Spend management. Just reading those words should get confirmation in your mind of the necessity for such a system in any business. However, the truth of the matter is that this may be one of the first times you have encountered the concept as such. Indeed it is such a rarity that Stanton Jandrell and Mark du Plessis, founders of software company Fraxion, often face as their biggest challenge educating their potential customers on the concept and how it adds value to corporations. But add value is does, as the pair have built a viable and thriving software business around spend management. Says Jandrell: “There is a component missing from most enterprise resource planning systems – that component is spend management.”
So just what is spend management? In a nutshell, it covers all spending activities that have a financial impact on the organisation, giving them the ability to gain control of and eliminate unnecessary spend. It’s a concept which pushes all the hot buttons of fiscal discipline, good corporate governance and sound financial management. Like many really good ideas, it makes such sense that one can only wonder why spend management such as that provided by Fraxion, is such a niche market. Easygoing and affable, Jandrell cut his technology teeth in the networking industry, before moving into CRM software. Those who know the technology industry will appreciate that networking is a world apart from software; Jandrell admits that making the change was: “Quite a challenge. Networking equipment is hardware – a company either needs it or it doesn’t. Software on the other hand, is sold on a ‘perceived benefit’, so taking it to market is a little different.”
That experience no doubt stood Jandrell in good stead; while working for the CRM company, he and du Plessis bought the incomplete spend management product from that organisation and, as he puts it, took a great idea and went to work making it into something that people would buy. Thus was born Fraxion. Taking spend management to market was difficult in that it is not a commonly understood concept. “It’s not like selling a physical product; first you have to establish a context,” says Jandrell. “Generally, people believe an accounts system does spend management; the reality is that it does not. Hence it is an educational process, but through an alliance with one of the big accounting firms and alignment with professional bodies such as the SA Institute of Chartered Accountants and the Institute of Management Accountants, we are getting over this hurdle more frequently.” “When we started, we hadn’t made a cent and had 15 developers working on a product which was close to completion but not yet ready to go to market. Funding came from securing our first customer; we also managed to secure funding from the Department of Trade and Industry which recognised our solution as a viable industrial innovation,” says Jandrell.
Like many other entrepreneurs, their own resources were also drawn upon heavily. “We had some resources from our previous employments, such as share options. We also tapped into our mortgages. There was a lot of faith in what we were doing, and maybe a touch of stupidity, but there was a definite vision of where the company should be,” Jandrell relates. As the company steadily grew, so did demands on cashflow. Fraxion soon reached the point where it needed further investment to fuel its growth. “Knowing this was an eventuality, we developed relationships with private equity companies, but without asking them for money. Of course, those relationships changed when we did ask for money, but with a good story to tell we had Venfin buy into the company by taking a 30% stake,” says Jandrell. He believes success is a result of a great concept backed by people who are qualified and experienced for the roles they perform within the organisation. “Recognise your strengths and weaknesses, and employ or partner with people who have complementary abilities. In our case, there are four core areas – sales and marketing [Jandrell’s focus], research and development [du Plessis’ metier], professional services and financial management. We have the right people in these areas which we believe positions us very well to handle the challenges of business and continuing to grow.”
Contact: +27 21 683 5310; www.spendmanagement.com
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