Porter’s Five Forces and Procurement Technology Suites: Suppliers

suppliers DOC RABE Media/Adobe Stock

Michael Porter’s five forces provides a useful comparative framework to understand the competitive dynamics of markets. I recently authored a five forces framework exploring procurement technology suites based on Porter’s model.

In this post, I’ll consider one of Porter’s five forces in more detail: suppliers.

In the analysis of suppliers, I begin by suggesting that there is a high degree of fragmentation in upstream areas. Different segments in this fragmented market include:

  • Middle market-centric e-sourcing providers
  • “Upstream” source-to-contract providers that deliver integrated sourcing, analytics, supplier management and related capabilities
  • Source-to-pay providers that offer integrated “upstream” modules along with procure-to-pay
  • Specialized advanced sourcing and optimization solutions
  • Category-specific sourcing solutions

Speciality capability within the procurement technology market can be materially differentiated in specialized solutions versus suites. Contract lifecycle management (CLM) is a great example of this, with capabilities such as artificial intelligence (AI) beginning to make its way into these best-of-breed solutions ahead of suites. Another example is sourcing optimization differentiation among best-in-class providers versus suites.

Further, there is increasing breadth of capability among core providers in this market, who are expanding the modules they are selling. Another trend is that specialized analytics-focused solutions are becoming more common as a core component or an add-on to suite products (as well as new types of standalone analytics solutions).

Another trend is that network and platform-based models are in the early stages of creating new ecosystems. These include integrated “apps,” which are starting to become available via API-based integration on platform providers without certain capabilities. Tradeshift, for example, is integrating e-sourcing and risk management into its supplier network and e-invoicing capabilities, which are expanding into the broader P2P market as well, creating a kind of “virtual” suite.

Finally, middle market-centric solution providers are a growing presence and increasingly selling to larger customers, as well.

What do you think of Porter’s Five Forces applied to procurement from the supplier “force” perspective? What am I missing from a trend perspective in this area?

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