The Elusive Supplier Database

Quite often, I find myself asking sourcing and procurement professionals what their top wish list items are. Almost always, access to "better supplier information" and "supplier databases" tops the list. What's remarkable about this response is not the need for access to new suppliers -- especially in the case of low cost countries -- but how limited the actual marketplace for supplier information is.

In my early FreeMarkets days (about six years ago), we would posit that our supplier information in certain direct materials categories was the best in the world, bar none. Not only did we understand supplier capabilities and processes, but we also understood how supply market dynamics could change day-to-day, week-to-week, because of our experience sourcing similar categories (e.g., metal stampings) on an almost daily basis.

In reality, how much of this claim was true? Virtually all of it, in most cases. We really did have that level of knowledge across many categories (as Ariba does now). But the issue was, at the time, that this information was in the minds and spreadsheets of those actually doing the sourcing, and was not available for stand-alone purchase. In fact, you had to sign up for a full-service agreement that included software and professional services to gain access to this information, and only then could you tap a resource who had this information as part of an event-based sourcing process. Later, FreeMarkets -- and then Ariba -- would make this information more generally available to customers. But still, to date, Ariba has not fully capitalized on this information from a commercial perspective -- just as FreeMarkets failed to do – despite its huge potential value in the market.

Why have vendors like Ariba failed to capitalize on this information? It would seem that selling software and services is very different than selling information, which lends itself more to a publishing model, which is not something software vendors or services firms understand. This might explain why another vendor, Open Ratings, which has, by many accounts, the most current information on supplier performance and predictive measurement, has also not focused its resources on opening its supplier database to the masses for basic search capabilities (which I've heard potential partners clamoring for). While Open Ratings offers this capability to some degree to customers today, like Ariba, it has only begun to scratch the surface of the market.

If a firm like Thomas Register got their hands on the type of information that Ariba and Open Ratings have available, I'd wager that they’d figure out a way to market and sell it to a mass audience -- and reap huge profits in the process. But until they do -- or until Ariba or Open Ratings invest significantly in a publishing model to complement their software and services businesses -- the general sourcing public will have to make do with regional supplier search portals like Alibaba which have limited information, and typically rely on supplier-pays models which always invites suspicion (and can make it difficult to tell, especially in the case of LCCS, if you’re dealing with a middle-man or directly with a supplier).

Curiously, Alibaba has become somewhat of a valuation darling of late, given Yahoo's recent $1 billion investment in it. One wonders if companies like Ariba and Open Ratings are sitting on a huge monetary asset that they've yet to realize ... maybe it's time to bring in a content team, hire a few more folks on the ground in China, and bring in a few investment bankers to find out!

Jason Busch

Discuss this:

Your email address will not be published. Required fields are marked *