Rainmaker Systems Transforms its Business
Ken Nagy, CFA
Rainmaker Systems (RMKR) , provides business-to-business (B2B) e-Commerce
solutions. The Company's solutions, which are offered on a global
basis, drive online sales and renewal for products, subscriptions
and training for large companies in the computer hardware, software
and information services industries. Rainmaker's three primary
solutions (Transact, Renew and Educate) are designed to deliver
maximum revenue in its client's mid-market. The transformation of
the business model from telesales to e-Commerce should drive margin
expansion and growth.
B2B versus B2C
With the rise of the internet in the past decade it was a natural
that online shopping would take a greater and greater piece of the
consumer dollar. On-line shopping offers easy comparability of
products from your own home. Consumers only need an on-line
connection, a credit card and a place for the product to be
delivered. This one size fits all "vending machine" model
helped push the business to consumer (B2C) market place in the US
from $40 billion in 2000 to $145 billion by 2009.
While often lumped together in the same breath as B2C, the
Business to Business (B2B) e-commerce market place is a much
different entity. Transactions can be complex involving several
decision makers, channels, and complex technical
specifications. That complexity often pushes the B2B buyers
to consult a sales agent before committing several thousand
A successful B2B E-Commerce platform should include
- Multi-Channel Functionality
- Banded pricing
- Offer the ability to communicate with a sales agent
Rainmaker's goal is to target the mid-market technology B2B
segment, which is underserved and a bigger opportunity than B2C.
The Software industry market is estimated at $250 billion. Consumer
'app-stores' are setting expectations for business buyers. They are
researching on manufacturer's sites. Research shows 68% of B2B
buyers get their product information from Manufacturer's
(suppliers) websites vs. 18% from offline events/ seminars.
The Transformation of the business model from the majority of
sales coming from telesales to e-Commerce should transform the
company's margin and growth characteristics to that of a high
margin/ high growth profile. Management has targeted a 70-30 mix
with 70% coming from e-Commerce. e-commerce enjoys significantly
higher margins, stickier revenues, and longer contracts (e-Commerce
contracts typically 1 to 3 years, telesales contracts are typically
3 months to 1 year). The transformation will also serve to decrease
Rainmaker's reliance on a low number of clients for revenue.
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