February 27th, 2005
Rearden Commerce transforms business services
Patrick Grady, the founder and CEO of the newly minted Rearden Commerce, likes to tell his story–a tale of perseverance, technology innovation and business acumen in the risky enterprise software business. A venture capital investment of $42 million plays a key role in the story, as well as the company’s unique, and likely successful, product–an XML/Web services-based commerce platform for orchestrating and automating travel, package shipping, conferencing and other business service requests for corporate employees and consumers.
Grady told me about founding his company in November of 1999 at the tail end of the Internet bubble, and then operating in stealth mode for the next five years. He explained that he kept the company under the radar during 58 months of R&D to deter potential competitors and because of what he termed the "extreme audacity" of his undertaking. "Many failed very visibly and publicly," Grady said, citing General Magic and HP’s eSpeak as inspirational predecessors who developed personalized service platforms for end users. General Magic developed a communications-oriented language for distributed applications and intelligent agents and an object-oriented operating system for PDAs. The big idea was to let users create agents that would perform tasks on their behalf. Unfortunately, General Magic was pre-Internet and its ambitious remaking of computing and communications software flamed out. HP Labs created eSpeak, a middleware platform described as a universal language for services on the Internet. Grady credits the failure of eSpeak to a lack of an application that met real world requirements. You can add Microsoft’s aborted Hailstorm to the list as another attempt to personalized services for users with XML and Web services.
So how did Grady evade the unfortunate fate of his predecessors? I wouldn’t call it extreme audacity–more a mix of luck, pluck, patience, practicality and smarts. Nor has he been as stealthy as he claimed. In the last quarter of 2003, Grady’s company issued press releases, white papers, launched a Web site and conducted a Web seminar that described the firm (then called Talaris) as "the leader in employee business services (EBS) procurement, delivering a new class of solution with a hosted, Web services-based platform that enables enterprises to gain visibility and control of EBS spend."
It’s easy to be the leader in a new category you invented. The description is more apt today as product has evolved, XML Web services technology has matured, and the company has several blue chip, paying customers, including Cingular, Genesys, JDS Uniphase, Motorola, Warner Music, and Whirlpool.
Grady and his team have succeeded so far because they focused on delivering a solution that customers actually needed, rather trying to blaze a new trail with a new operating system or an under-cooked, visionary product concept. His company tackled a problem common to all corporations–dealing with a disparate set of business service providers, each with its own application interface, access management, and integration requirements. Gaining visibility into spending levels and policy compliance or switching vendors for business service procurement is a complex, costly ordeal.
"The applications are in different silos, with no interoperability or integration with calendars, address books and devices. It’s a big hairball," Grady said. "At macro level, you reach a state of diminishing returns. With the introduction of each successive application, the adoption rate goes down. Contained in applications are the business rules, polices and negotiated rates a company has sourced with vendors. If employees don’t use the applications, lots of money is lost."
Maverick spending–employees not using the sanctioned services with negotiated contract rates–and unmanaged services with no contracts in place for preferred suppliers can account for up to two-thirds of a company’s business service spending, Grady said.
At the core of Rearden Commerce’s EBS application is the notion that many of the functions across different business services can be abstracted and encapsulated as reusable Web service components. "There are scores of common characteristics among services. We cracked the code and took the time on the design side to understanding common traits," Grady said. "Web services are no cure-all. We are on the ground with real knowledge of the system, and we have had to master not just [Web] services, but also calendaring, notification, invitations, voice and how to orchestrate and interoperate."
The XML-based, event-driven Rearden Commerce technology platform provides the infrastructure for the applications, with schema definitions and business logic for service categories (e.g., car rental, air travel, package shipping) and for notifications, service workflow and orchestration of multiple processes. It also provides common APIs across all the services for handling events, such as checking availability, reserving, booking, purchasing and cancellation, as well as hooks for tying into directories and e-mail and financial accounting systems. The platform also handles concepts such as users, groups and time periods. Components in the registry of Web services can be used to spawn new applications.
