In a column earlier this week, I examined how boutique e-sourcing providers like e-Three are gaining strong adherents in the sourcing world from procurement leaders attracted to the cost, flexibility, and expertise that smaller firms offer, especially in the case of what have largely become commodity, full-service e-sourcing projects (i.e., what FreeMarkets originally pioneered). But part of the appeal of an e-Three is not just that its principals are highly customer focused and that the price is right for the services they sell -- it's also that they've got an established technology partner behind them. Recently, Oracle and e-Three announced an expanded partnership between the two organizations, which includes additional capabilities in the area of spend visibility. Clearly, Oracle's choice to embrace boutique partners like e-Three reflects a belief that the future of this market will not just be owned by large consultancies, SIs, and outsourcing providers.
The e-Three/Oracle relationship in the area of spend analytics and audit/recover is perhaps most interesting as a signal of where the integrated software/services partner model might be headed. I particularly like the extension of spend analysis to include the ability to "recover profit through detailed interpretation of overpayments, duplicates, and supplier overcharging" by leveraging Oracle technology (and, no doubt, some good old-fashioned Excel and Access manipulation). Perhaps more interesting on a higher level, though, is that even though Oracle also delivers hosted versions of its own applications, it's also clear that they realize that pursuing a strategy along the lines of an Ariba -- which has opted not to embrace a broader ecosystem of partners that leverages its technology or delivers it via hosting services -- could limit their potential market share.
At the time of Oracle's announcement at OpenWorld about its latest hosting strategy and capabilities, I wrote that the provider was "putting its On-Demand enablement money where their mouth is by delivering enabling technical services designed specifically around a hosted deployment model. These include a specific 'hosting and functional service desk' and 'hosting implementation' for On-Demand as well as a 'rapid implementation' capability to help companies get up and running more quickly." In other words, Oracle was opting to have the hosted-procurement ball passed to them in the specific areas that SAP was punting on (outside of their Frictionless-derived e-sourcing and contract-management solutions, that is).
But I also noted in the same column that, "process and content expertise appear to largely remain the responsibility of either the buying organization or other Oracle partners." And this is where niche sourcing shops like e-Three come into play. By managing their own hosted version of Oracle applications in the e-sourcing and spend-analysis areas, e-Three can drive rapid deployments for customers on their own, or they can opt to run events on a customer's own Oracle applications (or a combination of the two, eventually transitioning data stores to customers who opt to purchase new Oracle licenses).
Oracle's strategy will prove prescient if they have the ability to scale pilot relationships like e-Three globally, from a handful of beta partners to hundreds or thousands of potential niche consulting shops and resellers. If the strategy works, it could be very similar to how earlier, smaller ERP providers like JD Edwards and Baan originally leveraged the VAR or reseller channel to build market penetration and dominance in targeted verticals and demographics. It will be interesting to see whether Oracle also ramps up similar relationships with IBM, Accenture, Deloitte, and other larger providers. And because they're "Oracle" after all -- and these firms have dedicated Oracle practices -- they’ll potentially be able to get around preferred relationships that already exist with providers like Emptoris within the procurement/supply chain consulting teams and the outsourcing groups (which often manage technology relationships independently).
- Jason Busch