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Verticalnet, Inc. (VERT) |
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CEOCFO Current
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This is a printer friendly page! Verticalnet
navigates the tough technology market by focusing on delivering value to market-leading
customers, improving its award winning technology, and building financial stability and
flexibility BIO: Previously, Mr. Lentz was a Vice President and
Partner of Mercer Management Consulting, where he was employed from 1991 to 2000. While at
Mercer, Mr. Lentz managed the San Francisco Office and was a leader in Global Process
Industries and E-Commerce Practices. He received his MBA from Stanford University and a
B.A. from Brown University. Verticalnet’s solution
facilitates the entire lifecycle of Supply Management, including: Supply Strategy — Enables companies to understand and analyze current spending and
develop supply strategies for managing total cost through demand aggregation,
rationalization, supplier collaboration, and better negotiation. Supply Selection —
Enables companies to quickly and effectively identify, select, and negotiate with the best
strategic partners to achieve the best portfolio of suppliers to optimize price, risk, and
performance. Supply Execution — Ensures that the strategic partners selected and
terms negotiated are implemented and utilized across the global enterprise while
eliminating much of the manual and administrative effort from procurement . It also
enables the sharing of planning information with strategic partners to improve the supply
chain's efficiency. Supply Performance — Measures, analyzes and improves the
performance of, and relationship with, strategic partners and suppliers ensuring
continuous improvement and a "closed loop" Supply Management process. Many point solutions exist to
provide components of Supply Management including Reverse Auction, RFX, Contract
Management and eProcurement. Verticalnet provides the only solution which facilitates the
full lifecycle of Supply Management ensuring continuous improvement within all categories
of spend and across the entire global organization. Utilization of Verticalnet's solution
provides world class Supply Management capabilities helping companies achieve operational
excellence and ensuring the maximum benefits from world-class Supply Management processes. CEOCFOinterviews: Mr.
Lentz, where was Verticalnet, Inc., when you became its CEO and what changes did you
orchestrate, and what attracted you? Mr. Lentz: “There has been a tremendous amount of change in the business since I took on this role. This change focused on a couple different areas, one of which was the need to take control of our financial situation. Gene Godick re-joined the company at the same time as I took on the CFO role. Gene, who was Verticalnet’s CFO at the time of our IPO, had left the company in 2001. When Gene re-joined the company, we immediately focused on cleaning up the balance sheet and expense base. Since November of last year we have eliminated over twenty five million dollars in both on- and off-balance sheet liabilities, both large leases and debt. Most recently, we bought back 90% of our long-term debt using a small amount of cash and stock. We eliminated about six million dollars in operating costs without headcount reductions. Part of the reason we needed to do this was that Verticalnet, as many people know, was a much larger company that was focused in a different space. We have transformed the business from being an operator of online marketplaces, a business which we sold off last year, to focusing exclusively in the supply management and strategic sourcing software market. We were carrying with us a huge amount of legacy liabilities that we needed to clean up to give us a clean financial slate to take this business forward.” “On the business side, we are much more focused on targeting our products and our applications towards the way that customers want to buy and use them. We have created opportunities for customers to begin working with us through a small purchase and then purchase more modules from us as they achieve value and their needs expand over time. One of the challenges in the software space over the last couple of years is that many people made very large software purchases but did not experience the return they expected. In order to fight a reluctance to reinvest in software, it is critical that a company like Verticalnet prove out the value of our solutions and then grow with customers. We put a tremendous effort into repositioning our applications and pricing to focus on lifetime customer value. That includes a shift from a license to a subscription model, which lowers the risk for our customers while providing a more stable and predictable revenue base for Verticalnet. Additionally, believe we are squarely focused on the most attractive software sector – Strategic Sourcing and Supply Management.” CEOCFOinterviews: Will you tell us about your product, what it does and why people need it? Mr. Lentz: “Our core entry product is our Spend Analysis solution, which is sold as an entry application into a broader supply management suite. Spend Analysis is critical for large companies because as they have grown and acquired many different IT systems