forrester

November 30, 2006. Call in at 12:55 p.m. Eastern Time

TeleconferenceThe Spend Management Market — How Big, Where Is It Growing, Who Are the Market Leaders Andrew Bartels

Vice President

Forrester Research

2Entire contents © 2006 Forrester Research, Inc. All rights reserved.

Agenda

• Spend management market — what it is

• Size and key trends for overall spend management market

• Demand side indicators — who is buying?

• eProcurement — Size, trends, leading vendors

• eSourcing — Size, trends, leading vendors

• Spend analysis — Size, trends, leading vendors

• Contract life-cycle management — Size, trends, leading vendors

• EIPP — Size, trends, leading vendors

• Supplier networks — Size, trends, leading vendors

• Services procurement and procurement BPO

• Recommendations


The spend management market includes software that supports the eight-stage ePurchasing process

1. Spendanalysis

3. Supplieridentification

4. Sourcing

5. Contractmanagement

6. Procurement

7. Orderfulfillment

8. Invoicing, reconciliation, and payment

2. Supplierassessment


US$ millions

Source: Forrester Research, Inc.

$888 $975 $970 $1,059 $1,103 $1,160

$629 $585 $548$591 $626 $679

$149 $196 $225$302

$389$501

$72$73 $100

$110$143

$182

$90$126 $154

$208

$269

$321

$42$62 $88

$109

$130

$155

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2003 2004 2005 2006F 2007F 2008F

Suppliernetwork

EIPP

Spend analysis

Contractmanagement

eSourcing

eProcurement

$1,887$2,059

$2,170

$2,465

$2,660

$2,999

Spend management revenues on rise, with eProcurement and eSourcing still dominating

Base: 60 vendors(numbers are rounded)


Subscription and maintenance revenues outpacing license and services

$612 $630 $613 $684 $732 $797

$374 $433 $464$517 $569

$626$280$367 $437

$544$672

$790

$620$631

$657

$719

$687

$786

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2003 2004 2005 2006F 2007F 2008F

Consulting andintegrationservices

Maintenance

Subscription

License

US$ millions

$1,887$2,059 $2,170

$2,465$2,660

$2,999




eProcurement and eSourcing adoption most advanced

5.8

6.8 7.17.7

1.72.1 2.4

2.9

0.81.1

1.61.9

0.5 0.71.1

1.6

0.2 0.3 0.3 0.40

1

2

3

4

5

6

7

8

9

2003 2004 2005 2006F

eProcurement

eSourcing

Contractmanagement

EIPP

Spendanalysis

Number of clients(thousands)




EIPP and contract management growing fastest

10%

5%

2%

27%

21%

29%

30%

Total

eProcurement

eSourcing

Contract management

Spend analysis

EIPP

Supplier network

Compound annual growth rate, 2003-2008




Software as a service most popular for EIPP, supplier network, and spend analysis

22%

14%

24%

6%

22%

60%

Total

eProcurement

eSourcing

Contract management

Spend analysis

EIPP

Subscriptions revenue as percentage of total revenues, 2006




North American demand strongest at Global 2000

2% 2% 0% 1% 7% 3%

61% 58%48%

23%29% 36%

21%16%

20%

38%26%

12%

4%5%

4%6% 5%

5%

9%16%

22% 22% 25%34%

3% 4% 7% 10% 9% 11%

Small (5 to99

employees)

Medium(100 to 499employees)

Medium-large (500 to

999employees)

Large (1,000to 4,999

employees)

Very large(5,000 to19,999

employees)

Global 2000(20,000 or

moreemployees)

Major upgrade

Minor upgrade

First-time purchase

Using, but not purchasingor upgrading in 2007

Not using

Don't know

“Will your company purchase any procurement or sourcing software in 2007?”