When a user requests a dinner meeting with colleagues in a different city via the Service Assistant application, the Rearden Commerce platform asynchronously works behind the scenes; checks the user’s profile and adherence to corporate policies; contacts suppliers for flight, car, hotel and dinner reservations; invites the other parties; updates multiple calendars; and sends notifications to preferred inboxes and devices. The system also monitors for delays, cancellations and other request-related events and sends the appropriate notifications.
A next phase of the software could go even further in providing personalized services. If the user’s profile includes information about sports, music and movie interests, for example, the Rearden Commerce platform could alert the user to events, such as baseball games, concerts and movies, at the locations where the user will be. It could book tickets, facilitate invitations to friends or business clients. If the system were more intelligent, it could determine that the user always books a car service in a particular city, tie it to an event and make the reservation without any intervention from the user.
Rearden Commerce’s Services Console interfaces with business services and allows IT departments to set up granular business rules and spend policies. For example, a company can disable suppliers by division, department or other categories, or integrate spend requests with approval processes and financial systems.
The Services Grid deals with the integration of business service suppliers. Without a critical mass of suppliers, Rearden Commerce would fall on its face, and so far Rearden Commerce has pre-qualified (with service-level contracts) major suppliers, with access to 80,000 hotel properties, over 530 airline carriers, more than 50,000 restaurants.
Rearden Commerce is a hosted, multi-tenant service, similar to salesforce.com. All services are provided through a Web interface. Subscription fees for large corporate customers average about $1.5 million per year, Grady said, and are typically three- to five-year deals. Annual subscription fees for smaller mid-market companies will average $300,000 to $350,000 per year. Rearden Commerce doesn’t take any piece of the transactions or negotiate rates for its corporate customers.
Nor does the company allow customization of its platform by individual service providers. However, Rearden Commerce achieves a nice network effect for adding new features. If a travel service provider, for example, must have a new feature due to customer demand, Rearden Commerce assesses the request, and it if makes sense, builds it into the master schema so all travel service providers and customers get the new feature, whether they like it or not.
For both corporations and business service providers, the ROI proposition for Rearden Commerce’s solution is attractive. The company claims a 20 percent savings by channeling requests through the system as well as up to 50 percent cost savings in the self-service approach. Even if their cost benefit analysis is half right, the concept should spur enterprises spending tens or hundreds of millions of dollars on employee-initiated services to make some calculations.
As part of its roll out this week, Rearden Commerce also announced a partnership with Hewlett-Packard. As part of its business process outsourcing (BPO) service, HP will initial sell the EBS application and share revenue with Rearden Commerce. In addition, the two companies are doing joint development to build native on-demand applications on the Rearden Commerce platform, Grady said. Initial projects could be around procurement applications for temporary labor and contract manufacturing. The company has a development toolkit that reduces the time and cost to build applications compared to other platforms, Grady said.
Grady is also going after consumer customers, working with online portals, wireless carriers and device vendors. "Portals have high attrition rates. They need sticky applications," Grady said. "We won’t build a destination site–it’s too expensive–but we will let others repurpose our platform. The only distinction [from the current EBS application] is corporate rules, and we can add more personal service and have an on demand concierge." Individual users could set up their personal profiles and let the Rearden Commerce engine do their bidding for various business and personal services. In this model, Grady said his company would take a piece of the transaction.
Grady has a lot of ambition and confidence in his technology and business model. "Many key industry players need standards to transact. There is one eBay, one Amazon, only four airline applications, which will rationalize to one or two vendors. We will be one of the gorillas," Grady said. The company is building its patent portfolio and expanding its customer base and staff (currently 105 people headquartered in San Mateo, CA), signing strategic partnerships, and looking to expand outside the U.S. Grady also said that some corporate customers, such as Motorola, would become investors in the company.
Rearden Commerce may not join eBay, Amazon and Google in the pantheon of companies significantly changing the global economy, but Grady understands what it takes to win in his space. "We will be lowest cost provider of services because of the stack we built," he said. If it can get a critical mass of business and consumer service providers and customers to map into the software stack, Rearden Commerce just might live up to its hype.
Dan Farber, editor-in-chief of CNET News.com, has more than 20 years of experience as an editor and journalist covering technology. See his full profile and disclosure of his industry affiliations.
