In yesterday's post on Ketera, I provided a quick foundation to describe the provider's new marketplace strategy. In today's column, I'll provide some more background and context, as well as introduce a few thoughts on how their new approach might work in practice and what it means for Ketera and Ketera's legacy customers. In the final post analyzing Ketera's new model, I'll provide a candid pro/con analysis on whether or not this will work based on my experience in this sector working with a few dozen vendors, supplier directories and marketplace providers not to mention covering it first as an analyst and later as a journalist and blogger (for you marketplace junkies, my first exposure to the sector started with a Tradex briefing in 1998).
Let's begin today's analysis by talking about how Ketera views this new marketplace effort in the context of the broader procurement service-provider community. In this regard, Ketera is smart to realize that this new business network is a potential platform for partners to take advantage of, including GPOs, BPO providers, sourcing and supply chain consultants and affiliated service providers (e.g., data contents, supplier audit providers, etc.). In fact, they plan to make a targeted effort to go after these types of partners as they build out their network ecosystem.
But scaling such a partnership model will be easier said than done when it comes to recruiting potential partners. Take e-sourcing, for example. While Ketera's new E-Sourcing offering that's part of the network provides basic capabilities sufficient for many companies -- yet without proven scale such as the ability to manage hundreds or thousands of line items and lots -- it will have to go head to head against Iasta and Emptoris to capture a consultant user base dominated by the two providers today. In the past few years, Iasta and Emptoris have collectively captured what I'm guessing is 80% or more sourcing and outsourcing services providers as customers. Winning these folks away will not be easy (even considering the fact that Ketera is a former Iasta partner and clearly learned a thing or two about e-sourcing from them).
Moreover, marketing to suppliers and getting them to convert to become long-term customers and advertisers (let alone buyers) will not be a walk in the park, especially in the current environment which is proving to be a winner take all milieu for some directories and marketplaces (but not others as the plight of Thomas Global shows). In fact, supplier marketing is an art. And it's one that takes an entirely different skill-set than understanding and selling to the buy-side -- as I've learned over the years from talking with a number of former Thomas employees and current successful directories and marketplaces including ThomasNet, Alibaba and MFG.com.
I suspect that Ketera might realize early traction getting suppliers to sign-up -- and will also be able to claim a giant directory based on existing suppliers and integration of third party directory sites -- but getting them to pay on a consistent and majority basis after a trial period won't be easy. It never is in this business. Beware marketing claims here vs. actual supplier revenue (follow the cash, not the talk, I say). After all, marketplaces are a classic chicken and egg problem. And without buyer-driven volume, they can come crashing down fast, as we all learned in the B2B implosion between 2001-2003.
I've been a bit critical of the prospects for certain supplier-driven aspects of this model so far. In fact, I'll go further and say that the supplier component of Ketera's new model is the riskiest element of the underlying business model (more on this tomorrow). But the new buy-side implications of what they're doing are novel and potentially quite exciting. In fact, this is where the new model shines. Take, for example, how Ketera is now more closely integrating the supplier discovery process into sourcing. In this regard, Ketera actively monitors its network to see which categories receive the most activity and then it actively solicits more information from suppliers in those areas, notifying buyers that they’ve matched their requirements to a broader set of suppliers than they had previously discovered.
Likewise, Ketera's latest take on spend analysis is one of the slickest network-driven approaches I've seen to leveraging benchmark intelligence across the buyer base. Everything from the overall design to the actual pricing intelligence that shows how companies are doing relative to peers and even on a regional basis in their ability to rapidly benchmark pricing and launch into an RFI process to lower costs immediately is novel. In many ways, it's what Ariba should have done with their network all along, but is just finally getting around to. Think about it. The vision here has a spend analysis and benchmarking application integrated across an entire buyer-community tied into the supplier facing world which includes current pricing and catalog data and overall pricing trends in the marketplace. Very cool and potentially invaluable at the same time.
In my view, it's a useful concept indeed to allow supplier discovery within the context of category specific analysis based upon which organizations are most competitive in the business network. Toss on top of these capabilities the likes of Ketera “Quick Quote” that converts a PO into an RFQ in a single click and you begin to see the true consumerization of B2B technologies -- Amazon meets Ariba as some might call it. As I see it, whether or not Ketera succeeds with this new business model, such approaches will someday become the future of all integrated Spend Management and supplier discovery.
Stay tuned for the final post in this series when we talk about the pros and cons of the approach and Ketera's current situation which might suggest whether they'll succeed (or not) with this new model.