Part 1: Reflections on Spend Management's Decade

Picture a Spend Management world where packaged or on-demand applications do not exist. Imagine a business culture where procurement -- even in advanced companies -- is more about transactional buying than strategic decision making. These characteristics marked the Spend Management environment back in 1996, a time when industry technology pioneers such as Ariba, Commerce One, and FreeMarkets were just getting off of the ground. In fact, the combined annual revenue of these vendors back then was less than a management consulting firm might have made in a large, one-off category sourcing engagement. But at that point in time, that's where the market was focused.

Back when I was a graduate student at the time, I can remember how AT Kearney tried to recruit at fancy cocktail parties, luring aspiring consultants to their firm under the guise of focusing on business strategy. Yet while the smoked salmon and canapés were making the rounds as the regional MD spoke about the firm's commitment to helping clients grow their top line, we could sense the smirks on the consultants' and managers' faces who were also at the event, as they knew the bulk of the firm’s revenue came from sourcing work, despite the positioning of firm leadership. But the partners were afraid to admit or even discuss the firm's operational and sourcing practices, lest they scare away potential recruits. My, how things have changed! In today's environment, there is nothing wrong with operations, procurement or supply chain experience. In fact, it's considered a critical skill-set for rounded executives, at least in the manufacturing world (just ask the heads of Wal-Mart and Toyota).

But in the mid nineties, things were different. Back in 1996, Gene Richter was just two years into his procurement transformation at IBM. At the time, Gene had the vision to ignore convention, centralizing procurement at the global technology giant, and moving manual processes and visibility into an online environment. The rest, as everyone knows, is history. Thanks to Gene's work, IBM because the poster child for the power of procurement transformation, and Gene became an industry legend. But IBM was not alone in focusing on procurement innovation. GE and UTC, among others, invested significant time and effort in experimenting with new types of transaction automation and management, not to mention online negotiations and reverse auctions.

Later in the week, as Ariba rings the bell at NASDAQ, I'll continue with my personal history of the decade. I'll get to how I eventually landed right smack in the mix of things, helping make Spend Management history in a small way, rather than sitting on the sidelines.

Jason Busch

Discuss this:

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