Similar to our other New Wave 2014 organizations, there were a number of reasons why we selected cloudBuy as a company to watch this year.
From their relationship with Visa through which they are able to address the challenges that smaller suppliers face in terms of over 90 receivables that no longer support their operating line of credit, to the intuitive interface that provides a buyer experience similar to consumer oriented platforms, there appeared to be good reason for keeping a watchful eye upon the company
Despite that positive point of view, the one question that lingered was not one of potential, but instead tangible realization.
For those viewing the company’s website for the first time, and then reading about how cloudBuy plans to “become the biggest technology business in the world, beating Apple, Google and Microsoft,” one might be excused for wondering what it all means. Specifically, is cloudBuy too diversified in the panoply of services it seems to provide to present a cohesive picture that the market can understand?
The reason I raise this question is that I have had the good fortune of being the President of a publicly traded company that was listed on a major exchange (TSE), as well as leading an application development team that eventually led to my selling my software company (and its web-based platform) for $12 million during the dot.com boom heyday. Being on both sides of the client-vendor fence during that period certainly provides one with a unique lens of experience through which to view the ever changing procurement world.
Ironically, I was reminded of this background-based perspective when I was directed to a February 20th, 2014 Spend Matters UK post regarding cloudBuy. After reading what was generally speaking a fair and even-handed piece, it dawned on me that the biggest challenge the company faces is that the industry journalists and analysts such as Gartner are viewing their offering from the buyer perspective as opposed to the supplier.
This isn’t just semantics about which we are talking.
If you look at cloudBuy from the buyer side of the equation, their multiple streams of diverse services is at once overwhelming and somewhat confusing. Especially if you as Peter Smith pointed out, consider their revenue stream. Something just does not appear to add up.
On the other hand as one considers services such as company registration, web site and catalog development and the incorporation of the embedded VISA payment system, it becomes clear that cloudBuy’s focus or view is from the supplier side. Which goes a long way towards explaining the suggested low revenue red flag raised by Smith.
Let’s face it traditional revenue models were driven from the buyer side of the equation. When you consider the alternative of having to develop and service a massive, highly splintered supplier-side market, the revenue flow is not necessarily going to be commensurate with the provider’s platform’s prowess and breadth – at least not at this stage of the game.
This is the reason why Peter Smith and the vast majority of industry journalists and analysts who have covered cloudBuy refer to the company as an enigma in that it looks and acts big but does not appear to have the revenue stream to cast such a large shadow. They are in short and understandably, seeing things primarily from the buyer side.
So what does all this mean?
Well quite frankly, if cloudBuy plays their cards right, the timing for them could not be better.
As highlighted in my February 6th, 2014 post regarding the Hackett Group’s study on supplier consolidation, rather than looking to rationalize supply bases, both public and private sector organizations are actively pursuing strategies surrounding an expansion of the number of suppliers with whom they deal. The challenge is how do you engage a significantly larger number of suppliers while at the same time minimizing the associated risks.
This is where cloudBuy comes in.
Through their spectrum of services they are leveling the playing field across the board by empowering supplier capabilities to the benefit of the buyer. And I am not just talking about a supplier repository service, but a true supplier development program that extends deeper and further into the supplier organization itself .
In talking with cloudBuy’s Ronald Duncan earlier today, he indicates that the company will be posting a series of articles in their In The Cloud blog over the next couple of weeks where they will highlight each stream of their supplier service offering. They will then through this series tie these single streams of services into a single and cohesive platform picture that they hope will remove them from the shadows of being an enigma, to the bright light of industry revelation.
I will keep you posted.
cloudBuy sees procurement from a different perspective . . .
30
Procurement Insights 
piblogger
April 29, 2014
Reblogged this on Procurement Insights EU Edition and commented:
Editor’s Note: The company that Spend Matters Group, LLC has called an enigma . . . but why?
Spend Matters UK/Eur (@spendmattersuk)
April 29, 2014
Good post Jon. I think the next 12 months is critical for Cloudbuy. Great potential but they have to show some significant conversion to revenue. If they can declare, say, 50% growth – which should be possible if there is reality behind the PR – then I will be a convert!
piblogger
April 29, 2014
That is a very reasonable approach Peter.
Mat
April 30, 2014
Is revenue important just yet? To create a viable market you need buyers and suppliers. Neither appear over night (hence the turning point for @UK with the VISA partnership). You simply need a chunk of money, time and balls of steel. If you’ve got money, you buy yourself some time, i’ll not pass judgement on the third requirement 🙂
piblogger
April 30, 2014
A very good observation Mat. The question is when do reach that point in time where you have to make the move from potential to realization? Peter is talking about 12 months, which I think is important to consider in that as time progresses the barriers to competitive entry begin to fall as the rest of the market begins to recognize the true scope of the opportunity that is at hand.
Up until this point in time there has been a seemingly universal acceptance of the vendor rationalization strategy that was largely due to the limitations of traditional ERP procurement applications. This has now changed with terms such as rapid supplier on-boarding, IoT P2P processing and the realization that fewer suppliers rarely if ever deliver the expected savings (read my 2007 post Dangerous Supply Chain Myths regarding Dynamic Flux and Historic Flat Line commodity characteristics to better understand this latter point; http://wp.me/p4HrB-c).
Since it’s inception, cloudBuy has had the benefit of toiling in relative obscurity holding what I believe is the key to the next innovation wave in the procurement world. This has provided them with the opportunity to develop their platform to the point of positioning themselves as the leader in terms of capitalizing on a now awakened market. How long do you think it will be before others re competitors clue into this. Or to take a line from the movie All The President’s Men . . . follow the money.
For cloudBuy, the future is definitely now!
Mat
May 1, 2014
Agreed on your point about rationalisation rarely delivers savings. In fact i’d argue government policy to rationalise drives up costs as they give more business to the larger companies and drive out SMEs, which in turn means less income tax and drives out innovation. Large companies are then left to drive up costs and so the cycle continues. Einstein’s conservation of energy highlights that energy cannot be created or destroyed, it simply changes form. Same goes here. Squeeze one part of the system and it balloons the other end.
I’d give CloudBuy three years if they have the cash. Whilst new entrants are abound (although less than you’d expect), i don’t think corporate / public sector buyers will move that quickly (unlike consumer markets), so whilst 12 months is eminently sensible to gauge direction of travel, i think they’ve got longer to prove the model.
Final agreement from me is that these sorts of marketplaces are definitely the direction of travel and agree that ERP systems have driven the current modus operandi, contrary to efficient / effective market theory.
Ps. like your post on Supply Chain Myths!!