The Supply Management Market Sizing Report, 2007 2012

Supply Management 2008 Market Sizing Series The Supply Management Market Sizing Report, 2007 2012 by Mickey North Rizza, Marianne D Aquila, and Karen Carter The supply management market grew 11% in 2007. Sustained double-digit growth will continue, with technology vendors and service providers answering the call for immediate supply management value with simplified business processes, cost containment and reduction, and cash acceleration. Market Services Report

List of Tables Table 1: Supply management vendors ranked by application revenue, 2006-2007 6 Table 2: Supply management vendors ranked by license and alternative pricing revenue, 2006-2007 7 Table 3: Supply management application revenue and share by revenue type, 2006 2007 9 Table 4: Supply management license revenue and alternative pricing revenue share by application segment, 2006 2007 13 Table 5: Supply management license and alternate pricing revenue and share by customer company size, 2006 2007 15 Table 6: Supply management license revenue and alternate pricing revenue and share by geographic region, 2006 2007 16 Table 7: Supply management application revenue estimate by revenue type, 2007 2012 21 Table 8: Supply management application revenue share by revenue type, 2007 2012 21 Table 9: Supply management application revenue growth rates by revenue type, 2007 2012 21 Table 10: Supply management application revenue estimate by application segment, 2007 2012 22 Table 11: Supply management application revenue share by application segment, 2007 2012 22 Table 12: Supply management application revenue growth rates by application segment, 2007 2012 22 Table 13: Supply management application revenue estimate by geographic region, 2007 2012 23 Table 14: Supply management application revenue share by geographic region, 2007 2012 23 Table 15: Supply management application revenue growth rates by geographic region, 2007 2012 23 List of Figures Figure 1: The supply management application revenue estimate, 2007-2012 2 Figure 2: Supply management vendor license and alternate pricing revenue share, 2007 8 Figure 3: Supply management application revenue and share by revenue type, 2006 2007 9 Figure 4: Supply management license and alternate pricing revenue and share by application segment, 2007 13 Figure 5: Supply management license and alternate pricing revenue by customer company size, 2007 15 Figure 6: Supply management license revenue and alternate pricing revenue and share by geographic region, 2007 16 Figure 7: Top 10 supply management vendors by 2007 total revenue share 19 Copyright 2008 by AMR Research, Inc. AMR Research is a registered trademark of AMR Research, Inc. No portion of this report may be reproduced in whole or in part without the prior written permission of AMR Research. Any written materials are protected by United States copyright laws and international treaty provisions. AMR Research offers no specific guarantee regarding the accuracy or completeness of the information presented, but the professional staff of AMR Research makes every reasonable effort to present the most reliable information available to it and to meet or exceed any applicable industry standards. AMR Research is not a registered investment advisor, and it is not the intent of this document to recommend specific companies for investment, acquisition, or other financial considerations. This is printed on 100% post-consumer recycled fiber. It is manufactured entirely with wind-generated electricity and in accordance with a Forest Stewardship Council (FSC) pilot program that certifies products made with high percentages of post-consumer reclaimed materials.

The Supply Management Market Sizing Report, 2007 2012 by Mickey North Rizza, Marianne D Aquila, and Karen Carter Buyer focus on cost containment and reduction, coupled with cash acceleration requirements, will continue to shape the supply management market. The Bottom Line Executive Summary The revenue shift from license to software as a service (SaaS) and other services has helped to fuel the supply management market s global growth. Buyers are increasingly looking to ensure business process workflows are streamlined so that greater strategic value can be derived from supply management technology. Buyer vigilance on cost containment and reduction as well as cash acceleration continues to push technology vendors toward helping customers generate more insight from and make better use of strategic information that cuts across functional boundaries. Vendors have responded with innovation and functional enhancements to meet the demand, which resulted in sustained doubledigit growth in 2007. Tough economic conditions bring a stronger emphasis to cost reduction and containment. They also continue to propel the sourcing market the largest supply management market segment. Indirect procurement, the second largest segment, provides opportunities for buyers to put more spend under management control, another key objective in challenging economic times. SAP and Oracle continue to dominate the supply market, with SAP leading in total revenue. It should be noted, however, that the euro conversion to the U.S. dollar inflates the growth rate. Oracle maintains its No. 2 position just ahead of Ariba, a bestof-breed suite vendor. When compared by license and alternate pricing revenue market share, however, SAP is the leader by a small percentage, followed closely by Ariba and Oracle. Ariba s second place finish in license and alternate pricing revenue market share clearly articulates the technology value Ariba is providing to the market. The revenue segment rankings also indicate that SAP and Oracle have gained market share by adding consulting and custom services as well as software maintenance. ERP vendors continue to emphasize their one-stop-shopping model, appealing to the C-level buyer, a community that is beginning to include the CFO because of the finance and supply management integrated touchpoints that ERP provides. Providing the financial backbone of the organization, the ERP vendors are now connecting the dots between supply management and finance for all types of spend. The best-of-breed vendors are expanding their functionality across an extended ecosystem of technology Supply Management Report 2008 Market Sizing Series 2008 AMR Research, Inc. 1

capabilities and buyer organizational functions, enhancing their value to the C-level executives. This expansion is necessary to streamline workflows across organizational functions in an effort to reduce and contain costs across the business. Forgiven these factors, the outlook for the supply management vendors and service providers looks bright. Driven by enhanced supply management functionality that cuts across business functions and better end-to-end demand spend signals throughout the supply management function, we project the supply management market to grow at 10% CAGR, becoming a $4.3B market in 2012. Figure 1: Supply management application revenue estimate, 2007-2012 $5B $4.3B $2.7B $3.0B $3.3B $3.6B $3.9B 2007 2008 2009 2010 2011 2012 Acronyms and Initialisms BIP Buyer-initiated payment CAGR Compound annual growth rate CLM Contract lifecycle management EIPP Electronic invoice payment and presentment ERP Enterprise resource planning GTM Global trade management HCM PLM ROI SaaS SIP SPM SRM Human capital management Product lifecycle management Return on investment Software as a service Supplier-initiated payment Supplier performance management Supplier relationship management 2 2008 AMR Research, Inc. Supply Management Report 2008 Market Sizing Series

