Local software company Genie Systems says it is not surprised at the major retrenching amongst its US competitors, pointing to their too-heavy reliance on the fad of online marketplaces.
Genie — often compared to US players Ariba, Commerce One, i2 and Broadvision — says it has stayed away from public online marketplaces and has instead focused on solving old-school supply chain problems.
“Last year I said the real returns for the companies behind these marketplaces would only ever be 0.5% or 1% of revenues,” says Genie’s general manager Nigel Varcoe.
“We saw it unlikely that marketplaces could sustain the value propositions [put forward] and I think that’s been proved.
“Two out of three of our recent sales have been solving existing business problems that had little to do with the hype of e-commerce — but we used e-commerce to solve them. Those sorts of deals are 50% of our revenues.”
Varcoe says Genie avoided a surprise fall in earnings like the others by cutting its financial projections in December to a more “prudent forecast”.
“We haven’t been so bullish as the others,” he says.
The big four US players have all announced in recent weeks steeply revised earnings forecasts for the March-end quarter, and hundreds of staff cuts. All cited a fall in software licensing, and Ariba chief Keith Krach admitted his company did not expect marketplace revenues to ever reach the same heights.
Analysts say these cuts have been a wake-up call, signalling a sharp shift toward private B2B marketplaces rather than public — that is, within existing supply chains, not out to consumers.
The fizzling interest in exchanges has coupled with the US economic slowdown to affect the vendors’ sales, they say.
Genie says its significantly lower price point means it is more attractive to the same high-end corporates the big four target in the Asia-Pacific region. It also means Genie operates in a different market in the US — the mid-corporate market, not the high end.
Varcoe says Genie has closed deals this quarter with local corporates including with Fisher & Paykel and the Blue Star Print group.
Three more deals in the New Zealand market are being closed at the moment and made public in next month or two, he says.
While the tougher market and revised forecasts in December did not change Genie’s channel plans, Varcoe says they have affected other plans. The start-up has kept hiring to minimum, only increasing its 50-strong ranks by a couple in the last three to four months, he says. Last year Genie’s payroll skyrocketed from seven to around 50.
Its plans to expand to Singapore after securing a major deal there with Keppell group “have taken longer than we thought’, Varcoe says.