Operationally, the Accelerator is a consulting business designed to serve middle market companies in Central Indiana. Teams of professional consultants, faculty and students work directly with these companies - helping them to grow and simultaneously providing a living laboratory in which undergraduate and MBA students learn and experience real business problems and situations.

Recognition of Market -> Recognition of Market Opportunity -> Ability to Meet Market Opportunity -> Meeting Market Opportunity at Profit

1. Content, Communications and Collaboration (CCC) - $2.6 billion
2. Customer Relationship Management (CRM) - $2.3 billion
3. Enterprise Resource Planning (ERP) - $1.2 billion
4. Supply Chain Management (SCM) - $826 million
5. Office Suites - $68 million
6. Digital Content Creation (DCC) - $62 million
7. Other SaaS offerings - $472 million

"These are all words and phrases that dumb people use to sound smart. It's ludicrous. I mean, if you are in a meeting and you say ‘From a 30,000 foot view, this looks like a great idea’, aren't you just saying that you are too stupid to look at the details of the proposal to figure out if it will actually work? Your employees lose all respect for you.  That's why when I take my chair in the Oval Office, one of my first orders of business will be to outlaw these inane words and phrases."

               

- President Obama

I understand the President's point, but personally I still like this phrase as long as it is not overused and used properly. 

The Indiana 21st Century Research and Technology Fund was created in 1999 by the General Assembly to stimulate the process of diversifying the State's economy by developing and commercializing advanced technologies in Indiana. The Fund is now an integral element of the Indiana Economic Development Corporation's Small Business and Entrepreneurship Division. 21st Century.

Marketing Technology Blog by Doug Karr

Social Media Blog by Kyle Lacy

Silver Square Blog by Raquel Richardson

 

I recently just completed Ronald Cohen's book, The Second Bounce of the Ball (hat-tip: Greg Mark). The book is a great study in what it takes to be a successful entrepreneur. Perhaps most important in this regard is being able to read what Cohen refers to as the "the second bounce of the ball". After all, when we enter a market for the first time, it's easy to anticipate initial demand, interest, expectations, etc. But after the ball bounces a second time -- as it always does -- it's not always as clear which direction things will go in. Iasta is one of those companies that successfully read not only the second bounce of the ball, but the third as well. After migrating successfully from being a low-cost full service auction provider into a SaaS vendor with a strong e-sourcing mousetrap, they've once again listened to and read the market, moving in a new but logical direction.

Iasta's latest foray is into the world of what I'll term value-added sourcing and procurement services. Relatively speaking they're not breaking any new ground here. But just as they did in the past, they're copying and adapting an existing business model and delighting customers with both their price points and level of service. And they're doing so successfully, down to working with customers on broad- scale procurement transformations. Yes, you read that correctly. Iasta, that niche Indianapolis sourcing vendor, is competing against the Accentures and AT Kearneys of the world in the area of procurement transformation. And they're doing so successfully.

One of the secrets of their model is maintaining a relatively small full-time consulting team. In fact, nearly all of their team members are contractors with excellent reputations from past roles as consultants at major firms. Iasta is giving them far more autonomy and marking up their services significantly less than what other firms tend to do (e.g., I spoke with one of their procurement transformation leads with significant Big 5 experience who had also worked as a contractor for Denali and Accenture doing similar engagements). With Iasta, he was able to take home a significantly larger percentage of the overall client billings for his time and was also able to save the client material amounts over what bigger name firms would have charged (most likely to put in place more junior resources).

But what class of new services is Iasta offering specifically? For one, they're looking to define and bring to market offerings that, in their words, can help "new customers who aren't in a position to successfully use our software for 12 months until we can get them up to speed". If this requires dropping in more senior team members to drive initiatives in almost an interim management capacity, they'll do it. They'll also do more traditional opportunity and organizational assessments and follow through with customized programs designed to bring companies up to the next level of maturity (interestingly on this note, a number of other services providers in the market use Iasta as their sourcing platform and I suspect they might begin to see Iasta as potentially competitive -- the same problem that Ariba has had with its channel partners in the sourcing area).

In addition to procurement transformation offerings, Iasta is embracing the term "cloud sourcing" to describe a range of other services they bring to bear. These include what they're calling strategic initiatives in the form of energy sourcing and management, green supply chain consulting, MRO transformation and procurement outsourcing. But they're also productizing other cost reduction services based around what they're terming Zero Budget impact programs. These are, in Iasta's words, "8 indirect categories that are difficult to source and are not conducive to auctions".