The 2007 Supply Management Market Companies are becoming more demand and value driven, emphasizing the delivery of value, growth, and profitability in cost-to-serve models. The emphasis from inside to outside in and across the extended enterprise is forcing companies to look at their capabilities across functions and their supply networks. In response to these changing requirements, supply management vendors are innovating and extending their product and service portfolios to capitalize on the opportunity. This extension is evident in improved supplier collaboration, product lifecycle management (PLM) functionality, the addition of highly developed global sourcing and trade management abilities, and financial spend management process capabilities. These extensions will force changes in the supply management function as technology enables access to more information across traditional business processes and functions that can be used to generate insight. The focus now is on closing the gaps across functions that impede working capital, reliable supply, risk mitigation, and cost containment. Findings and analysis ERP providers continue to dominate the supply management market. The sourcing and indirect procurement segments are the primary drivers of their growth. SAP continues to dominate in sourcing and procurement. However, this lead is small in percentage terms when deployment models are compared. The 2005 Frictionless Commerce sourcing acquisition aided SAP s supply management sales in 2007, since the much anticipated release of SRM 2007 was delayed. The Frictionless Commerce product, now called E-Sourcing, saw a huge boost in sales with the delayed release of SRM 2007. We expect SAP to post strong growth again in 2008, with new releases of contract management, spend analytics, and E-Sourcing midyear, not to mention the upcoming release of SRM 7.0 that is tied to the SAP Business Suite later in the year. Oracle remains in second place in terms of total revenue, but falls to third behind best-of-breed suite Ariba when excluding service revenue. SAP and Ariba have articulated the deployment option value of SaaS and license to the savvy supply management buyer. Oracle may want to follow their lead in terms of providing and marketing deployment model options. Supply Management Report 2008 Market Sizing Series 2008 AMR Research, Inc. 3

Another significant finding in our study this year was the movement of the best-ofbreed applications. Basware, a European best-of-breed suite vendor, emerged in the U.S. market. Basware will give Ariba and Perfect Commerce long awaited competition. With the Ariba acquisition of Procuri and the emergence of Basware, Emptoris fell from sixth to eighth. Emptoris is still focused on its core sourcing suite and supplier performance management capabilities. However, expectations are that Emptoris won t sit still this year as it seeks to gain more market share. Watch for partnerships or acquisitions in 2008 and 2009 with Emptoris in the mix. Ariba, barely in third place, is projected to move to second now that SaaS is firmly in place and finally driving revenue. Quadrem International, a transaction delivery network that ties in best-of-breed suite functionality with sourcing and procurement, has moved up because of its web services. Watch for continued revenue growth from Quadrem because of ongoing functionality improvements. BravoSolution has moved onto the list after its acquisition of Verticalnet. BravoSolution s save of the Verticalnet sourcing product enhances its supply management portfolio immensely. The acquisition came at the right time for Verticalnet, which was on the verge of bankruptcy. Companies suffering the largest total decline in 2007 include i2 Technologies, which saw a revenue drop of 7%, NewlineNoosh with a 13% drop, and Perfect Commerce with a 21% drop. AT Kearney also fell with the completion of its technology product transfer to UGS, now Siemens. However, AT Kearney s overall sourcing practice continues to grow and dominate the sourcing market. i2 dropped largely because of its slow conversion onto its ABPP platform in supplier relationship management (SRM) and with its change to a more managed service approach. Perfect Commerce merged with Cormine, but kept the Perfect Commerce name. While the acquisition aided the company, the numbers are still lower than expected. It is regrouping and will be a potential partner for supply chain vendors. These shifts reflect the market forces of consolidation and penetration, and AMR Research expects more of the same this year. The vendors will continue to make meaningful advances in functionality and connecting functions and technologies across the organization. Watch for the addition of capabilities that provide the following: More collaborative commerce and visibility across all spend types, functions, and supply partners Greater global sourcing capabilities, including the connection of the total cost equation and management of the global trade management areas, such as lines of credit, export documentation, and track-and-trace capabilities PLM functionality Data management of multisystem supplier information 4 2008 AMR Research, Inc. Supply Management Report 2008 Market Sizing Series

Spend financing, including purchase cards, buyer/supplier initiated payment (BIP/ SIP), payment terms management such as dynamic discounting, electronic invoice payment and presentment (EIPP), third-party financing, and settlement options. Most of these capabilities are extensions of supply management, design, or supply chain management applications. These changes ultimately expand the number of potential buying centers or points of influence for supply management vendors to include commodity managers, directors, and vice-presidents that report to CPOs, CFOs, CEOs, COOs, and CSOs. Currency conversion AMR Research s methodology converts revenue from companies reporting currencies to dollars using the average exchange rate over the four quarters. The exchange rate between the U.S. dollar and the euro went from 1.25 in 2006 to 1.37 in 2007. Therefore, some companies in Table 1, like SAP, show inflated growth because of currency exchange. While detailed transactional analysis would be needed to do a more rigorous analysis, AMR Research has estimated the effect of currency conversion here: Looking specifically at the euro as an example, SAP year-over-year growth in euros would be 9% (13% as reported in constant currencies) and 19% with AMR Research s currency conversion. SAP and other European countries are adding an approximate uplift of 10% to their year-over-year growth and their contribution to the overall market. Supply Management Report 2008 Market Sizing Series 2008 AMR Research, Inc. 5