across their different divisions and locations, they have found that they have no visibility into what they are spending and with whom. Spend Analysis helps companies gain visibility and insight into their spending, and then takes them through the process of identifying the best areas to focus on to achieve value. In today’s environment, where growth is hard to achieve on the revenue line, people are looking for ways to drive value in their business by finding ways to buy cheaper and better. The first thing they need in order to do that is visibility into what they are buying and from whom and to identify a real opportunity for savings. Our application takes data from different systems, and creates a common view of that data and provides and analytic framework and ability to dig into the data and understand where the hidden savings are. Beyond our Spend Analysis solution, we also offer software and services that help companies select suppliers, manage procurement and contracts, and measure and monitor supplier performance. All of our solutions are focused on helping our customers drive measurable, sustainable value out of their supplier relationships.” CEOCFOinterviews: Will you give us an example of how your customers might have used this, and how it is working? Mr. Lentz: “One of our key customers is MasterBrand Cabinets, a 1.2 billion dollar manufacturer of kitchen and bathroom cabinets and one of the largest divisions of Fortune Brands (NYSE: FO). The company had grown through a series of acquisitions over the years and today consists of multiple divisions that still purchase materials separately. They implemented the Spend Analysis application about twelve months ago. Prior to using our software, they had very little visibility in terms of what they were spending with different suppliers and were buying common products from different suppliers across different divisions. They were looking for a way of gaining visibility to allow them to buy in aggregate at a corporate level and to take advantage of the fact that they are a much larger company today than they were before. They should be able to buy from a smaller numbers of suppliers, at higher volume and at lower cost. They have stated that in some of the early sourcing projects completed using our application, they were able to achieve 250-300% return on their total investment in our application. In addition to cost savings, by having better visibility into spending and supplier performance, they are also able to achieve better quality and manufacturing efficiency, because their suppliers are performing better. CEOCFOinterviews: What do you provide that is not available to companies now? Mr. Lentz: “Many people have tried to do Spend Analysis with spreadsheets, and other people have hired consultants to come in and do a one-time view of spending – both of which are manual, expensive, and time consuming efforts. The real challenge is that companies do not have a consistent way to categorize the items that they purchase. You may call them ‘paper cups’, I may call them ‘Dixie cups’, and someone else may call them ‘paper supplies’. When you go to create a common view of what is being bought from a paper product standpoint, it is very difficult because there is no consistent classification scheme across the entire organization. On top of that, you may be buying paper cups from a company like Weyerhaeuser (NYSE:WY) who also provides you with corrugated or other types of paper products. You do not want to just understand that you are buying paper cups, you want to understand what your relationship is with Weyerhaeuser. You can imagine the complexity for a manufacturing company that purchases thousands of different items across multiple locations and divisions – all of which have similar naming disparities as the paper cup example I just gave you. We automate the process of gain a standard view into spending – taking over 80% of the manual effort out of developing a common classification system. The ability to pull all that together and understand how many paper cups you are buying at one level and all of the spending with Weyerhaeuser at another level, allows companies to conduct smarter negotiations, and lower their total cost of ownership for purchased materials.” CEOCFOinterviews: You are most in demand where the companies are larger, is that correct? Mr. Lentz: “Large
companies are typically more complex. While companies have moved to standardize their ERP
systems, in reality, they usually installed many individual systems many departments. When large companies say ‘I have SAP’ what they are usually saying is that they have thirty SAPs - because they implemented different instances in different locations and/or divisions. The also likely have legacy systems and they may also have acquired a company that has a JD Edwards system that they haven’t yet replaced with SAP. The problem is how to get visibility through all of that complexity. Typically, we find that companies with over $500 million in purchases experience the kind of pain that is most quickly and easily solved by our solutions.” CEOCFOinterviews: How do you reach your customers? Mr. Lentz: “We have a direct sales force that goes out and engages with customers. On the marketing side, we have an active lead generation program that includes direct