Amber Road enters China
Software provider acquisition adds compliance capability in world’s biggest export market.
The strength of any provider in the global trade management (GTM) space is typically measured on two axes — the robustness of its technology and completeness of its content.
If a provider has a robust platform and invests in the people and expertise to keep pace with global trade regulations, then it’s a good bet the company offers a compelling solution.
GTM solutions provider Amber Road clearly falls in the category — it has long been regarded as among the top vendors in its market, with core strengths in internally provided content and a cloud-based architecture that allows shippers of all sizes and complexities to manage their compliance programs.
But what Amber Road lacked was a presence in Asia, and more specifically China, and that manifested itself in a couple ways. For one, Amber Road didn’t provide users with the technological depth to manage China’s often mystifying web of trade regulations. And second, the lack of presence in China represented a hurdle toward expanding its geographic footprint in the Asia-Pacific region.
For sure, Amber Road provided GTM content in the Asia-Pacific region, but those endeavors were largely handled at arm’s length. That changed this summer, as the company tied up the acquisition of Shanghai-based GTM solutions provider EasyCargo.
The move was aimed at providing Amber Road customers a more incisive tool to navigate China’s complex customs regulations, especially pertaining to China’s so-called Processing Trade provisions. Managing the Processing Trade provisions (a set of regulations designed to encourage foreign companies to import raw materials into China, manufacture goods, and export finished goods) is a core strength of EasyCargo. The vendor even coined the term China Trade Management (CTM) as a way to delineate the unique compliance characteristics of its home market.
“(Processing Trade) is similar to other duty programs, like the U.S. foreign trade zones program, but its unique requirements make it difficult for software vendors to construct one application to handle all duty programs,” the analyst Gartner wrote about the EasyCargo acquisition. “Until now, Amber Road has only been capable of supporting clients importing into and exporting out of China, and not to manage the in-country processing and manufacturing of goods. Amber Road customers can now rely on a single cloud-based provider for both import/export compliance and support for Chinese customs processing under the Processing Trade regime.”
More than that, Gartner said the deal provides Amber Road a clear competitive advantage.
“This acquisition gives Amber Road functionality that is currently lacking in most ERP and even competitive trade compliance systems,” it said.
The deal, which closed Sept. 3, has been in the works since February, Amber Road Chief Executive Officer Jim Preuninger told American Shipper in an interview.
The catalyst was General Electric, a key customer for both companies. Preuninger said GE advised Amber Road as far back as February to discuss with EasyCargo ways to integrate the companies’ two platforms, as EasyCargo provided robust capabilities in helping GE with its China production and export process.
Amber Road executives were left thoroughly impressed with the sophistication of EasyCargo’s technology, and the companies worked through the summer to hammer out a deal.
Preuninger said the acquisition has two primary benefits for Amber Road: it expands the company’s technology footprint into a critical, but challenging market that nearly every Amber Road customer does business in; and serves as a launching point for Amber Road’s sales and marketing endeavors in China and the Asia-Pacific region.
“What adding EasyCargo does is allows us to go deep when (our customers) bring raw materials in, manufacture and export out,” he said. “It’s difficult to track this through the manufacturing process. It’s an amazing piece of technology these guys have developed. Now we have the roundtrip ticket. We can get you get in, manage everything inside China, and then get you back out.”
He said the deal was not driven by a need for greater content in China.
“We have pretty good China content, so there’s a bit of overlap there, and an area where we expect to have some synergies,” Preuninger said. “The depth of the software capability and the combination of our platform and theirs is fantastic.”
EasyCargo has roughly 50 customers, some overlapping with Amber Road (aside from GE). Preuninger said the timing of the deal was poignant.
“We had a bunch of customers this summer asking us what we were doing in China,” he said. “I was delighted to be able to answer some RFPs (requests for proposal) under NDA (non-disclosure agreement) about this. It was a good validation that this wasn’t a point solution that a few customers were going to be interested, but that this was a theme that many customers were going to be interested.”
EasyCargo founder and chief executive Kae-por Chang said he and his team developed the tool to take advantage of an underserved market. He saw trade flourishing in China, but little parallel development on the trade compliance management side.
“We started in 2007, and at that time, there was no such market as CTM,” he said. “Companies were using tools or excel spreadsheets to manage operations. We saw there was a void in the market. We also saw companies treating the supply chain and CTM as separate tracks. There was no tool to have a cohesive business process to kill two birds with one stone. We saw an opportunity with that.”
Indeed, China remains a tricky market with regard to compliance, despite the maturity of logistics and transportation processes there.
“The biggest issue with China is that often times what is published in their regulations is not actually enforced,” said Beth Peterson, president of the global trade consultant BPE Global. “This makes setting up a compliance program a tremendous balancing act. If they did enforce their written regulations, it would be a huge challenge to implement a program that is compliant. We always suggest that our clients retain legal counsel in China to help them wade through what really needs to be done to comply. We also strongly suggest that they work with a freight forwarder or broker who has been in China for a long time.”
EasyCargo will be rebranded as Amber Road China, with Chang serving as the subsidiary’s managing director. It’s the first acquisition for Amber Road since 2005.
“We’re not a very acquisitive firm,” Preuninger said. “We like to build technology. But we took a look at the opportunity in China, and we saw this could very well be as large as everything else we do. It would take a long time to build something this big. I looked at our guys and said, ‘we could never do this.’ We can now spend pretty aggressively to grow, with Shanghai the center for Amber Road in Asia.”
Preuninger said the two companies have already done a “great deal” of work in integrating their two platforms, with a target date for the end of 2013 to be fully deployed.
“We both use very modern Web-based architecture, so there’s a great deal of commonality there,” he said. “In both cases our business is about integrating our technology with other tools, whether it be an ERP or a supply chain tool.”
The deal greatly expands Amber Road’s footprint in Asia.
“We had a fair number of people in Hong Kong working in our content group, and some customer-support personnel,” he said. “But that was pretty limited. With this transaction, we pick up a strong base in Shanghai. This is a great market for talent, the culture is right, the energy is terrific. There are great competencies in terms of trade, logistics, and technology. Now we have a base to build on for all of Asia.
“This deal opens up those doors for us — both with multinationals and Chinese companies, even middle-market companies and small and medium enterprises. We’ll invest heavily in infrastructure. We’ll also invest pretty heavily in sales and marketing and drive business here in China,” Preuninger said.
Gartner said consumers of compliance systems can expect GTM providers to eye key niche expansions or acquisitions more in the future.
“With more nations enacting similar regimes, enterprises will increasingly look to software vendors to support the processing of the inventory, logistics and compliance information required by new and changing regulations,” the analyst said. “Developing software functionality that supports such changes can be onerous for software providers, and the benefits of developing and maintaining a complete country-level solution that has limited demand are often minimal. China has been an exception.”
Financial details of the Amber Road-EasyCargo transaction were not disclosed.