Apexon performance woes

1 comment February 20th, 2007 David Bush - Iasta

Yesterday, like many others, I learned from Spend Matters that Apexon had basically shut down operations by releasing most of its team, including executives like Kevin Brooks. Many are familiar with Kevin from positions at supply management companies and from posting guest blogs on sites like E-Sourcing Forum and Spend Matters on topics like supplier performance. It appears that the assets are in the process of being acquired by another company which will roll it up into a larger portfolio.

Kevin is a great person and this is very unfortunate for him personally. It now makes sense why he did not have time to contribute to the guest posts here a month ago as there was quite a bit going on there at the time. I do have all confidence that he will not be on his own for long, however, as he is very talented and intelligent. After that, I thought about the factors that led to this occurrence. I am probably oversimplifying because I do not know everything that happened at Apexon nor do I profess to be an expert on supply risk, performance or quality. That being said…I am left wondering:

Can these types of applications exist independently? The supply management software community has already lost high quality vendors like Apexon and Open Ratings. Not lost in entirety, but lost in autonomy. Both companies where highly lauded as ground breaking and ahead of their time but eventually ground to a halt (remember Mindflow?). However, the execution never met the expectation which leads one to believe that out-thinking the masses increases the possibility of failure to a level of unacceptable risk (for both vendor and customer). It also shows indications that having too tight of focus, or niche, becomes an unstable business model with enterprise applications. There is no question that both companies delivered immense value and very strong value propositions with functionality that is needed by many in procurement and supply chain but were unable to monetize that into a sustainable business.

I believe that points to the fact that a supply management software company must offer a mixture of broadly applicable functionality + useful features + cost effective pricing, even if it does not go into the deepest levels of detailed minutia or special cases scenarios. A software company can get hopelessly mired in these types of development projects. In fact, Iasta once built an advanced type of bidding lot for a $50mm reverse auction event and, to my knowledge, that setting has never been used since - by any customer, and it took us a MONTH to develop! It seems like supplier performance functionality will ultimately be handled by eSourcing or ERP applications or home grown internal data, as Charles Dominick commented. Charles, I believe “cracking the code” of SPM lies in not relying on it exclusively for revenue success.

My next observation comes back to my old soap-box of being a slave to other people’s money. As Iasta has grown, I have seen clear benefits of infusion of capital. Although we have never done this, there are compelling opportunities which would allow us to flip a switch and double or triple our development, operations and sales bandwidth. Alas, it has not happened - by choice. A software company is difficult enough to manage without having influence pushed down into the business decisions which are led by groups that want a certain yield on their investment. Jason mentioned that Apexon was looking for a path to $50 million in revenue within 3 years instead of 5. I repeat $50,000,000!! And, 5 years was too slow? I highly doubt Apexon would have made that number any way, with price compression and feature diversity on a non-stop curve. This industry is littered with companies that over promise and under deliver but not necessarily at their own fault. However, who cares if they made $50 million in revenue, are satisfied customers and stable businesses not enough? No, its not, when people want their money back. There is an inherent danger when numbers are the only metric used for business decisions and evaluation of success.

I apologize for the rambling stream of consciousness but wanted to capture my initial thoughts without edit. Ultimately, this is just a continuation of the expected market consolidation. As stressful as all of this is, I still feel comfortable that we are moving in the right direction and we will not be surprising the market with this type of news, even if we have to “sacrifice” hyper growth for our pedestrian 100% YOY. I can live with that.

Entry Filed under: General, Supplier Performance, e-Sourcing Marketplace