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Published in Print: December 5, 2001, as 'E-Procurement' Firm Simplexis Closes Doors as Industry Struggles

'E-Procurement' Firm Simplexis Closes Doors as Industry Struggles

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In the heady days of the dot-com economy, about a dozen "e-procurement" companies promised to streamline schools' inefficient purchasing systems. Now, only a handful of those companies still exist, and their numbers continue to dwindle.

Last month, Simplexis, an online-purchasing company for education, headed by former U.S. Secretary of Education Lamar Alexander, was sold for an undisclosed amount by its parent company, Co-nect. The purchaser was PublicBuy.net, an online-purchasing company based in Baltimore.

The sale marked the end for Simplexis, a San Francisco-based company, because Simplexis' assets will be folded into PublicBuy.net.

One of the first e-procurement companies to hit the education market, Simplexis was launched in 2000. The company and others like it have served as one-stop online shops for schools to buy supplies. But analysts say the industry is not taking off as quickly as the companies had hoped it would.

"E-procurement is a market that can work, but it's going to take some time," said Tom Evans, a senior analyst for Eduventures.com, a Boston-based firm that tracks the education industry.

School districts' reluctance to use online-purchasing outfits, the drying up of investment dollars throughout the dot-com industry, and the downturn in the economy helped bring about Simplexis' demise, Mr. Evans said.

"Educators tend to be a little later in adopting tools than their counterparts in business," he said. "Also, [venture capital] funding is down over 75 percent compared to last year. In the K-12 market in particular, it's extremely difficult to get funding now."

Co-nect, an Arlington, Mass., company that works with 60 districts in 30 states to provide teacher professional development online, will use the money from the Simplexis sale to expand its training and other programs for teachers, said Andrew Skoler, Co-nect's chief executive officer.

Financial Troubles

Simplexis' birth two years ago drew attention in the education world because of Mr. Alexander's involvement as its co-founder and board chairman. But despite an infusion of $35 million in venture capital, the company fell into financial quicksand.

This year, it had two rounds of layoffs even as it formed a partnership with International Business Machines Corp.

In July, Simplexis merged with Co-nect, netting Co-nect more than $10 million, according to company officials. Mr. Alexander will remain with Co-nect as the company's chairman.

Despite the troubled economy and the failure of companies like Simplexis to find a market niche, the future of electronic procurement may be good, Mr. Evans of Eduventures predicted.

But he said it's going to take a concentrated effort by the companies in that field to market themselves better—to begin with, he said, they need to let school administrators know what they do. Then they need to prove to superintendents and school boards that they can save schools money and time, Mr. Evans said.

In the education community, "e-procurement rarely comes up," he noted.

"There's a lot of factors working against e-procurement" Mr. Evans continued, "and if there's one thing we've learned, you have to make that return on investment as tangible as possible to the customer."

Vol. 21, Issue 14, Page 15

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