Frictionless Commerce: Small But Sharp

Frictionless Commerce rubs customers the right way. Though at times constrained by its small size, the 85-person company is praised for being open and responsive, and for providing a well-rounded spend management software suite.

Anthony Santiago, vice president of global sourcing and supplier management at Bristol-Myers Squibb, says Frictionless has been “a remarkable partner.” The pharmaceutical company uses its software to track suppliers and hold online auctions, pumping $380 million in spending through the system in 2005. Bristol-Myers Squibb installed the software in late 2002. Early on, when Frictionless released an update, the software didn’t always work at first, Santiago says. Now, however, “they have it down to a science.” Adds Santiago: “They’re really straightforward about what they can and cannot do.”

For Alticor, the parent company of Amway, “Frictionless was almost a perfect marriage for the processes we’d set up here,” says Michael Nelson, director of strategic procurement. For example, Alticor’s “sourcing effectiveness” teams used to analyze categories of spending by compiling data in spreadsheets, then taping printouts to a wall in a 6-by-10-foot matrix. Frictionless “gave us the tools to automate that analysis and turn it into actionable information,” Nelson says.

But Frictionless hasn’t been able to support customers in Europe or Asia very well, says Luke Nieuwenhuis, Alticor’s manager of strategic sourcing and direct materials procurement. Alticor has had to help Frictionless get training programs established in some countries, according to Nieuwenhuis. “It’s unfortunate that we’re forced to lead them and direct some of their activities,” he says. Frictionless acknowledges that it has relatively limited international operations, with its only European presence an office in London and no offices in the Asia-Pacific region (though it expects to expand its reach in 2006).

And while privately held Frictionless isn’t profitable—it expects to become cash-flow positive this year—the company appears to be more stable now than it was three years ago, says Jon Finseth, director of sourcing and procurement at TDS Telecom, a cable and phone service provider. “Frictionless was small, but they had all the capabilities we wanted in one system,” he says, adding: “They’re one of the vendors in this space left standing.”

Spend Management and Analysis

Frictionless Commerce
400 Technology Square
Cambridge, Ma 02139
(617) 495-0180

Ticker: Privately Held
Employees: 85

Mary Cotton
President & CEO
Hired in February 2005, Cotton previously was CFO and COO of Aspen Technology, which sells supply chain software designed for manufacturers.

Wayne Haubner
Before joining Frictionless in 2000, he worked for Lotus Development Corp. and Digital Equipment Corp.

Spend & Compliance software analyzes spending transactions to see whether purchases are being made with suppliers that have negotiated contracts. SRM Explorer software provides spending analysis tools. Enterprise Sourcing software handles online auctions and electronic requests for information and requests for proposal.

Reference Checks

Bristol-Myers Squibb
Anthony Santiago
VP, Global Sourcing and Supplier Management
[email protected]
Project: Pharma-ceutical company, with 275 procurement and sourcing specialists, runs auctions and manages supplier interactions with Frictionless’ software.

Michael Nelson
Dir., Strategic Procurement
[email protected]
Project: Parent company of consumer products distributor Amway tracks 800 sourcing and procurement projects with Frictionless.

Sprint Nextel
Mike Kalinock
Mgr., E-Sourcing
[email protected]
Project: Wireless and long-distance carrier uses Frictionless for 180 employees to track sourcing and procurement projects.

WE Energies
James Baillon
VP, Administrative Services and Supply Chain
(414) 221-2345
Project: Power and gas company in Milwaukee rolled out Frictionless in June 2005 to let 30 buyers manage requests for proposal, auctions and related activities.

Bill Huber
Senior VP, Outsourcing Strategy and Governance
[email protected]
Project: Bank uses Frictionless to track most of its $4 billion in annual spending, including hosting supplier auctions and managing contracts.

TDS Telecom
Jon Finseth
Dir., Sourcing and Procurement
[email protected]
Project: Cable and phone service provider uses Frictionless to manage about 40 auctions or requests for proposal per year.

Executives listed here are all users of Frictionless’ products or services. Their willingness to talk has been confirmed by Baseline.

Revenue, 2004: $10.8M (Information Access est.)
Revenue growth claimed: 50% from 2003 to ’04
Total funding to date: $58.1M in four rounds
Investors: Polaris Venture Partners, RRE Ventures, Lake Street Capital, Draper Richards
No. of customers reported: 45

Akamai Technologies, BEA Systems, Intel, Oracle

Accenture, Archstone Consulting, BearingPoint, Delinea, Denali Consulting, Deloitte

Financial Services: Aetna, Cigna, MetLife, Prudential, Wachovia
Energy: PSEG, Florida Power & Light
Manufacturing: Philip Morris USA, Revlon
Pharmaceutical: Bristol-Myers Squibb,
Eli Lilly and Co.
Telecommunications: Sprint Nextel

Cambridge, Mass. (headquarters); London