N = 204 N =206 N=143 N = 240 N = 130 N= 101

Source: Forrester Business Technographics® September 2006 North American And European SMB Software Survey


European demand strongest at medium-large and large companies

0% 0% 5% 4% 9%

48% 41%30% 26% 26%

33%

19%25%

22%28% 35%

23%

7% 6%19% 7%

5% 7%

15% 18% 19% 23% 21% 21%

12% 10% 11% 10% 9% 7%

0%Small (5 to

99employees)

Medium(100 to 499employees)

Medium-large (500 to

999employees)

Large (1,000to 4,999

employees)

Very large(5,000 to19,999

employees)

Global 2000(20,000 or

moreemployees)

Major upgrade

Minor upgrade

First-time purchase

Using, but not purchasingor upgrading in 2007

Not using

Don't know


N = 75 N =80 N=64 N = 96 N= 57 N= 43



Manufacturers will be biggest buyers in 2007

4% 1% 6% 0%14%

2% 2%

32% 35% 23% 31%

29%

21% 23%

23% 28%31% 28%

17%35% 40%

5%6% 6% 8% 7% 7% 5%

25% 21% 29% 28% 21% 28% 17%

12% 9% 5% 6% 12% 6% 14%

Ma

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Re

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& w

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Bu

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erv

ice

s

Me

dia

&e

nte

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liti

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lec

om

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ati

on

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Fin

an

ce

& i

ns

ura

nc

e

Pu

bli

c s

ec

tor

Major upgrade

Minor upgrade

First-time purchase

Using, but not purchasingin 2007

Not using

Don't know


N = 198 N = 80 N = 118 N = 36 N = 42 N = 82 N = 111



eProcurement/eSourcing market consolidating

37

22

44 4244

4852

55

0%

10%

20%

30%

40%

50%

60%

70%

1999 2000 2001 2002 2003 2004 2005 2006

0

10

20

30

40

50

60

Share of SAPand Oracle(w/PeopleSoft)

Share of othertop 10 vendors

Number ofvendors

Percentageshare of market

Number of vendors



© 2006, Forrester Research, Inc. Reproduction Prohibited

The Forrester Wave™: eProcurement

Risky StrongBets Contenders Performers Leaders Other vendors

not included:• BasWare• ePlus• MRO Software• Proactis (UK)• SciQuest• Lawson, Infor,

other ERP• eMarkets such as:

• Agentrics• cc-hubwoo• IBX• QuadremUpdate coming

in Q1 2007

January 4, 2005, Tech Choices “Forrester Wave™: eProcurement, Q4 2004”


Largest eProcurement vendors

Vendor Estimated number of

clients, 2006

Comments

SAP* 2,500 Largest vendor, almost all licensed

Oracle with PeopleSoft* 2,400 Mostly licensed, some licensed under Oracle OnDemand model

Ariba 250 Fortune 500 clients, not much growth

ePlus 450 US only; linked to IT product sales

BasWare 80-90 Nordic countries; licensed product

Perfect 80-90 US mostly; SaaS offering

IBX 80-90 Nordic countries; SaaS offering

CC-Hubwoo 60-70 Germany and France; SaaS

Quadrem 30-40 Mining and CPG companies; SaaS

Ketera 25-30 US; SaaS

Source: Forrester Research, Inc., based on vendor data from over 60 vendors


eProcurement market inches toward $1 billionUS$ millions

$348 $356 $326 $368

$238 $263 $262$279

$65$99 $121

$150$238

$258 $262$262

$0

$200

$400

$600

$800

$1,000

$1,200

2003 2004 2005 2006F

Service revenues

Subscriptionsrevenues

Maintenance

License revenues

$972 $970$1,059

$888




The Forrester Wave™: eSourcing Suites

Others vendors not included:

• I-Faber• Bravo Solutions• Intesource

eMarkets such as:• Agentrics• Quadrem• IBX

Changes to market: • SAP acquired Frictionless• IBX acquired Portum• Emptoris acquired Mindflow

November 17, 2005, Tech Choices “The Forrester Wave™: eSourcing Suites, Q4 2005”


