Thomas Accelerates the Growth of Ketera's Network Business

It seems that being a marketplace is back in vogue these days. But this time around -- based on the strategies of MFG.com, Ariba and Ketera -- there appears to be two keys to being successful: building scale and building liquidity (versus following a Field of Dreams "if you build it they will come" type of approach that doomed hundreds of similar efforts a decade ago). When it comes to scale this time around, some providers like MFG.com have opted to go deep in certain areas (e.g., metals fabrication, textiles, etc.) while others, like Ariba and Ketera, have decided to take a broader focus. Ketera's recently announced partnership with Thomas -- yes, that Thomas, that used to ship the big green book -- is an attempt to build sell-side critical mass into their marketplace.

According to the announcement, "the two organizations have partnered to bring the entire ThomasNet.com community into the Ketera Network. This action simultaneously offers new online transactional capabilities and greater online exposure to ThomasNet® suppliers while growing the Ketera Network with additional suppliers and more than 5,000,000 new publicly available catalog items." ThomasNet suppliers will "have the abilities to participate in Ketera Network sourcing events, receive POs from Ketera buyers, manage invoices electronically, and host catalogs in an open transactional network."

Our cursory research suggests that there was material thought put into this relationship and approach. If it proves successful, it will be an example of a clear win/win for both Ketera buy-side and Thomas sell-side customers. Yet Ketera will need to accelerate the pace of buy-side liquidity in its marketplace on the sourcing side to compensate for the addition of all these new suppliers (especially from a direct materials perspective). Still, given that Ketera has focused historically on indirect materials trading enablement, the direct materials flavor of the Thomas deal should help broaden its providers' overall sourcing appeal if they can get additional manufacturers to sign on the buy-side dotted line.

But others aren't sitting still in the network enablement race. Ariba Discovery, a new free marketplace matching and sourcing tool from Ariba, provides Ariba users with the ability to identify new suppliers in the Ariba marketplace (and in the future will be more tightly integrated with many of Ariba's products). While Ketera may be ahead of Ariba today in overall supplier matching and discovery integration into its solutions, the ultimately name of the marketplace game is scale. This suggests that in part, the winner will be the one that can bring the most liquidity to the categories where they bring buyers and suppliers together.

In addition, the winner will also need to come up with a revenue model that works for all parties involved. I personally think that marketplace offerings will always remain an outgrowth of a publishing model where suppliers pay for either directory listings or for specific access to RFQs. Some, like MFG.com, charge suppliers a flat-fee per year to access and bid on all the RFQs they want. Others, like Thomas, charge a flat fee for inclusion in a directory with a premium listing and value-added marketing services (e.g., SEO, website and catalog creation, etc.)

Yet I believe the model that will potentially prove most appealing to suppliers will combine some of these elements with a pay-as-you-go model for access to specific business opportunities based either on participation in the sourcing process or the actual contract award. Suppliers -- just like everyone else -- feel more comfortable with models that provide performance-based incentives, measurement and return.

Jason Busch

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