Friday Rant: B2B Dark Horses — Disrupting the Procurement, Distribution and Supply Chain Market

Earlier this week, the shot-heard-round the industrial distribution (and potentially P2P) world was Amazon formally announcing its entrance into the B2B sector. You can read Spend Matters and MetalMiner coverage of the news here, here, here and here. In our view, Amazon represents a potential dark horse from the business-to-consumer (B2C) sector driving into a B2B environment. We suppose one could argue that Amazon also represents a distribution and infrastructure -- both warehouse and technology -- company entering the space as well. But as we see, it, their consumer background is most interesting, because that's where they cut their teeth and how they garnered leadership in online commerce.

What other dark horses from different markets outside the consumer and tech world might enter the B2B, procurement and supply chain space with disruptive solutions that could steal Ariba, IBM, SAP, and Oracle's lunch from out in front of them? We've got a few ideas. Perhaps most obviously, a financial services company, especially a hungry bank (versus one that is too big to fail, without the sufficient willingness to take creative risks), could enter the space with an extension of a discounting/supply chain finance offering extended into P2P, T&E, travel and related areas. This might emerge regionally; it might emerge in a sector (e.g., Silicon Valley Bank serving the transactional/B2B needs of growing tech firms). But there's definitely a play here, and whoever does it, could go to school on all the corpses already in the market like Amex (Harbor, Ketera, etc.), and Chase (Xign).

The next logical dark horse sector is logistics companies, especially 3PLs, expanding into new areas. Supplier management including qualification, auditing, quality assurance and the like all seem reasonable. It would probably be far more impactful in the market for an Achilles to end up with a DHL exel or UPS than with a larger BPO or software provider, for example. Moreover, 3PLs could easily get into the financing of transactions as well, going beyond the basic customs clearing/brokerage, management of LCs, etc. A movement into P2P, especially invoicing and discounting, might at first seem far-fetched for a logistics provider, but in reality, could make significant sense, as could taking ownership of multi-tier visibility, planning and forecasting. Just think what a dominant 3PL might do with e2Open, for example.

The final dark horse is not a sector, but an individual company: Microsoft. Microsoft, you say? What is their play in this market? Everything they touch except operating systems and office suites is cursed. Well, not entirely. And while their ultimate participation could take many forms, Microsoft has, for a long time, wanted to be a more valuable participant in SMB core financials and business applications (taking Dynamics to a new level). Expanding into the transaction space, where they are already on the desktop of every major (and not major) buyer and supplier, could prove interesting. Moreover, we'd argue that 90% of sourcing today is still done in, you guessed it, Microsoft Excel. Add to this all the rigging we've seen companies do of Sharepoint and Access and one could argue Microsoft is already a dominant -- albeit indirect -- arms dealer in the B2B and P2P world. And they've no-doubt signaled their interest in the space more seriously, at least on the sell-side, by partnering with Ariba.

Regardless of whether it's an Amazon, a bank, logistics provider or left field software company like Microsoft (or Google for that matter), we believe that we'll see more and more dark horse candidates enter and compete in the P2P and B2B worlds. Those that think the ERPs and Ariba have locked up this market (not to mention the many fast growing upstarts in the sector) would do well to think outside the box. It could very well be a disruptive offering from a dark horse provider and sector that could change the basis about how we think about procurement, supply chain and B2B connectivity.

- Jason Busch

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