Welcome to the new era of configurable private label eProcurement solutions (Part 1 of 2) by Jon Hansen

Up until my conversation with Merx’s Paul Bodnoff, the thought of using the terms private label and eProcurement solutions in the same sentence would have never crossed my mind.

What does Merx and President’s Choice have in common?

In fact, when I think of private label products I am instantly reminded of Dave Nichols’ President’s Choice brand which, similar to Kleenex becoming the calling card for all tissue products, has become the ubiquitous case reference in the grocery chain world.

All this being said Bodnoff’s revelation that MERX, which in its own right has become ubiquitous with government tenders, has begun the transformation from a secure yet confining relationship with Canada’s Federal Government to an open market provider is noteworthy.  Especially when he talks about private labeling the Merx platform through a configurable plug and play process that elevates both the end clients name and partnership value.

The only question is whether Merx can actually achieve what so few in the high tech industry have been able to accomplish . . . surviving and expanding beyond the single track client relationship that both defined and built the original business.

Let’s take a trip across the pond to consider the Elcom story.

Elcom’s origins and continuing success is based upon their long-standing 12-year relationship with the Scottish Government, in which they have become the engine behind the highly successful eProcurement Scotland initiative.

While there is no doubt that the company’s solution has found its proverbial sweet spot with the Scottish Government in terms of showcasing the potential of its technology, one might be hard pressed to quantify similar results beyond the framework of this primary relationship.  This of course is the critical point.  Is Elcom’s solution scalable beyond a uniquely strong but limited partnership with a key client?

Even my own company, which I sold for $12 million back in the frenzied dot.com boom days, provides a lesson worth noting.  Specifically, our revenue stream was based on delivering an incredibly high level of needed service to a single, large government customer.  While we would eventually go on to land other accounts such as the New York City Transit Authority, in truth nothing came close to equaling our success through the original relationship in which our mark was made.

Once again, and in the case of both Elcom and my company, there is/was no question that we have/had the technological chops to leave a bigger footprint on the eProcurement marketplace landscape.  Technology was not the issue.  The real challenge was overcoming market perception based on the long-term tie with a single client, as well as overcoming the comfort factor that inevitably occurs when you become accustomed to a certain revenue stream.  I am not saying that you become lazy – far from it.  However, you aren’t exactly out there on the high wire without a harness and a net.

Turning our attention back to Merx, it should come has no surprise that losing a contract that over the past 9 years was worth $36.95 million may cause some feelings of uneasiness.  That’s to be expected.  Add into the equation suggestions by some that Merx “hasn’t really kept up with technology in terms of taking advantage of newer means of getting information out there,” and one might even be excused for losing a few nights sleep.  However, and this is an important difference, unlike Elcom and even to a lesser extent my company, Merx has a much broader client base upon which to build a new, more robust business model.  This is due to the fact that the loss of the Federal Government contract was offset by a long standing revenue diversification strategy, a strategy that has been structured around the configurable plug and play platform referenced by Bodnoff.  I will talk about this at length in Part 2 of today’s post.

In the meantime I leave you to ponder the following question . . . if you had one client that accounted for the lion’s share of your revenue stream, what would you do to prepare for that inevitable day when all good things must come to an end?  It is in your answer to this question that you will find the reason or reasons why there are better days (and years) ahead for Merx.

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