Zero Budget categories include pharmacy benefits sourcing (delivered via a coalition / GPO model) which delivers, on average, 8-10% savings). They also include non-medical benefits and telecom (both delivered via sourcing events with 7-22% and 15-30% average savings respectively). Other categories that fall under this umbrella include software contracting, MRO/safety supplies, print, fuel management and relocation services.

Iasta has not abandoned more discrete service programs in the least, however. They continue to deliver what they term "tactical sourcing" programs in the form of spend analysis services, sourcing services, optimization services and user training. They're also offering spend analysis as service (including data classification, report and spend assessment surveys), fully managed source services, and staff augmentation around category-specific opportunities. To deliver all of these capabilities, Iasta is leveraging a network of "some 100 consultants" many of whom bring either specific category experience (e.g., print) or other areas of expertise.

Stay tuned for additional analysis of Iasta -- including software enhancements and pricing trends / observations / levels -- as this series continues.

PART I

While I'm not an old man just yet -- even though some might say that I have my curmudgeonly tendencies, not to mention liking to get to bed hours before Letterman comes on -- I have been around the provider side of the Spend Management world long enough to see dozens of vendors move from writing their initial business plans into their formative years and later into additional stages of maturation. Such is the case with what used to be a small provider I always enjoyed talking to and catching up with, Iasta. I've known the founders of Iasta since before they knew me. When I was at FreeMarkets, Iasta initially set out to copy our full-service sourcing model (and they did succeed in undercutting us on price and winning deals from time to time, as various salespeople reminded me when asking: "Who the heck are these guys from Indianapolis.")

Back in those years Iasta's three founders were heck-bent -- that's Bible Belt / Indy speak for hell-bent -- on creating a viable business model. And while they weren't sourcing guys, they knew a good business model when they saw it. As I got to know Iasta's three founders and became friends with David Bush at the time, it became clear that the Iasta business model was evolving from one of full-service capabilities into a self-service sourcing platform (along the lines of Procuri, Bay Builder and others). Early on in this migration, Iasta competed primarily on price, but as its features and capabilities grew, they started to win deals on more than just their willingness to undercut FreeMarkets, Ariba, Emptoris, Procuri and others. In fact today, they're often among the pricier options in certain deals. But they continue to win more than their fair share of deals in the areas in which they compete (primarily e-sourcing, spend analysis and optimization).

Last week, I had the chance to catch up with Iasta at their reSource event roadshow, as it swung through Chicago. In a series of posts this week and next, I'll dig into how Iasta continues to morph as it grows at one of the fastest rates in the overall market. In this first post today, I'll tackle some of the basics regarding their history and growth, sticking to the facts and figures. But perhaps most important, as a first question to tackle, is how did three guys from Indy create a thriving business in the Spend Management world without outside investment and with little or no initial knowledge of how the sector worked?

They listened to customers, that's how. And this remains a strategy they continue to employ to this day. In fact, starting out in 2000 through 2002, they followed their customer's requests to focus on fully managed auctions. Then in 2003-2006, they rode the SaaS e-sourcing wave. And more recently, they've grown through both customer and solution diversification, in addition to pushing a core sourcing platform that continues to garner accolades from users.

Today, Iasta has approximately 100 customers using their applications. Most of these are typically Global 1000 companies. They also have 50 services clients today (with a strong overlap between the two areas). These numbers not only represent what's been a strong level of customer acquisition in recent years, but also strong revenue growth overall (which is a signal that e-sourcing and related markets aren't seeing the type of pricing pressure that many initially hypothesized they would).

In fact, Iasta has realized a trailing three-year growth rate of 256%. This includes 77% growth in 2008. In Q2 alone, they saw 121% growth between the 2008 and 2009. And they've signed 32 new clients year to date. Moreover, 27% of the recent quarterly growth has come from software license sales (which represent what over 90% of the time amounts to a perpetual annuity).

Compare these numbers with Iasta's competitors and you'll quickly realize this is a company that is on the move. Moreover, the growth is all the more impressive if you consider they've done it without any outside cash infusions. Iasta remains 100% owned by the management team. They've also not yet hit a commercial inflection point, needing to bring in a truly heavy hitter in the sales area. So in other words, not only is all of this growth truly organic and real, it's evolved without the typical investments in sales, marketing and other areas that often require millions of dollars in a Series B financing round.

Stay tuned for the rest of this series looking at Iasta's growth. Next-up: a quick-hit investigation of Iasta's platform and related sourcing services.