Largest sourcing vendors

Vendor Estimated number of clients, 2006

Comments

Ariba 300+ Pushing on-demand

Procuri 150 Pure SaaS; reseller partnership withCC-Hubwoo

Emptoris 150 Strong growth, acquirer

I-Faber 150 SaaS, Italy, and Germany

Oracle/PeopleSoft 140 Slow uptake in install base

SAP with Frictionless

160 (120 + 40) Frictionless acquisition fills hole

UGS 80 Linking to PLM

Iasta 70 Low-cost SaaS; partner with Ketera

Global eProcure 60 SaaS vendor; growing

Perfect Commerce 60 SaaS vendor

IBX with Portum 60 Acquired Portum

Synertrade 50 Licensed; France and Germany

VerticalNet 50 On the block



eSourcing market shifts away from services

$150 $144 $134 $150

$84 $97 $106$121

$130 $140 $137$143

$265 $204$171

$178

$0

$100

$200

$300

$400

$500

$600

$700

2003 2004 2005 2006F

Service revenues

Subscriptions revenues

Maintenance

License revenues

US$ millions

$585$548

$591$629




Spend analysis vendors

Vendor eSourcing Wave

Emptoris 5.0

Verticalnet 4.5

Ariba 4.3

Perfect Commerce 4.0

Frictionless Commerce 3.8

Procuri 3.6

Global eProcure 3.6

SynerTrade 3.3

• Other vendors with competitive offerings:

» Zycus

» Ketera

» CGI Silver Oak

» SAS

• Changes to market:

» Procuri acquires TrueSource

Source: November 17, 2005, Tech Choices “The Forrester Wave™: eSourcing Suites, Q4 2005”

Wave coming in Q2 2007


Spend analysis market shifts to software as a service

$30 $25$32 $27

$14$17

$22$22

$5 $10

$18 $25$23 $20

$28$37

$0

$20

$40

$60

$80

$100

$120

2003 2004 2005 2006

Service revenues


Maintenance

License revenues

US$ millions

$73

$100

$110

$72




EIPP and CLM markets still fragmented, and dominated by specialists

24

8 8

25

2120

1716

0%

10%

20%

30%

40%

50%

60%

70%

1999 2000 2001 2002 2003 2004 2005 2006

0

5

10

15

20

25

30

Share of SAPand Oracle(w/PeopleSoft)

Share of othertop 10 vendors

Number ofvendors

Percentageshare of market

Number of vendors




Vendors with contract management specifically for purchasing contracts:

– Perfect– Frictionless (acquired by

SAP)Changes to market:

– Emptoris acquired diCarta– OpenText acquired

Hummingbird

The Forrester Wave™: Contract Life-cycle ManagementSeptember 2006, Best Practices “How To Drive Document Management Adoption”


Largest CLM vendorsVendor Estimated number of

clients, 2006Comments

Accruent 350 Real estate contracts

I-Many 280 Mix of buy-side revenue management contracts and all contracts

Oracle 500 Mostly for services contract; about 80 buy-side

Procuri 150 Acquired CMSI

Ariba 120 Pushing into SaaS

Upside 85 .Net based; licensed and SaaS

Emptoris 60 Acquired diCarta; licensed, growing

Nextance 50 Licensed product; growing

Open Text 30 Licensed product; acquired Hummingbird

Selectica 25 SaaS; acquired Determine



Contract life-cycle market booms

$81 $95 $107$133

$39$54

$72

$107

$9$8

$7

$19

$59

$82

$86

$131

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

2003 2004 2005 2006

Service revenues


Maintenance

License revenues

US$ millions

$238$272

$388

$187




Buy-side contract life-cycle management still dominates

$64 $77 $89 $108$28

$40$56

$74

$9$8

$7

$19

$48

$70$74

$102

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

2003 2004 2005 2006

Service revenues


Maintenance

License revenues

US$ millions

$196$225

$302

$149




Forrester Wave™: Accounts Payable EIPP

August 2005, Tech Choices “Accounts Payable EIPP, Q3 2005”

Other vendorsnot included:• Harbor

Payments• Perfect

Commerce• Bottomline• 170 Systems• Dozens of small

vendors


EIPP market dominated by software as a service

$19 $24 $28 $32$10

$14 $17 $22$47

$67$86

$125

$15

$20

$22

$29

$0

$50

$100

$150

$200

$250

2003 2004 2005 2006

Service revenues


Maintenance

License revenues

US$ millions

$126

$154

$208

$90




The logic of eMarkets and supplier networks

Buyer #1

Buyer #2

Buyer #1

Buyer #NBuyer

#2

Buyer #N

vs.