mail, online marketing, and free online web seminars to teach people about Supply Management. We also use channel partners, primarily consulting firms that specialize in the Supply Management space. One of the new, innovative marketing programs that we have recently put into place is called our Spend Diagnostic program. We can go into a company and take some of their actual spend data and create a common, normalized view of it – for no charge. We then come back and demonstrate our product with actual data, and demonstrate savings opportunities during the sales process. Because our application manages the data complexity so quickly and automatically, we are able to do this cost effectively. While many software companies are struggling to get their customers ROI, or Return on Investment, Verticalnet can deliver ‘RBI’ - Return BEFORE Investment. They see the business case prior to buying anything from us. It allows them to actually use this data to go to their management with an investment case and say “this is why we should buy from Verticalnet, because we have already seen opportunities for savings even before we spend a nickel.” CEOCFOinterviews: Is the hardest part getting in the door? Mr. Lentz: “In this environment, it is very challenging. People are just beginning to think about spending from an IT investment standpoint again. But we are finding that our solutions target real and pressing problems for a majority of the large manufacturing companies out there. Our Spend Diagnostic program helps get companies over the hump, and demonstrates the real, immediate value that we can deliver. Ultimately, this lays the roadmap for companies to make fast decisions.” CEOCFOinterviews: Do you have particular industries of focus? Mr. Lentz: “We focus on industries where input products are more complex. Most discrete manufacturing and consumer products companies are targets for us. We also are seeing relevance in the healthcare space. Multiple locations and multiple system complexity is something we look for. We go out and try to find companies with divisions that have been growing both organically or through M & A activity, or a combination; that is an obvious target for us.” CEOCFOinterviews: You mentioned that you changed the revenue model to a subscription based, how is that going? Mr. Lentz: “It is still early in the process, we changed it a little more than a quarter ago, and because we get our revenues from licenses as well as implementation, it gives and will continue to give us greater visibility over time. Rather than looking to end the quarter trying to get those big license deals to make quarterly revenue, we will be looking to have subscriptions and grow our customer relationships over a longer time period. What it also does for us is that it commits us to a longer-term relationship. We tell the customers that we are going to help them get value from the application and it is not just like selling a large license and then walking away. Traditionally, software companies were engaged in what I refer to as ‘drive-by’ license sales. They would sell a big license, hand the implementation over to a systems integrator, and move on to the next sale. We are focused on building relationships with our customers. The Spend Analysis application is our entry application to a much broader footprint. As our customers have used our software, they typically expand their relationships with us as they develop their supply management visions. By having a subscription model, and by being committed to delivering value over time, it also gives us an opportunity to get into a relationship and work from an entry application into our broader footprint. This model has been successful with our existing customers, and we expect that new customers will like our unique approach.” CEOCFOinterviews: How do the partnerships work for you? Mr. Lentz: “We have had quite a number of channel partners primarily with some of the larger systems integrators, and we have been initiating some smaller channel partnerships. System Integrators have some of the boardroom relationships and supply management domain expertise that can help our customers achieve successful implementations. As I mentioned, we are completely focused on delivering customer value, and will continue to leverage partnerships where we feel that they will help us deliver value, and extend our reach.” CEOCFOinterviews: Do you have much competition, and why should people choose you? Mr. Lentz: “There is competition in every software sector. We will often compete against our customers’ incumbent ERP players – who have continually proven that they are unable to deliver the kind of value and immediate ROI that we provide. Our technology has proven itself over a number of years in just some large name brand accounts such as IKEA, Lowe’s (NYSE: LOW), Valvoline, and MasterBrand Cabinets, just to name a few. In addition, in a head-to-head comparison of supply management and strategic sourcing vendors by AMR Research last year, our technology was rated number-one in a very deep evaluation of strategic sourcing software solutions. So while the software market continues to be challenging, we’re confident about our ability to succeed.” CEOCFOinterviews: Where do you go from here? Mr. Lentz: “We stabilized our balance sheet and have taken control from a