Table 1: Supply management vendors ranked by application revenue, 2006-2007 2007 Rank Company, 2006 ($M), 2007 ($M) 2006 2007 2006-2007 1 SAP 400 520 17% 19% 30% 2 Oracle 302 332 13% 12% 10% 3 Ariba 297 302 12% 11% 2% 4 Basware 75 100 3% 4% 34% 5 Lawson 84 97 4% 4% 15% 6 BravoSolution 59 61 2% 2% 3% 7 Dun & Bradstreet 57 60 2% 2% 5% 8 Emptoris 58 59 2% 2% 1% 9 ICG Commerce 39 50 2% 2% 28% 10 i-many 30 41 1% 2% 39% 11 Agresso 29 40 1% 1% 38% 12 Quadrem International 29 38 1% 1% 31% 13 IBS 35 37 1% 1% 5% 14 Aldata Solution 29 29 1% 1% -1% 15 i2 Technologies 28 26 1% 1% -7% 16 Accruent 21 25 1% 1% 19% 17 Agentrics 25 25 1% 1% 2% 18 AMEX-S2S 24 25 1% 1% 4% 19 SciQuest 16 23 1% 1% 44% 20 Hubwoo 20 22 1% 1% 12% 21 Infor 21 22 1% 1% 4% 22 Upside Software 15 21 1% 1% 40% 23 NewlineNoosh 23 20 1% 1% -13% 24 IQNaviagator 19 19 1% 1% 0% 25 Perfect Commerce 19 15 1% 1% -21% 26 CombineNet 11 14 0% 1% 27% 27 A.T. Kearney* 51 0 2% 0% -100% Subtotal 1,816 2,024 76% 76% 11% Other Supply Management Vendors 584 647 24% 24% 11% Total 2,399 2,671 100% 100% 11% Note: See the currency conversion sidebar for more on the revenue figures. * Technology platform no longer sold 6 2008 AMR Research, Inc. Supply Management Report 2008 Market Sizing Series

Table 2: Supply management vendors ranked by license and alternate pricing revenue, 2007 2007 Rank Company, 2007 ($M) 2007 1 SAP 172 15% 2 Ariba 153 13% 3 Oracle 142 12% 4 Emptoris 39 3% 5 Basware 35 3% 6 Quadrem International 33 3% 7 BravoSolution 26 2% 8 Agentrics 24 2% 9 SciQuest 20 2% 10 Hubwoo 17 2% 11 Lawson 16 1% 12 Dun & Bradstreet 15 1% 13 AMEX-S2S 15 1% 14 IQNaviagator 15 1% 15 Aldata Solution 12 1% 16 Upside Software 11 1% 17 Perfect Commerce 11 1% 18 NewlineNoosh 10 1% 19 CombineNet 9 1% 20 Agresso 8 1% 21 IBS 8 1% 22 i-many 7 1% 23 Accruent 7 1% 24 i2 Technologies 5 0% 25 Infor 5 0% 26 ICG Commerce 0 0% Subtotal 815 69% Other Supply Management Vendors 362 31% Total 1,177 100% Note: See the currency conversion sidebar for more on the revenue figures. Supply Management Report 2008 Market Sizing Series 2008 AMR Research, Inc. 7

Figure 2: Supply management vendor license and alternate pricing revenue share, 2007 SAP 15% Other 43% Ariba 13% Hubwoo 2% SciQuest 2% Agentrics 2% BravoSolution 2% Oracle 12% Emptoris 3% Basware 3% Quadrem International 3% Supply management revenue segments and market channels, 2007 Best-of-breed vendors derived a larger percentage of revenue from technology deployment versus the ERP vendors whose revenue was largely from implementation, service, consulting, and custom development. Technology vendors that added more in managed services and consulting achieved greater revenue than technology-only vendors. ERP vendors application revenue share for license and alternate pricing was from 30% to 42%, while best-of-breed players ranged from 51% to 83%. Driven in part by the emphasis on SaaS, revenue from licenses and alternate pricing grew 11% year over year, accounting for 44% of total revenue. The implementation, services, consulting, and custom development area accounts for 34% of the total revenue and grew 10%. Numerous companies will continue to capitalize in this area, such as Accenture, Ariba, Capgemini, Connell Sourcing, Corbus, CGI, Genpact, Global eprocure, ICG Commerce, Infosys, Satyam, Spinnaker Management, Wipro, and XChanging. Software maintenance continues to plug along at 21% of the market, growing with the market at 15% and in line with the ERP vendor revenue growth and renewals. Supply management applications are typically sold direct to companies by the vendor, though many deployments are also done by service providers. Most of the service provider sales are currently for license deployment models only, though this will continue to expand into SaaS models in 2008. 8 2008 AMR Research, Inc. Supply Management Report 2008 Market Sizing Series

