In this post, we'll continue to tackle the subject of strategic sourcing and double-click again on optimization. Below, I print an e-mail interview with Sourcing Innovation's Michael Lamoureux, who knows more about the subject of optimization than any other independent analysts and consultants. Here's what Michael had to say:
"There are a number of ways that you can attempt to compare:
- CombineNet Communiqué I: The Story to Date
- CombineNet Communiqué II: Comparisons
- CombineNet Communiqué III: Differences
- CombineNet IV: BoB's Unique Talents
- CombineNet V: Expressive Bidding (in Combinatorial Optimizations)
- CombineNet VI: Strategic Sourcing Decision Optimization
- CombineNet VII: BoB's Power Source
...and Trade Extensions
- On the Eleventh Day of X-Mas ... (Introducing Trade Extensions)
- e-Leaders Speak: Garry Mansell of Trade Extensions on "Strategic Procurement through Optimisation"
- Sourcing Innovation Welcomes Trade Extensions as New Lead Sponsor
- Trade Extensions Trades Up Its UI and e-Negotiation Management Capabilities
- Trade Extensions Demonstrates Optimization is Not Just for the Private Sector
...but in every way but one -- including power, constraints, and flexibility -- they are now more similar than you'd think. The only true way to truly differentiate these players is in their philosophies. CombineNet is still mired in the event-based we-do-it-for-you model, while TradeExtensions has always been focused on the platform-based you-do-it-yourself model, even though they do end up doing a lot of event-based and we-do-it-for-you projects.
With this philosophy, CombineNet's primary focus for years was developing the biggest, baddest solver that they could then use to solve the biggest, baddest models, and the self-service UI has always been an afterthought. (Their "Self-Service Solution" announcement from last September is no more impressive than what MindFlow, which went head-to-head with them on a number of deals from 2001-2004 [and won its fair share], announced back in 2001). In comparison, Trade Extensions was always focused on allowing the end-user to leverage any advancement they made as soon as they made it, and have, in fact, gone through multiple self-service UI iterations in an attempt to not only expose the full power of the platform to every user, but to make the solution as simple and easy to use as possible. They've also worked extensively on Excel integration to allow a user to perform data entry in a convenient and comfortable matter. In fact, a user can even add rows and columns to an automatically generated spreadsheet, and the Trade Extensions platform will still be able to process the spreadsheet just fine. It will simply ask the user to identify the new rows and columns on import.
As a result, even though CombineNet and Trade Extensions were both formed in 2000 on different sides of the Atlantic, for the first half of their existence, CombineNet was always ahead of Trade Extensions in brute force power and as well as big-name clients they were initially able to win. This used to mean that if you absolutely needed the biggest, baddest, solver available, you went with CombineNet and handed most of the project over to their team, paying a six-figure price tag for the privilege of doing so. However, if you could settle for a little less power, and were comfortable doing (or wanted to do) it yourself, you could pay five figures to go with another player like Trade Extensions and still have a best-of-breed solution.
Over time, however, the one-sided power-play philosophy caught up with CombineNet, who went from losing deals to MindFlow and Emptoris, to losing deals to Vertical Net and Bravo Solution, and, now to losing deals to Iasta and Trade Extensions. With the market maturing, more and more people want to do it themselves, and with the recession, no one wants to pay six figures when they can get a platform license for a year and hold all the events they can manage themselves. As a result, in the mid-noughts timeframe, CombineNet had to backtrack, go back to basics, and start building self-service front-ends to its solvers in logistics and sourcing. In the meantime, Trade Extensions could keep charging forward, adding more power, more constraints, and more features to its already mature front end -- which allowed it to solve bigger and badder problems all the time.
So now you have the situation -- as evidenced by the fact that Trade Extensions was recently able to solve a model with over 65,000 items, 60,000 transport destinations, and 400,000 bids from over 100 suppliers that was valued at $1 Billion, with a "B" -- whereas the Trade Extensions solver platform is just as powerful as the CombineNet models, but you get an industry leading do-it-yourself UI to boot! The only "edge" CombineNet retains is that it has built and solved more models outside of sourcing and logistics, namely in Energy and Health-Care, and can claim more experience. But the flexibility of the Trade Extensions platform allows them to attack most of these models too. In other words, unless CombineNet's new UIs allow you to do most of what you need, or you need a custom model built, then you're probably going to see Trade Extensions continue to grow while CombineNet continues to think, unless they have a brand new pricing model to go along with that brand new website that is more competitive than it has traditionally been. Especially since the Trade Extensions solution has an integrated RFX, reverse auction (that supports real-time optimization) platform, and an analytics engine that allows you to cube, slice, and dice your RFX, reverse auction, and optimization results data like a typical high-end suite spend analysis tool.
As a final aside, not only should you remember Iasta, BravoSolution, and Emptoris if you are shopping for a suite and don't need best-in-class optimization, but you should also remember that on the other side of the Atlantic, though much closer to the equator, is a company called Algorhythm that offers a complete supply chain optimization platform that also does inventory optimization, distribution network optimization, production planning optimization, and integrated multi-echelon distribution, inventory, and logistics optimization th
at can take into account desired service levels as well as operational costs and optimize your entire supply chain. I first covered them about two years ago here, and will be covering them again soon.
Spend Matters would like to thank The Doctor, Michael Lamoureux, for sharing his expertise on the subject of sourcing optimization providers.