It's taken Patrick Grady a lot longer to change the world than he expected.
"I started in 2000. I was so ahead of my time and I really thought I had it figured out," he told me in a recent interview by phone.
"It's taken me longer. I could have started this company in '07 or '08 and been in exactly the same place I am today."
When I first met him, Grady was still at the beginning of that journey with his company, now renamed Deem but then known as Rearden Commerce. In 2006 I wrote a white paper on the company's technology (disclosure: this was a paid consulting engagement). Back then, much of what he described remained unbuilt, although the core foundations had already been laid down.
Then in May this year at SuiteWorld, Grady presented a demo on stage as Deem announced a partnership with the show host NetSuite [updated - I originally wrote that he had shown a video but I have reviewed the keynote video, starting at 38:00, and it was a product demo]. It was a revelation to see the vision I had written about seven years ago now brought to life as a functioning service.
"In the last ten quarters we've really just assembled the missing pieces to pull this together," says Grady.
"The grounding use case in the original business plan called for a business traveler landing in New York at JFK, and the Web would know their identity, their location, their destination — their context — and would start making contextual recommendations and facilitate purchasing decisions for me.
"It was a grand vision but all the piece parts are now assembled and are now live."
The essence of Grady's vision was to build a platform that would bring together all the separate activities of day-to-day business purchasing into a convenient, efficient, end-to-end process.
For that traveler arriving in New York, for example, the platform would know his arrival time, transit plans and hotel address, and would recommend restaurant options for dinner that night based both on his personal preferences and on his employer's expenses policy. The same platform also lets him upload the restaurant receipt using his smartphone's camera and match it to the relevant line item on his company payment card record later that month.
The second essential element of the vision was to offer the platform as a white-label service provided by merchants of those goods and services. Grady had no interest in owning the customer. The prize was owning the underlying network platform.
"You have to figure out who your market is — is it the buyer or the seller? For us it's the seller," he explains. Deem earns its living from delivering value to the merchants, as Grady insists on calling them, by providing a fully-functioning syndicated commerce platform. "It's not just marketing, it's really a mindset for the company here."
The Deem platform shortcuts the advertising-to-purchase cycle by placing the merchant proposition directly in the user's workflow. Think of it as in-app purchasing for the real world of your daily routine. In a detailed report published earlier this year, Wells Fargo analyst Jason Maynard calls the model Syndicated Commerce (PDF).
"It's the next shift from an advertising model that's difficult to measure to a closed-loop, card-based model," says Grady.
In Deem's syndicated commerce model, a partner like airport transfer operator Supershuttle becomes both a merchant of services and a provider of contextual data. Its services are offered among the menu of ground transportation propositions presented when, for example, a traveler books a flight. Once it accepts a booking, then it informs the context for other offers to appear, monetizing its data with a slice of the revenue on any sales.
"Pick-ups and drop-offs are really rich signals," explains Grady. "The publishers have really rich datasets on their customers. We then deliver offers in a contextually rich way."
No wonder it has taken so long to deliver the vision. While others have been building discrete applications, Deem has focused on building the underlying infrastructure of syndication engines, analytics and APIs to merge the end-to-end process and reconcile and distribute payments out to the participants.
"This is where we are winning these partnership agreements," says Grady. "There must be a network in the middle that takes any merchant and any content and syndicates it out."
Deem's main markets at present are among large enterprises for travel purchasing, where partners such as American Express and Carlson Wagonlit use the platform to automate reservation processes, and in the small business segment, where partners white-label its network. For example, the Mastercard Business Network (video) is powered by Deem.
Working with partners allows Deem to reach high transaction volumes without having to sell to prospects individually. "We do not have a single sales rep targetting businesses one-to-one," says Grady. "We get paid from our partner."
In the SMB market, which Grady defines as companies with up to 300 employees, those partners are able to offer the purchasing app free of charge as they earn a revenue share on purchases. On the travel side, the cost is no more than a traditional travel agency service. The list price for adding expense management functionality is $10 per month per active user, though some partners chose to absorb that cost rather than pass it on.
"We feel like we can dominate the small business segment with what we have today," Grady believes. "These are companies that are coming off of spreadsheets or they've tried something like Concur and they're not very happy."
The company expanded beyond travel in 2010 with the acquisition of Ketera, a SaaS spend management vendor that competed with Ariba. This long sought-after acquisition added the general-purpose B2B supplier network that Grady had always wanted to add. There are now around 800,000 different products in the purchasing network, and enterprises can also add in their private catalogs.
""What used to be the Ketera network is now our catalog," says Grady.
"I really bought it for the network — that was a highly coveted asset. Ariba and Ketera were the only large-scale, general purpose, diversified general purpose networks."
Another significant acquisition was in 2011 when the company bought Demand Chain, the operator of HomeRun.com, a commerce network offering localized content for the consumer market. This became an important ingredient in the company's deemoffers service, which recently helped Deem strike a deal to offer local deals on Microsoft properties such as Bing, Outlook.com, MSN and Windows Phone.
Change the world
The partnership with NetSuite marks Deem's first move into the midmarket and the first step beyond QuickBooks for a prepackaged integration to its [email protected] suite.
Initially, Deem will sell direct as it gets the feel of the market and begins to understand the more complex workflow and integration needs there. Grady is still aiming to change the world, but is willing to spend whatever time it takes to get there.
"I believe the key competitive advantages for [email protected] include being a true cloud suite, the breadth of applications — we think that's a big deal; whether it's a Fortune 50 CFO or the finance officer of a Fortune 5000 company, they want a one-stop shop — breadth of network content and a consumer experience.
"If we can adhere to those principles and then walk up market, that becomes a category killer."
Deem has certainly come a long way since those early days as Rearden Commerce when the vision was first laid out. It now claims a distribution network of 200 million individual consumers, 10 million SMBs and 65,000 larger enterprises, and 1.2 million participants in its merchant network.
But even with a minimal sales overhead and a focus on selling through partners, the cost of building out the necessary scale and infrastructure has been huge. Over 13 years since it was founded, the company has consumed more than $340 million in VC funding and other investments, including large corporate investments from its partners American Express, JP Morgan Chase and Citi.
It's fortunate those partners have had deep pockets and were willing to take a long-term view. Grady is not the kind of person who will ever admit the possibility of failure, but he's had to beat a lonely path to drive Deem this far.
Finally the company is beginning to reveal partnerships that really leverage its underlying syndication infrastructure and broad network reach. Now Grady is able to boast:
"There is no company I am aware of that has a network like this in place to connect up and acquire customers through multiple merchant constructs and such a broad and diverse list of partners."
Back at the turn of the century, when Grady was pitching VCs to finance his initial vision, one backer told him, "You're coming to me with a 20-year business plan to reinvent commerce." Thirteen years later, Grady believes the end of the journey is in sight:
"Now it's a game of execution."
Disclosure: As noted above, Rearden Commerce (now Deem) paid the author to write a white paper in 2006. NetSuite paid the author's travel and accommodation to attend SuiteWorld.
Photo credits: Cloud touch screen © violetkaipa - Fotolia.com; Patrick Grady and [email protected] courtesy of Deem