Table 3: Supply management application revenue and share by revenue type, 2006-2007 Type Application Software Licenses and Alternate Pricing, 2006 ($M), 2007 ($M) 2006 2007 2006-2007 1,057 1,177 44% 44% 11% Application Software Maintenance 488 561 20% 21% 15% Implementation/Service/Consulting/ Custom Development 820 898 34% 34% 10% Other 34 35 1% 1% 3% Total 2,399 2,671 100% 100% 11% Figure 3: Supply management application revenue share by revenue type, 2007 Implementation/ n/ Service/Consulting/ Custom Development 34% Other 1% Application Software Licenses and Alternate Pricing 44% Application Software Maintenance 21% Supply Management Report 2008 Market Sizing Series 2008 AMR Research, Inc. 9

Supply management application segments, 2007 AMR Research s 2007 quantitative survey reviewed six functional submarkets: sourcing, indirect procurement, direct procurement, contract management, financial settlement, and supplier performance management. Four of the six areas posted double-digit market share in 2007. Here we look at each submarket. Sourcing Sourcing, the largest application segment, continues to lead the pack for the fourth consecutive year, with a 35% share of the market. This market application segment doubled in one year. With the globalization of business, we expect this segment to remain vibrant as companies continue to source globally and streamline business processes across the world. Leaders in sourcing include Ariba, Agentrics, AT Kearney, BravoSolutions, Basware, CombineNet, CGI, Dun & Bradstreet, Emptoris, Hubwoo, Iasta, ICG Commerce, Oracle, Perfect Commerce, Quadrem, SAP, and Zycus. Companies need sourcing tools that enable the cycle-time reduction of the total spend, RFX, negotiation, analysis, and award segments. Sourcing products provide either pure negotiation and award or a suite of products. The pure negotiation may include an optimization engine that quickly analyzes the supplier s bids, and in some cases can automatically award the business. Suites may include spend analysis, project tracking, negotiation, award, and contract management. With technology enhancing the business process, users can now quickly strategize, plan, and achieve cost reduction or containment on anything that is purchased. Sourcing is the quickest ROI application segment, providing immediate savings from 10% to 35% in the first few sourcing events. And in a period of rising prices, sourcing suites are the quickest way to find savings. This upstream technology is a sure bet for every company that needs cost savings and containment. Watch for the functionality to expand, adding global trade management (GTM) and PLM for even greater returns on the front end of the global sourcing process. This area is primed for partnerships, mergers, and acquisition. Indirect procurement Indirect procurement management is the second largest segment at 27%, and it grew by 25% in one year. ERP providers Agresso, Lawson, Oracle, and SAP had the greatest portion of their supply management revenue from this area. Best-of-breed leaders include American Express, Aravo, Ariba, Basware, Click Commerce, Elcom, Hubwoo, IQNavigator, Ketera, Perfect Commerce, Proactis, PurchasingNet, Puridom, Quadrem, Rearden Commerce, SciQuest, and Tblox. 10 2008 AMR Research, Inc. Supply Management Report 2008 Market Sizing Series

Share in this segment will be maintained as continued emphasis is placed on indirect goods and services across all functions of the organization an area that has largely been ignored. New catalog functionality will allow for increased buyer speed and flexibility. Finally, continued emphasis on services procurement to put more spend under management will continue to drive healthy performance of this segment. Direct procurement The direct materials procurement segment share was 14% in 2007. SAP and Oracle led with their license revenue products, with Agresso, Infor, i2 Technologies, and Lawson making up the bulk of the rest of the market. NewlineNoosh, MFG.com, and Perfect Commerce were the leaders in alternate license deployment models for direct materials. Direct materials will continue to experience growth as companies require greater functionality to enable demand- and value-driven models focused on cost to deliver and cost to serve. Collaborative commerce requirements with suppliers around forecasts, orders, planning, purchase orders, contracts, and multilevel supply visibility will aid this expansion. Companies such as e2open and SAP with its SNC product are leading this expansion effort. In addition, watch for ERP companies to finally provide access to all spend types by integrating purchase order functionality of direct and indirect materials in one area. Contract management Contract management represents 8% of the market, and the best-of-breed vendors Ariba, Emptoris, i-many, Nextance, Selectica, and Upside Software lead this segment. Meanwhile, the ERP vendors vary on product functionality and maturity. Oracle s product has been available for quite awhile, but SAP and Lawson are the vendors gaining traction against the best-of-breed vendors. Watch for greater functionality as companies find that contract management is a necessity across sales, supply management, and legal. The best-of-breed vendors are leading because they figured out how to market and sell into these three areas. AMR Research expects continued consolidation of this area into upstream sourcing suites or to contract lifecycle management (CLM) applications that can be used by the sell side, buy side, and legal functions. The future suggests that contract management applications will replace purchase orders on the buy side. The purchase order will then be relegated to work order and transactional status indicators at that time. Supply Management Report 2008 Market Sizing Series 2008 AMR Research, Inc. 11

Financial settlement Financial settlement held 14% of the market, increasing substantially last year, mostly because supply and finance are finally coming together. Segment share will surge once companies understand when and how to use a p-card, EIPP, terms management including dynamic discounting, buyer/supplier initiated payments, and third-party financing. Vendors providing clarity in this message and differentiating their products according to spend type work streams will see greater adoption and gains. Enhancing the financial settlement area is the trend of vendor investment in connecting the financial workflows that are an integral part of procurement and spend management. These financial workflows have typically been dumped into the finance area and not bridged as one business process. AMR Research believes spend financing will be the bridge between expense management, spend management, and supply chain with Treasury and the office of the CFO. AMR Research expects more announcements of partnerships, mergers, and acquisitions in 2008. American Express, Ariba, Bank of America, Citibank, Crossgate, Demica, GE Capital, JP Morgan Chase, Mastercard, OB10, and Prime are some of the notable vendors with a presence in this segment. Supplier performance management Supplier performance management (SPM) constitutes 1% of the supply management market. Companies such as Ariba with its Procuri acquisition, Compliance Networks, Emptoris, IQS, and Tier Connect have a strong presence in SPM. The ERP vendors have the functionality to track it, but they do so as part of other packages. This area will grow, but will most likely be merged into a business suite that includes supply management, ERP, manufacturing, and quality. Vendors needing an advantage in supply management may consider adding SPM functionality. 12 2008 AMR Research, Inc. Supply Management Report 2008 Market Sizing Series

