tirole of France has won the “Nobel” Prize for economics makes it a lot less of a stretch.

Tirole’s work, in part, includes work on “Two-Sided” markets which describes businesses ranging from Google to Visa and Mastercard, as well as dating sites and yes, even B2B marketplaces.  The Economist ran a good article on his work for lay people here.  His work, and the work of David Evans and Richard Schmalensee, demonstrate the power and complexity of getting pricing right in such markets.  Think of all of the arguments that now take place in B2B commerce over buyer versus supplier fees (Ariba, Tradeshift, Coupa, Basware, Ob10, etc.) as a small part of this debate.

Tirole puts a lot of emphasis on the “winner-take-all” aspects of these markets and the complexity of antitrust regulations associated with these type of potential monopolies.  I think most investors and entrepreneurs in “two-sided” markets secretly hope that some day their platform will have enough market power to attract the attention of the regulators! And eventually a few make it:  EDI VANs, Google, Sabre, Visa/MasterCard, AT&T, and a few others have all had run-ins with the antitrust regulators.  The rest will have to wait with a combination of envy and trepidation.

Take a walk on the Supplier Side

The laws of business physics suggest that for every “Source to Settle” process in a buying company, there is an equal and opposite “Quote to Cash” process at a supplier. (To verify that, I used Google Trends to compare the search frequency of the terms “Procure to Pay” and “Order to Cash”.).

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Most of us in B2B commerce, even if we work on networks or platforms, tend to understand one “side” better than the other. (It’s a bit like being left or right-handed.) Often the side we understand best depends on the business model of the platform we work with and which “side” is being subsidized to participate!

Those who work primarily for procurement-related software companies (like me) tend to be biased towards the “Source to Settle” Process.  (I try to force myself to keep the mirrored processes in mind at all times, but it is not easy!)  Recently, I have been working with more clients on the supplier half of the equation and or with networks that are fairly neutral platforms.  It has been a fascinating vantage point from which to work.

Practitioners know the source to settle process can be “sliced and diced” in a variety of ways:

  • The entire process can be outsourced (hence the interest in India of this search term) or
  • The entire process can be outsourced for just some spend categories (e.g., indirect) or
  • Every step in the process can be automated with a point solution or
  • “Chunks” of steps in the process can be automated as part of a suite, and suites can automate the whole process.  Again, this automation can be attempted across categories or with category specialists.

Those of you who follow Source to Settle can think of point, suite, outsource, and even managed service provider solutions at every step along the way in the top three rows below:

Slide1

Not surprisingly, (though it was a surprise to my biased mind), the exact same options are true for the Quote to Cash process of suppliers.  Following the bottom two rows of the above diagram:

  • Companies can, and do, outsource the entire process, including the sales force in some industries (e.g., Pharma contract sales organizations).
  • Lead qualification can be outsourced or automated by a myriad of providers.
  • There are many software companies selling sell-side proposal software, contract management, and sell side e-commerce sites.
  • Behind the website, companies can automate, or outsource, the entire order to cash cycle or any portion thereof, ranging from just credit and collection, to just e-billing, etc.

In fact, it is incumbent on every B2B company to consider both sets of processes (since all companies have both sides) and determine which are the right pieces of the process to leave untouched, automate, or outsource– and for which categories. Many companies may not realize how many permutations there are and how the right answers may differ by spend category.

Another OpenTable?

OpenTable was a great story. (I wrote about it almost exactly three years ago here.) To refresh your memory, the company went public in March, 2009 at the bottom of the stock market with a market cap of $700 million.  Two years later its market cap rose to 5-6x that figure, before falling back to $900 million.  At that point, many pundits wrote OpenTable off for “dead”, but it worked its way back to a market cap of $2.6 billion when Priceline bought it this past July.

As you know, OpenTable helped diners make reservations at restaurants and helped restaurants get rid of their paper reservation book.  But what about casual dining restaurants that do not take reservations–take TGI Fridays, Buffalo Wild Wings, or Little Serow, the hottest little restaurant in DC?  These restaurants typically ask you to call or come in, put you on a paper wait list that looks sketchy, and then may hand you one of those plastic disks that lights up and buzzes when your table is ready.  A few restaurants may take your phone number and text when your table is ready.

NoWait, which just raised $10 million in their Series B, aims to improve this process for the restaurant and their diners alike. Using their smart phones, diners can find and get in line at participating restaurants without physically being there. The NoWait app (http://nowaitapp.com/dining/) clearly shows wait times and place in line, and confirmations are delivered by text message. Who wants to wait in the restaurant lobby when you could wait at home, go shopping, or have a drink somewhere?

For the restaurant, NoWait offers complete wait list, notification, and floor map management for the front of house, delivered via iPad and/or smart phone. By putting this process in the cloud on an iPad, adding a seating chart and some analytics, adding some ability to make promotional offers in the text to the “waitee” and presumably helping restaurants build a diner database–NoWait hopes restaurants will buy their app and toss out those plastic, flashing, buzzy disks!

Statistically, NoWait appears to be a much bigger idea than Open Table in some ways. After all, only a tiny percentage of restaurants take reservations–though one has to remove fast food from the target market.  And this idea could extend to any business with wait times, not just restaurants–how about the DMV, for instance?!!!

On the other hand, many of the target restaurants may not have a big wait list problem and if they do, they will be unlikely to pay the fees that Open Table was getting. (Ironically, Open Table was starting to get some pressure on its fees and some restaurants stopped taking reservations just to avoid them!)

In any case, there is a lot of room between this $10 million B round for NoWait and $2.6 billion for OpenTable.  Personally, I cannot wait to see how this one develops!