Tuesday, August 07, 2007

EzRez EzMoney ToughBusiness

White label provider EzRez has announced a fund raising round of $15mm led by Canaan Partners and with pieces thrown in by Azure Capital and "existing investors". Not sure what the "existing investors" part means. Startup Capital Ventures partner John Davison is on the board already and they list EzRez as a portfolio company, however they have not put their name to this round.

EzRez have been very active in the online white labelling space. The initial white label moves in online travel were dominated by B2B versions of online agencies such as Expedia's WWTE or online versions of offline operators such as GTA's Octopustravel.com. However neither of these or other players like them were able to offer a technology style solution that allowed the distribution partner to either add inventory not contracted by the white label company or to request bespoke hosted layouts. This left a gap for EzRez (and competitors like TopDog) to steal clients and build a business despite lacking the scale in both supplier turnover and developer numbers of the OTAs.

There are been early success globally but also in my home market - Australia - with Qantas spin off Jetstar using EzRez for their packaging options. But even with these success and $15mm in the bank this is not an easy sector. EzRez has to constantly find the space between the online agents and the traditional distribution/connectivity companies (GDS and Switch). Simultaneously staying ahead of the OTA white label/affiliate providers on the technology elements that I mentioned above and staying ahead of the GDS' and Pegasus on contracted inventory and web display. It is like being David against two Goliaths but at least having a little bit more than a sling.

UPDATE - stated reason for the fund raising was to "drive product development and interenational growth to meet the increasing blah blah blah yadda yadda". The other sides of the story that I hear from anonymous industry insiders is that they have had to be a bit more radical that this stock phrase sounds by throwing out their old business plans and change the focus. This includes physical changes such as the well known shift in location from Honolulu to San Francisco and funding the not so well known round of redundancies. It also involves a change in the business model. The early days of the model had a lot of focus on mid and back office operations support for clients/distribution model. The new variation is focusing much more on web services/distribution and UI syndication. That is - less of the mechanics behind the scene to bring supply in and manage bookings, and more of the aggregation and distribution of different supply sources with flexible UI for delivery. Complex differentiation but think about it as less an end to end booking engine and more an aggregation engine.

It can not be said definitively whether a change in model is a sign of panic or genius. But it is further proof of the challenge that the EzRez' of the world face in making a business out of the gap between OTA's and traditional distribution companies.


Anonymous said...

Interesting post.

You're right in commenting that Ezrez has found it difficult finding the space between the principals AND intermediaries and this is evidenced in a mixed bag when it comes to localisation (or in fact operating outside of Hawaii!).

Ezrez feels like a system that has been designed by committee, resulting in the proverbial platypus.

And so it looks different from various angles, can operate in a variety of environments, but in total is more of a curiosity than a species, and as a whole isn't as pretty as we all first thought.

And $15m doesn't go far when you're trying to effectively build a next-Gen GDS by stealth, one market at a time and all your money is going on beak rebuilds and flipper tweaks, all in AJAX.

Tim Hughes said...

Good comment Anon. I agree. Thanks.

Anonymous said...

Very interesting...this Dynamic Packaging Space is an interesting one with companies like OpenJaw and Datalex from Dublin competing for some of the big distribution deals on the table to replace legacy systems - thing BA Holidays, AAA in the States and American Airlines Vacations (which EZ won and has partially launched).

My take on EZRez is that they need to spend a lot of money to make their system end-user friendly. The partners that use it now (and are sucessful) rely on agents or behind the scenes intervention to get through the very clunky search, booking and display functions. Rumor has it that a complete redesign is in the works for Q1 2008 to fix this.

However, - US$15 million is not a lot of money. Remember Atinera, the high flier joint venture between Amadeus and Fourth Dimension Software? They burned through $30 million in two years, establishing global operations, buying Atlas in Brisbane and only signing up a few B-level clients.

Finally - having visited their new offices in San Francisco recently, I can assure you the $$ is not being spent on a luxurious office space!

Anonymous said...

Frankly, it will probably take a lot more than $15 million for this company to turn anything around. Trust me on that one, we were a client...

Here's a few things that should set the alarm bells going:

* The front end and publishing system is Cold fusion based, making it old and inflexible
* They claim to have an API to their system, but guard it like some sort of crown jewel, denying their own customers access to it
* Their white label front ends all look largely the same—butt ugly and unusable—and are extremely inflexible. Take a look at the complete code mess by doing a "View source" on any of their customer sites.
* Customer service and training are non-existent—while they were in Hawaii, they expected their customers would be serviced during Hawaii business hours. For Asia Pacific customers, that implies some pretty unearthly hours.
* Their top management is arrogant and unresponsive to customer needs
* Here's the kicker: if you need customisation as a customer, be prepared to wait a long time. They have an 18 month road map already charted out and new requests from customers can go to hell.
* Configuring and using the administrative side of the product is worse than corporal punishment

Good luck to these guys and their investors--they're a company living in long forgotten times and their leadership is clueless.

Tim Hughes said...

Is there anyone reading this from EzRez? If so, would be very interested to hear your side. Please email me at timsboot [at] gmail [dot] com.

Anonymous said...

You will most likely not hear from anyone at EzRez because they are forced to sign an NDA.

Anon customer do have valid points. EzRez's business plan is as dynamic as their dynamic packages. They can't decide which direction to take, ignoring many of their less profitable customers behind.

It would be very interesting to see how far the $15 million will take them.