Table 4: Supply management license and alternate pricing revenue and share by application segment, 2007 Application Segment, 2007 ($M) 2007 Contract Management 98 8% Direct Procurement Management 171 14% Financial Settlement 164 14% Indirect Procurement Management 319 27% Sourcing 415 35% Supplier Performance Management 11 1% Total 1,177 100% Figure 4: Supply management license and alternate pricing revenue share by application segment, 2007 Supplier Performance Management 1% Sourcing 35% Contract Management 8% Direct Procurement Management 54% Financial Settlement 14% Indirect Procurement Management 27% Supply Management Report 2008 Market Sizing Series 2008 AMR Research, Inc. 13

Supply management revenue and market share by company size and geography, 2007 The supply management license and alternate revenue and market share by company grew 45% in the $1B or more customer revenue market. Large companies are changing and switching out their outdated products for new supply management products that have greater functionality and broader capabilities. In fact, AMR Research sees a 40% increase in buyer interest of supply management products. Buyers want knowledge of technology and service providers, their differentiators, their customers, and their ROI. The geographical market with the largest growth in 2007 was North America at 53%, a shift from Europe as the leader in 2006. Europe continued to grow, but at a smaller pace than North America. Clearly North America and Europe are leading the pack on supply management technology and service provider investment. Asia-Pacific and Central America saw some growth, but in only single percentage increments. Both of these areas are expected to grow, with continued emphasis on low-cost country regions and global sourcing initiatives. 14 2008 AMR Research, Inc. Supply Management Report 2008 Market Sizing Series

Table 5: Supply management license and alternate pricing revenue and share by customer company size, 2007 Customer, 2007($M) 2007 Less than $30M 196 17% $30M to $250M 163 14% $250M to $1B 285 24% $1B or More 533 45% Total 1,177 100% Figure 5: Supply management license and alternate pricing revenue share by customer company size, 2007 Less Than $30M 17% $1B or More 45% $30M to $250M 14% $250M to $1B 24% Supply Management Report 2008 Market Sizing Series 2008 AMR Research, Inc. 15

Table 6: Region Supply management license and alternate pricing revenue and share by geographic region, 2007, 2007 ($M) 2007 North America 624 53% Europe 388 33% Asia-Pacific 106 9% Latin America 41 4% Rest of World 18 2% Total 1,177 100% Figure 6: Supply management license and alternate pricing revenue share by geographic region, 2007 Latin America 4% Asia-Pacific 9% Rest of World 2% Europe 33% North America 53% 16 2008 AMR Research, Inc. Supply Management Report 2008 Market Sizing Series

Supply management technology trends, 2007 Supply management applications span multiple license and delivery methods: licensed, hosted, SaaS, and on premise. Hosted is a broad term encompassing any software application offered and managed by a third-party provider. SaaS is subscription software that is delivered on demand and not behind a firewall. On premise is a product that is placed on site, typically behind the firewall, and is usually licensed. The traditional license model still retains the largest share of the overall market, and the ERP vendors command the leading share; however, SaaS is gaining traction. Sourcing has been the primary source for SaaS adoption in supply management, followed by indirect procurement and contract management. In contrast, financial settlement represents the lowest SaaS deployment share in supply management. The 2007 supply management market structure SAP, Oracle, Ariba, and Basware are the top tier of vendors in the supply management market, with 47% of total revenue coming from companies with revenue of $100M or more. The second tier ranges from $97M to $37M, and the third tier (next 10) ranges from $29M to $19M. The remaining 72 vendors are $18M and below. SAP and Oracle dominate the top tier. They lead the market in license revenue. SAP has also achieved recent success in alternative deployment with SaaS. Ariba, third in the top tier, has successfully made the transition to two revenue models and, as predicted in our 2006 market sizing Report, has closed the gap significantly with the ERP vendors. Basware, rounding out the top tier, will be a strong competitor to Ariba and will win more deals from SAP and Oracle. The second tier of providers includes Emptoris, Dun & Bradstreet, IBS, ICG Commerce, and Lawson. Newcomers BravoSolution, i-many, Agresso, and Quadrem have been the beneficiaries of revenue that could have propelled the previous second tier providers to the top. And AT Kearney fell out of this tier as a result of its technology sale. The $29M-and-under crowd represents a populated field and potential fertile territory for mergers and acquisitions. Among its members: Aravo has a supplier information management technology that provides supply management executives with information across all aspects of supply management. Appealing to value-driven organizations that need supply information across disparate systems, Aravo fulfills a major organizational need. Watch for the ERP vendors to bring forward more master data intelligence across their applications. CVM Solutions offers spend analytics tied to supplier diversity programs, and appears to be making a difference to companies that need to better understand their spend. Supply Management Report 2008 Market Sizing Series 2008 AMR Research, Inc. 17

