TradingPartners: Does Restructuring Portend Changes in the Reverse Auction Market? (Part 1)

Last week, my soon-to-be partner in crime in a new Spend Matters UK/Europe site, Peter Smith, broke the story that TradingPartners is going through what appears to be a period of turmoil involving staff redundancies (layoffs) and restructuring. For those who don't know TradingPartners, the firm is a full-service reverse auction provider (you can read our past coverage on them here). I previously wrote that "their entire business model is predicated on reverse auctions" -- full service reverse auctions, to be specific -- and "they offer the gamut of fee options from 100% fixed fee to entirely variable/savings based (and everything in between)."

Peter writes that in late August, "there were office closures in the US (not the main office) and some immediate staff layoffs; that was quickly followed by issue of consultation notices (the prelude to likely redundancies) in the London office amongst some support and operational staff." Late last week, after Peter published the scoop, I had the chance to talk to TradingPartners CEO Mark Halpin, as well as a number of former executives and employees to get the complete story. Even if you're not a TradingPartners customer or prospective customer, this reporting and analysis is worth a quick read because I believe their situation portends a number of general trends in the e-sourcing market, especially around professional services.

First let's start with the basics: what we know. Some of our sources suggest that close to 15% of the North American workforce (eight or so employees) were recently laid off (Marc claims the company has around 50 employees in North America and 90 globally, but more on that later). However, our research also suggests that the company's six former managing directors (in charge of regional sales) have all left in the past twelve months, and numerous other employees have departed as well. Among the MDs, five quit and one was let go. However, it appears the firm is making strides to hire a new sales organization, yet of more junior caliber, except their sales VP.

Peter writes in his post that the layoffs are not necessarily "critical for the firm" and that he "understands there has been investment in front line sales staff in an attempt to drive revenue." Still, he further opines that if you are an organization having "a more strategic relationship or are involved in longer term projects or development with them, it may be worth having a serious discussion with your account person at TradingPartners to establish exactly what is going on in the firm, and what re-assurance they can offer about meeting your needs."

In my talk with Marc, he implied that TradingPartners is on solid footing. Specifically, he notes from "a 10,000 foot perspective, the market is as strong as we've ever seen it." So why the layoffs? I asked. Marc responded: "What's changed for us in recent years is that we're dealing with larger and larger customers. Back in the early days, we were a very small start-up (compared with FreeMarkets and others) and we looked primarily at the middle-market as our target customer base. Now, ten years later, we are focusing on a larger market segment -- $10-50 billion companies. This change has impacted how we think and the way we operate." According to Marc, "TradingPartners is seeing significant demand ... and we must make sure we are best prepared to take opportunities on. We are running managed events in 9-10 countries and our relationships are crossing international boundaries."

Marc claims that TradingPartners had a "record breaking quarter" in Q2 2010 prior to the layoffs. Yet others close to the organization share a picture that is not so one sided. Stay tuned for Part 2 of this post, where we'll look at the other perspective. And in Part 3, we'll talk about what TradingPartners' challenges signify, if anything, for the broader e-sourcing, reverse auction and strategic sourcing advisory marketplace.

Jason Busch

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