Financial Market – Cleo Communications And Project44 Target $7.6B Supply Chain Software Market
This picture taken on February 28, 2021 shows a view of the Israeli-owned Bahamian-flagged MV Helios … [+] Ray cargo ship docked in Dubai’s Mina Rashid (Port Rashid) cruise terminal. – The MV Helios Ray, a vehicle carrier, was travelling from the Saudi port of Dammam to Singapore when a blast occurred on February 25, according to the London-based Dryad Global maritime security group. (Photo by Giuseppe CACACE / AFP) (Photo by GIUSEPPE CACACE/AFP via Getty Images)
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The pandemic caused a surge in online buying — posing a massive logistical challenge for sellers and their shippers. The clogging of the global supply chain is nowhere more pronounced than at ports around the world where containers are stalled, according to the New York Times
Simply put, for too many consumers eager to take delivery of their goods, it was frustratingly difficult to predict when they would actually be delivered. And for consumers seeking to return goods, the process was similarly frustrating.
One way to minimize these bottlenecks is to deploy software that enables sellers to see exactly where goods are in the order fulfillment process in real-time. Such supply chain software represents a $7.6 billion market.
While many big name firms target parts of this market — most notably Dell’s Boomi division and IBM
Sterling — there are no publicly-traded companies that focus solely on the problem of end-to-end supply chain integration.
One private company — Rockford, Illinois-based Cleo Communications (which has raised $3.5 million) — counts leading e-tailers — most notably Amazon and Walmart — among its customers, according to my February 9 interview with CEO, Mahesh Rajasekharan.
Another rival — Chicago-based Project44, founded in 2014 and named after the 1926 project that constructed U.S. Highway 66 — has raised a whopping $241 million, according to BuiltInChicago. After a March 4 interview with its chief product officer, Vernon O’Donnell, I have better insight into why its investors see a bright future for the company.
Logistics expert Ben Gordon, Managing Partner of Cambridge Capital, sees opportunity for both companies.
On February 15 Gordon told me that he thinks “Cleo looks very interesting. In a market with increasingly loud competitors seeking to trumpet their offerings, Cleo has been relatively quiet. Cleo appears to focus on EDI integration. This puts them in competition with larger firms like Project44…which has raised a lot more money.”
Gordon advises Cleo to tout its successes. “Cleo seems to have won large accounts like JDA. If I were in Cleo’s shoes, I would look to create some high-profile wins with major brands, retailers, and supply chain companies. Then I would tell the story, loudly and clearly, to the supply chain marketplace!” he told me.
Given their rapid growth and my recent interviews with executives at both companies, I would not be surprised to see both become IPO candidates. Meanwhile, Dell’s Boomi unit — with $273 million in revenue, according to Zoominfo — and IBM Sterling are too small to make a noticeable difference in their parent’s revenue growth.
Supply Chain Software
Gordon sees great potential opportunity in supply chain software — and given the spike in demand for consumer goods and all the supply chain glitches the Times described — the need for accurate, timely data about the precise status of delivering each order has never been greater.
As Gordon said, “Supply chain software is vital to the logistics industry. It provides the technology to automate a $3 trillion industry. It is has never been more important. The key driver of supply chain growth was ecommerce with stock market capitalization of UPS, Fedex
and DHL [increasing 47%] to $343 billion in 2020.”
Demand for supply chain technology also increased. “Capital continues to pour into winning companies in this sector. Freight technology, for instance, attracted $4 billion in 2020. Supply chain software is vital because it automates a $1 trillion industry.”
Cleo offers ecosystem integration — software that enables supply chain industry participants to share accurate information with each other in real time.
The company says it “provides a one-stop integration platform to connect backend and frontend supply chain operations, both on-premise and cloud, to enable end-to-end visibility and management of exchanges, communications and transactions across an organization’s entire network of suppliers, partners and customers.”
Companies buy its services because failure to integrate the ecosystem costs money. Cleo spoke with IT managers before the pandemic and found that poor integration takes “a $500,000 toll(!) on the business every year in the form of lost orders, missed SLAs, and lost revenue opportunities.”
Rapid Growth During Pandemic
The pandemic has boosted demand for Cleo’s services. According to the company, in 2020 it achieved 38% new bookings growth; 35% growth in new subscriptions; 62% growth in new cloud customers and 100% increase in Services revenue.
Cleo customers — which include Amazon, Walmart
, TaylorMade, NewBalance, Ryder, Burris Logistics, Goya Foods, and ReddyIce — give the company high marks. Its net promoter scores consistently top 80, according to Cleo.