Coupa offers open source procurement solutions for small organizations and for those companies that wish to tie procurement as a service to Amazon EC2/S3. Workday and Fieldglass provide human capital management (HCM) applications with procurement services elements that tie the human resources and procurement business processes. Co-Exprise, Apriori, and Siemens UGS are three companies that tie direct materials into the sourcing process. Their products tie the product and component reviews to the sourcing process, providing the engineering and sourcing resources for a collaborative platform and environment. Agentrics, Centric Software, EcVision, Eqos, NGC, Rockblocks, Tradestone, and Zymmetry are retail-specific sourcing applications providing sourcing visibility that is dramatically different from standard sourcing and procurement applications. These products encompass direct materials sourcing, planning, execution and collaboration technologies. i-many, Nextance, Selectica, and Upside Software focus specifically on contract management. The emphasis for each of these vendors is on buy- and sell-side contract management in conjunction with the legal services entity in an organization. This three- pronged approach, when executed well, will position these vendors well in a growing market. Capital Business Credit, Demica, GE Capital, Prime, and Orbian are just a few of the suppliers in the financial settlement area that extend out supply financing functionality. With their third-party financing abilities, a buyer can have an impact on working capital. These companies represent strong partnership opportunities for supply management and supply chain vendors as they move up the value chain. Iasta, a sourcing vendor, continues to gain market share that once was mainly Procuri s. Since Ariba s acquisition of Procuri, Iasta is grabbing customers that prefer sourcing niche vendors with more focused service. Nextlink, Tradebeam, and Tradecard are GTM vendors with functionality that ties into sourcing platforms. Watch for these vendors and others like them to partner with traditional sourcing vendors that want to push out functionality globally. Zycus, a spend analytics vendor, is gaining more market share with the importance placed on supply visibility and with new sourcing functionality. 18 2008 AMR Research, Inc. Supply Management Report 2008 Market Sizing Series

Figure 7: Top 10 supply management vendors by 2007 total revenue share Other 39% SAP 19% Oracle 12% i-many 2% ICG Commerce 2% Emptoris 2% Dun & Bradstreet 2% Ariba 11% Basware 4% Lawson BravoSolution 4% 3% Supply Management Report 2008 Market Sizing Series 2008 AMR Research, Inc. 19

The Supply Management Market Forecast, 2007 2012 We expect the supply management market to grow at 9% CAGR through 2012. Innovation and technology enhancements that close business process gaps between the current functions will propel the market to projected revenue of $4.3B in five years. Technology vendors and service providers will have to step past traditional market boundaries into the uncharted waters of finance, PLM, and global trade management. Finance provides the backbone to supply management spend types, connecting the transactions to the dollars. Financial spend management will move supply management into the financial world as a major contributor to the balance sheet and income statement. Sourcing vendors will reap benefits from tying their applications to PLM, challenging ERP vendors to keep up. GTM functionality will also enhance sourcing suites as well as the finance and supply chain functions, but not until further market consolidation occurs. We project continued growth in license and alternate pricing, resulting in a 53% share in 2012. Implementation services, consulting, and custom development are projected to hold steady at 30% through 2012. The highest growth segments over the next five years will be sourcing (10% CAGR) and indirect supply management (11% CAGR). Contract management will grow substantially in 2009 and 2010 as buying companies finally get the message on this application s strength. Contract management technology assists the buy, sell, and legal functions within an organization. It brings forward the organization s ability to predict, protect, and defend its position; it is also bringing a risk mitigation tool. If direct materials management starts to span PLM, supply chain planning and execution, global trade management, and sourcing, the segment will quickly pick up traction and grow. Our belief is that this will start to occur in the next few years. Financial settlement is expected to be a big growth area, but may be impacted by the required education that must happen across finance and supply management. SPM will also continue to grow, but not at its full potential until companies understand how it can assist in sourcing and global trade strategies. The largest geographic growth segments of product and service purchases will continue to be in low-cost regions and countries. While a company s main mode of operation may be in one or two regions, the outlying regions and countries that provide competitive advantage with lower costs will continue to be a key element in driving strategic sourcing decisions. However, as companies start looking closer at total overall supply management costs, we do expect outsourcing of transactional work to continue. The expected growth of direct materials management, indirect supply management, sourcing, and financial settlement over the next five years supports this direction. 20 2008 AMR Research, Inc. Supply Management Report 2008 Market Sizing Series

Table 7: Supply management application revenue estimate by revenue type, 2007-2012 Type, 2007 ($M), 2008 ($M), 2009 ($M), 2010 ($M), 2011 ($M), 2012 ($M) Five- Year CAGR Application Software License and Alternate Pricing 1,177 1,388 1,578 1,792 1,994 2,240 14% Software Maintenance 526 563 587 610 626 639 4% Implementation, etc. 898 978 1,060 1,148 1,251 1,343 8% Hardware and Other 35 36 37 38 39 40 3% Total 2,671 2,965 3,262 3,588 3,911 4,263 10% Table 8: Supply management application revenue share by revenue type, 2007-2012 Type 2007 2008 2009 2010 2011 2012 Application Software License and Alternate Pricing 44% 47% 48% 50% 51% 53% Software Maintenance 20% 19% 18% 17% 16% 15% Implementation, etc. 34% 33% 33% 32% 32% 32% Hardware and Other 2% 1% 1% 1% 1% 1% Total 100% 100% 100% 100% 100% 100% Table 9: Supply management application revenue growth rates by revenue type, 2007-2012 Type 2007 2008 2009 2010 2011 2012 Five- Year CAGR Application Software License and Alternate Pricing 11% 18% 14% 14% 11% 12% 14% Software Maintenance 8% 7% 4% 4% 3% 2% 4% Implementation, etc. 10% 9% 8% 8% 9% 7% 8% Hardware and Other 3% 2% 3% 3% 4% 4% 3% Total 11% 11% 10% 10% 9% 9% 10% Supply Management Report 2008 Market Sizing Series 2008 AMR Research, Inc. 21