Primarilycollaborative

Primarilytransactional

Mixedcollaborative/transactional

Pre-launch

Lift-off

Escapevelocity

InOrbit

Approachingorbit

Transora

ChemConnect/Envera

CovisintPantellos

Enporion

e2Open

Cordiem

OmnexusExostar

TradeRanger

Converge

ForestExpress

RubberNetwork

WWRE

GNX

CPGMarket

Over $100 billion

in transactions/

year

Over $1 billion in

transactions/year

Over $100 million in

transactions/year

Over $10 million in

transactions/year

Elemica

SupplyOn

Transplace

RMX

GHX

Quadrem

Novopoint

Asite

FSMx

Under $10 million in

transactions/year

Rating the Consortia E-Markets, 2001

What happened to eMarkets?

$

$

$

$

RIP

RIP

RIP

RIP

RIPRIP

RIP

RIP

Agentrics

Agentrics

1SYNC1SYNC

ConvergeConverge


Leading supplier networks

Provider Number of suppliers

Number of customized catalog

suppliers

2005 PO volume

(millions)

2005 PO value

(billions)

Ariba 132,000 25,000 76.0 $75.0

Perfect 11,500 2,500 7.0 $3.9

Quadrem 46,500 400 5.4* $12.5*

CC-Hubwoo 12,000 1,800 1.0 € 5.0

IBX Nordic 10,000 1,200 1.2 € 3.5

Source: Forrester Research, Inc., based on provider Web sites and briefings

* YTD 2006 annualized


Supplier network services all subscription and services

$0 $0 $0 $0$0 $0 $0 $0

$25

$44

$69$83

$17

$17

$19

$26

$0

$20

$40

$60

$80

$100

$120

2003 2004 2005 2006

Service revenues


Maintenance

License revenues

US$ millions

$62

$88

$109

$42




Services procurement vendors

Other vendors with

competitive offerings:

» IQ Navigator

» Fieldglass

» Rearden Commerce


Vendor eSourcing Wave Rating

Ariba 5.0

PeopleSoft 4.1

Oracle 4.0

Ketera Technologies 3.1

SAP 2.8

Perfect Commerce na


Suites and BPO

• Supplier relationship management or spend management suites

» Ariba

» Oracle/PeopleSoft

» SAP

» Perfect Commerce

» Ketera

• BPO

» Accenture

» Ariba

» HP Services

» IBM Global Services

» ICG Commerce



Recommendations for IT buyers

• For buyers of spend management solutions

» Look separately at procurement/EIPP vs. eSourcing/spend analysis vs. contract management

» SAP and Oracle still have holes and weak points in their offerings — you still need specialists

» Expect new entrants and consolidation in EIPP and contract management

» Prices declining for eProcurement and eSourcing as products get commoditized

» Determine where to use licensed solutions and where to use software as a service solutions — both are available in all categories


Recommendations for IT vendors

• For vendors of spend management solutions

» Demand is growing but unevenly — pick your segments

» SAP and Oracle are not dominant yet

» Global 2000 enterprises are not as saturated as it had seemed!

» Expect new entrants from enterprise content management into contract management market

» Understand where demand for SaaS is strong (eSourcing, spend analysis, EIPP), and where it is not (eProcurement, contract management)


Andrew Bartels

(516) 869-0128

[email protected]

www.forrester.com

Thank you

forrester

Business

vendors numbers

leading vendors esourcing

leading vendors eipp

us saas

millions source

eprocurement size

management market demand

portum saas