In 2001, the year that the tech bubble burst and IT stocks crashed spectacularly, two executives from the struggling IT company Ixchange took a leap of faith, bought out a small division from Ixchange and ventured forth on their own.
At the time the only asset the division held was a partially developed software product which they believed had "legs and a future".
Using capital accrued during the IT boom, the pair completed the software development and launched Fraxion, which is a spend management solution that gives companies the ability to control, manage and analyse expenditure and cash outflows in real time.
"We believed that once companies had consolidated their initiatives around market demand generation and customer relationship management, they would start looking for the tools to manage their cash and spend more efficiently," says Stanton Jandrell, cofounder and CEO of Fraxion. "This is an emerging market space that we believe will be as significant as customer relationship management software has been."
It is not a financial enterprise resource planning (ERP) package, nor is it an accounting package.
"We are tracking the intent-to-spend processes in a company for all requisition types that may have a financial impact on an organisation," he says. "It allows companies to eliminate unnecessary spend, channel legitimate spend to selected suppliers and reduce the time and costs associated with these manual processes."
The management team, which by now had grown to six people with an additional two nonexecutive directors, were on to something. In its four years of operation, the company has licensed 15 000 users of its software, and lists JP Morgan, Standard Chartered Bank, American Express, Hollard, Woolworths, Truworths and Total among its customers.
For US companies like JP Morgan, the software provides them with better control, compliance and risk management which is required by the Sarbanes Oxley Act of 2002. For European clients, like Compass, which favour decentralised decision making but have stringent approval processes, Fraxion provides the tools with which to make decisions. And for local clients, the software helps to keep an accurate record of BEE procurement spending - something that is very difficult to do manually.
The challenge of operating in an emerging market space that is highly fragmented is that there is no big gorilla around to educate customers.
"We had to create the market demand ourselves and overcome organisational apathy and resistance to change," says Jandrell.
Initially it was easier for Fraxion to sign up clients in the international banking sector than it was in SA. "It is changing now, but SA companies did not see local companies as capable of being innovative - and there is no doubt that we are innovative on a global level," says Jandrell.
Last year the company secured venture funding from Venfin, an investment holding company with a reputation for thorough due diligence and an exceptionally high level of management input.
The capital has been used for product development and longer-term R&D. "This is an expensive and lengthy process that is difficult to finance using operational cash flows."
The first benefit of the cash injection was an almost complete rewrite of the software into a new version, V3, which the company introduced in July.
The main benefit of the rewrite, says Jandrell, is that the product is now a scalable and easily implementable solution which can be delivered globally through its growing list of partners.