Table 10: Supply management application revenue estimate by application segment, 2007-2012 Application Segment, 2007 ($M), 2008 ($M), 2009 ($M), 2010 ($M), 2011 ($M), 2012 ($M) Five-Year CAGR Contract Management 222 237 261 287 313 341 9% Direct Supply Management 387 415 457 502 547 597 9% Financial Settlement 374 412 450 488 520 558 8% Indirect Supply Management 724 815 910 1,019 1,126 1,236 11% Sourcing 940 1,059 1,155 1,259 1,369 1,492 10% Supplier Performance Management 25 27 29 32 35 38 9% Total 2,671 2,965 3,262 3,588 3,911 4,263 10% Table 11: Supply management application revenue share by application segment, 2007-2012 Application Segment 2007 2008 2009 2010 2011 2012 Contract Management 8% 8% 8% 8% 8% 8% Direct Supply Management 14% 14% 14% 14% 14% 14% Financial Settlement 14% 14% 14% 14% 13% 13% Indirect Supply Management 27% 28% 28% 28% 29% 29% Sourcing 35% 36% 35% 35% 35% 35% Supplier Performance Management 1% 1% 1% 1% 1% 1% Total 100% 100% 100% 100% 100% 100% Table 12: Supply management application revenue growth rates by application segment, 2007-2012 Application Segment 2007 2008 2009 2010 2011 2012 Five-Year CAGR Contract Management n/a 7% 10% 10% 9% 9% 9% Direct Supply Management n/a 7% 10% 10% 9% 9% 9% Financial Settlement n/a 10% 9% 8% 7% 7% 8% Indirect Supply Management n/a 13% 12% 12% 11% 10% 11% Sourcing n/a 13% 9% 9% 9% 9% 10% Supplier Performance Management n/a 8% 10% 10% 9% 9% 9% Total 11% 11% 10% 10% 9% 9% 10% 22 2008 AMR Research, Inc. Supply Management Report 2008 Market Sizing Series

Table 13: Supply management application revenue estimate by geographic region, 2007 2012 Region 2007 ($M) 2008 ($M) 2009 ($M) 2010 ($M) 2011 ($M) 2012 ($M) Five- Year CAGR North America 1,416 1,572 1,729 1,902 2,092 2,274 10% Europe 881 964 1,044 1,130 1,193 1,279 8% Asia-Pacific 240 276 313 355 399 448 13% Latin America 93 107 121 136 153 177 14% Rest of World 40 47 55 65 74 85 16% Total 2,671 2,965 3,262 3588 3,911 4,263 10% Table 14: Supply management application revenue share by geographic region, 2007 2012 Region 2007 2008 2009 2010 2011 2012 North America 53% 53% 53% 53% 54% 53% Europe 33% 33% 32% 32% 31% 30% Asia-Pacific 9% 9% 10% 10% 10% 11% Latin America 4% 4% 4% 4% 4% 4% Rest of World 2% 2% 2% 2% 2% 2% Total 100% 100% 100% 100% 100% 100% Table 15: Supply management application revenue growth rates by geographic region, 2006 2012 Region 2007 2008 2009 2010 2011 2012 Five-Year CAGR North America 8% 11% 10% 10% 10% 9% 10% Europe 14% 9% 8% 8% 6% 7% 8% Asia-Pacific 1% 15% 14% 13% 12% 12% 13% Latin America 100% 14% 13% 13% 12% 16% 14% Rest of World 39% 17% 17% 16% 15% 15% 16% Total 11% 11% 10% 10% 9% 9% 10% Supply Management Report 2008 Market Sizing Series 2008 AMR Research, Inc. 23

Appendices Appendix A: Research methodology AMR Research s Quantitative Research group tracks the enterprise software market from the bottom up. For this purpose, we have developed a database of software vendors that provide applications to enterprises worldwide. Selection criteria for application software vendors AMR Research s goal is to capture the leading 90% (by revenue) of enterprise application software vendors that are actively pursuing business within the United States. To be included in AMR Research s effort, vendors must meet the following qualifications: Develop and sell packaged application software products either directly to end users or through a third-party distribution channel (this excludes third-party distributors and developers that OEM source code exclusively) Achieve a minimum of $1M in total annual revenue or provide a fast-growing new technology or functionality for example, Internet-enabled APS applications Provide packaged software applications in the following segments: ERP, supply management (formerly procurement and sourcing), supply chain management, customer management, human capital management, and product lifecycle management Provide systems hardware as part of a turnkey solution only (this excludes hardware vendors like Sun, which does not provide application software) Provide implementation services, including consulting, customization, system integration, and training, as part of its application software business and not as standalone services only Information collection Information on application software vendors is derived from a number of sources: Electronic software vendor survey link, distributed in February End-user surveys that detail application software suppliers and company spending Vendor and end-user communications with AMR Research Annual reports, 10Ks, 10Qs, and IPO prospectuses Trade publications, seminars, and conferences The Internet 24 2008 AMR Research, Inc. Supply Management Report 2008 Market Sizing Series