financial stand-point. We are now focused on continuing to deliver value to our customers and on selling our products and building our go-to-market traction. We operate in an industry where everyone out there says this industry is going to consolidate. We will look for an opportunity to grow, not only organically, but through incremental opportunities. Our internal view is laying out a road map to grow organically, but we will take advantage of other strategic opportunities as they arise.” CEOCFOinterviews: Are there other applications for the technology you have developed? Mr. Lentz: “Focus is important and in the past we have found that at times we had gone too broad in the past. One of the things we have done on my watch is become more focused around going to market with our core Supply Management message. We want to be known as a Supply Management company with the leading Spend Analysis product. That is where we are focusing our go-to-market efforts and our sales efforts. We think we have picked the hottest space in software, and all of our efforts are going towards building our business in that space.” CEOCFOinterviews: Why should potential investors be interested, and what should they now that they might not realize when they first look at the company? Mr. Lentz: “The first thing they should know about Verticalnet is that it is not the same Verticalnet that they knew during the years of 1999-2001. The Verticalnet of today is a company focused on developing leading solutions in a high growth market. The strategic sourcing space is the next area that corporations are looking for to drive value and enable them to become more strategic in terms of how they manage their relationships with suppliers. This sector is predicted to be the highest growth sector in software over the next three to four years. We are extremely well positioned from a product and company standpoint with market-leading customers that include IKEA, Lowe’s, Valvoline, and MasterBrand Cabinets. We have a management team that has taken on the challenges that we faced financially and from a business standpoint, and have achieved a tremendous amount in a short time. I always believed that a true bet on a company is on management. Every person on the executive team has had experience managing much larger organizations. We have a team which is poised to grow into a larger business and a skilled team to get us there. Within the supply management and strategic sourcing space compared from where we are at a valuation standpoint compared to some of the other players, I think people will see there is a gap in terms of the kind of multiples we trade at vs. some of those other players, and that is an opportunity.” CEOCFOinterviews: What do you do as CEO? Mr. Lentz: “Since I took over the company last November at a time of crisis, I spent the first several months of my tenure working on stabilizing the business. I worked with our CFO Gene Godick to set a restructuring strategy that has enabled us to achieve some of the financial stability I spoke about earlier. I also spent a lot of time working on our repositioning and go to market strategy. Today, I get involved in most of the key functional areas. As I said before, we have a great management team that I can rely on to get things done – and I am here to provide direction and strategy when they need me. I help focus our sales and marketing direction and I spend a significant amount of time with our development and product management team. I spend time on what we are doing with our existing customers. I spend time talking to the investor community and external parties. Finally, I spend time thinking about opportunities of how we will change the growth of the business and how look at strategic opportunities.” CEOCFOinterviews: Is there anything else you would like to discuss? Mr. Lentz: “We have just completed a release of Vertical in 5.0. This is a significant release for us and it has enhanced functionality across all of our applications. It provides us the ability to deliver our solutions as traditional, behind the firewall software or as a set of hosted solutions, for those companies that don’t have the IT resources to manage an implementation. More than fifty percent of our people are dedicated to R&D, which is one of the indicators of future success and a testament to our commitment to maintain our technology advantages. In the software industry, if you are not investing in full product, you really have a limited timeline to get traction. We have made a commitment to product development and it is going to have an impact from a marketplace perspective.” disclaimers |
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To view Releases highlight & left click on the company name! Illinois Tool Works Inc. Selects Verticalnet
Spend Analysis Posted: 12/10/03 - CEOCFOinterviews.com
Malvern, PA, October 15, 2003 – Verticalnet, Inc. (Nasdaq: VERT), a leading provider of Strategic Sourcing and Supply Management solutions, today announced that it had completed a private placement of the Company’s common stock with a number of institutional investors.Posted: 10/20/03 - CEOCFOinterviews.com
Customers Cite
Rapid ROI, Flexibility and Power of Eleven Modules, and Ability to Optimize Total Cost of Posted: 9/25/03 -
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