Cleo says that the ecosystem integration market tops $7.6 billion “in its three target verticals alone: manufacturing, logistics, and wholesale distribution.”
What’s more Cleo sees itself as being unrivaled in this market.
To be sure, it faces competitors who participate in related businesses. These include “traditional B2B Integration Software companies such as IBM Sterling and Axway; Outsourced EDI companies such as OpenText, SPS Commerce and TrueCommerce that are mostly services based and Application Integration companies such as Dell Boomi, Jiterbit, and Snaplogic,” according to Cleo.
How Rajasekharan Transformed Cleo
Cleo has changed and grown under Rajasekharan’s leadership. As he said in a February 9 interview, “When I joined in 2012, I saw that Cleo had a great technology platform for moving data. The company had the potential to reinvent itself to improve communication between the supplier and the customer.”
To do that, a new industry needed to emerge. “We had bits and pieces but no-one was solving the entire problem for retailers like Walmart and Amazon. Building an end-to-end solution — between manufacturers, logistics and transportation providers, wholesale distribution, and retailers — was a multibillion dollar idea,” he explained.
Cleo aimed at boosting the economic performance of retailers — creating billions in new value for them. “We saw the opportunity to create $50 billion in value by 2025. Our software could help companies capture more revenue by increasing revenue per customer; reduce their operating expenses — by helping companies achieve their services standards; and lower the risk of violating their service level agreements,” explained Rajasekharan.
Cleo expects to grow rapidly over the next five years. Its people and culture are a big reason why. “We will be five time bigger in the next four or five years. We have positive cash flow and we hire great talent who are highly intelligent, selfless, who place their ego on the company and not the individual. They can admit when they make mistakes, and confront reality based on data, rapidly course correct and capitalize on evolving trends and opportunities,” he told me.
Project44 enables logistics companies — including “Air, Parcel, Final-Mile, Less-than-Truckload, Volume Less-than-Truckload, Groupage, Truckload, Rail, Intermodal, and Ocean” — to see in real time how goods are moving through the supply chain.
Through a cloud-based platform, Project44 provides considerable business benefits. These include “increased operational efficiencies, reduced costs, improved shipping performance, and delivery of an exceptional Amazon-like experience to their customers.”
Last December Project44 raised a $100 million Series D funding round led by Insight Partners. The company had over 175,000 carriers as customers and in 2020 added 135 new ones to its list which includes ABB
, General Mills
, Lenovo, and PepsiCo
, according to BuiltInChicago.
Why Project44 Wins
Project44 got started in 2014. It was not until 2016 and 2017 that it pivoted to offer real-time tracking — which sent top-line growth soaring at triple-digit rates. As O’Donnell told me, “When we started we were supplying data to third party logistics service providers. Three and a half years ago we pivoted to real-time tracking across multiple modes of transportation. We provided software for a visibility operations center that helped shippers improve customer service.”
Project44 recently acquired Ocean Insights — which supplies container tracking, sailing schedule, and ocean analytics products — enabling Project44 to “stitch together all transportation modes,” he said.
Project44 is benefiting from the supply chain turmoil. Since March 2020, “freight rates increased by as much as 174% due to the increased global demand for electronics, PPE goods and stay-at-home consumer products. At the same time, COVID-19 and other restrictions have caused significant port congestions, and rollover percentages have never been higher,” according to the company.
Project44’s growth springs from its ability to meet the needs of three distinct groups within its customers’ organizations. As O’Donnell said, “We give operational users easy-to-use, accurate data on transportation schedules; we enable financial executives to do better financial and inventory planning; and we give our technical buyers a relatively quick implementation plan — compared to the $10 million it costs for SAP.”
How Project44 Will Keep Growing
Project44 — which is winning more $1 million and larger contracts — responds quickly to change. “We are a very field-based company — 50% of our time is spent with the customer watching how they use the product. We have a co-innovation partnership with Dollar General
. If we can serve their complex supply chain, we will be able to serve other less complex ones in the future,” explained O’Donnell.
The company has a clear expansion path for future growth — with less than 10% of the market penetrated — and expects to benefit from the experience of its board. “We are already in Latin America, Mexico, Brazil, Australia/New Zealand and will expand into new regions. We will participate in other parts of the shipment life cycle. And we will use our data to supply market intelligence.”
He continued, “As we challenge ourselves to prioritize and sequence opportunities, we will benefit from the insight — pattern recognition and thought leadership — of our investors and the alignment between our board and executive team.”
Cleo and Project44 are tackling the enormous problem of trying to make the global supply chain more efficient. I would not be surprised to see them sustain their rapid growth and go public.
Financial Market – Cleo Communications And Project44 Target $7.6B Supply Chain Software Market