AMR Research has developed an electronic Vendor Information Request survey form that is distributed via e-mail to each company in our software vendor database. We then follow up with these companies to ensure the timely completion of the completed survey. Inconsistencies or questions are resolved between AMR Research and each company before the data is finalized our database. It is easier to gather detailed company information from publicly held companies or those close to filing IPOs than from privately held companies. In cases where companies do not share performance information with AMR Research, we estimate financial information based on a number of factors. These include, but are not limited to, customer information, information by business partners, competitors, resellers, and analyst estimates. AMR Research shares these estimates with the company for confirmation or correction before entering them into the database. Database for software vendors Based on the selection criteria outlined above, AMR Research has built a software vendor database that provides detailed information for each company on the following metrics (we do not quantitatively publish all of the metric data listed below in our reports): Total company revenue and revenue by product type (software licenses, hosting or subscription, maintenance, implementation, hardware, and other) Number of existing and new customers Software revenue by application segments Software revenue by database management system Software revenue by customer size Software revenue by geographic region Software revenue by vertical industry Company revenue by revenue type Most application software vendors sell more than software licenses. They also provide installation, implementation, training, and other services, including turnkey solutions. In order to understand a software vendor s business model and its future revenue potential, AMR Research determines the share of its revenue derived from each of the following segments: Application software licenses generally provide the highest profitability and signal future growth opportunities. Application software license revenue can be derived either from licenses paid in full or from one-year license fees/leases. Application software license revenue does not include revenue from middleware, database runtime licenses, or one-of-a-kind software products developed for a specific customer. Supply Management Report 2008 Market Sizing Series 2008 AMR Research, Inc. 25

Alternate pricing delivery revenue captures revenue that is not perpetual or term for application service providers. This includes subscription, hosting and software as a Service (SaaS). Software maintenance provides a stable revenue stream. However, a maintenance share higher than industry average can indicate a lack of new customer growth or market momentum. Generally, software maintenance includes free upgrades, bug fixes, access to bulletin boards, and some software support. It does not include implementation service, training, consulting, software customization, or custom development, among other things. from implementation services, training, consulting, and custom development, among others, is harder to manage and generally provides lower profitability than software licenses. Most application software vendors prefer to hand off a share of these revenue opportunities to system integrators or value-added resellers. from computer hardware sold by software vendors has been decreasing the last few years. However, market niches remain for midrange manufacturers that demand complete systems. AMR Research does not include computer hardware sold without application software by companies like Sun in this Report. Application segments Enterprise management Core ERP (including core financials) Finance and revenue management (stand alone) Supply chain management Order fulfillment Transportation management Global trade management Warehouse management Production and distribution planning Demand planning Sales and operations planning Inventory optimization Service parts management and planning Supply chain performance management B2B collaborative technologies 26 2008 AMR Research, Inc. Supply Management Report 2008 Market Sizing Series

Customer management Marketing automation Sales force automation Customer service Human capital management Core HR Workforce Acquisition (formerly Talent Acquisition and Recruiting) Workforce Management (formerly Scheduling Optimization and Professional Services) Workforce Development Workforce Assessment (formerly Employee Performance Management and Enterprise Incentive Management) Product lifecycle management Product data management Portfolio management/program management/decision support Collaborative design/engineering Customer needs management CAD/CAM Supply management (formerly sourcing and procurement) Indirect procurement management Direct procurement management Sourcing Contract management Financial settlement (formerly procure to pay) Supplier performance management Geographic revenue distribution AMR Research provides information on vendors worldwide revenue distribution by five main geographic regions. (Vendors included in this analysis are active within the United States and Europe, although their headquarters may be elsewhere.) Supply Management Report 2008 Market Sizing Series 2008 AMR Research, Inc. 27

North America United States, Canada Europe Western and Eastern Europe, including Russia and other parts of the for- mer Soviet Union Asia-Pacific Australia, China, Hong Kong, India, Japan, Korea, New Zealand, Singapore, Taiwan, Thailand, among others Latin America Mexico, Central America, the Caribbean, and all of South America Rest of World e.g., Africa, the Middle East Customer base by revenue size AMR Research reports on application software revenue derived from sales to companies within the following ranges of annual revenue: Less than $30M $30M to $250M $250M to $1B $1B or more This allows AMR Research to be up to date with trends relating to the movement toward the middle market. Forecasting AMR Research forecasts are developed by us with input from a number of sources: Vendors own growth expectations End-user spending plans Wall Street analysis AMR Research s competitive analysis Regional and worldwide economic growth expectations The five-year forecast focuses on revenue of all major software vendors active within the United States and Europe, based on long-term growth expectations. These growth projections are primarily based on the following factors: Past and present performance by application segment End-user IT investment plans Emerging/declining technologies Worldwide business drivers 28 2008 AMR Research, Inc. Supply Management Report 2008 Market Sizing Series

Notes

Research and Advice That Matter AMR Research is the No. 1 independent advisory firm serving supply chain, operations, and technology executives. Founded in 1986, AMR Research focuses on the intersection of business processes with value chain and enterprise technologies. We provide our clients in the consumer products, life sciences, manufacturing, retail, and technology sectors with subscription advisory services and expert-led Peer Forums. To learn more about our research and services, please visit www.amrresearch.com. This is printed on 100% post-consumer recycled fiber. It is manufactured entirely with wind-generated electricity and in accordance with a Forest Stewardship Council (FSC) pilot program that certifies products made with high percentages of post-consumer reclaimed materials. More information is available at www.amrresearch.com. Your comments are welcome. Reprints are available. Send any comments or questions to: AMR Research, Inc. 125 Summer Street Boston, MA 02110 Tel: +1 (617) 542-6600 Fax: +1 (617) 542-5670 AMR-R-21626