blur Group CEO Speaks – More on Growing Procurement Marketplace Firm

We reported yesterday on Thursday's announcements from blurGroup that led to the share price dropping by some 40 percent. blur provides a platform that enables buyers to advertise their requirements in a number of services categories, and blur then matches those needs with suitable suppliers in its network.

I’ve been reflecting further, and I’ve now also listened to last week’s  webcast from Philip Letts , the CEO.  He talks mainly about moving to larger ‘enterprise’ clients, and the shift to the new platform, and he comes over well. But what he doesn’t talk about is revenues, margin, profit, or customer retention. He was totally unapologetic about the revenue recognition issues that led to the indications for 2013 being lower than the market expected, presenting that as a positive for 2014 instead.

He did talk about a few named enterprise clients such as Momentive and Danone.  But there aren’t any client case studies on the blurGroup website, and although we asked the firm if there were clients we could talk to a few months ago, nothing ever came of that.  We also note that last week, Momentive Performance Materials filed for bankruptcy and went into Chapter 11 in the US, in a move to escape its crippling debts. Now there is also a Momentive Specialty Chemicals, which is still doing fine, and the non-US business may be unaffected. Here's what blur said when we asked:  "we can't comment on their business (Momentive's) but I know that blur looks forward to continuing its relationship with Momentive during and after its pre-negotiated reorganisation programme.  They will continue to operate in the 'ordinary course' as they put it and we will do the same."

I’ve also done some research around various websites such as Trust Pilot and Glassdoor, which provide reviews of firms in various contexts.  Now we need to be very careful here – there can be competitors, disgruntled ex-employees or others with a vested interest here putting bad stories into the public domain on such sites. (Of course, there can also be submissions from staff or other biased people on a firm’s side too).  But one regular theme emerges – allegations from people, claiming to be clients, who say that they didn’t realise the nature of the contractual commitments they were getting into when they started doing business with blurGroup.

So without getting into this or taking sides, there are some obvious tips for anyone considering using blurGroup. Indeed, these are sensible points for any commercial relationship!

1. Be very clear what you are committing to in terms of the fee you will pay to blurGroup if it successfully  fills your requirement and finds supplier(s) for you.  Its standard fee appears to be 20 percent of the project value - one assumes that is negotiable for larger projects.

2. Be just as clear what you’ve committed to if you don’t end up using a supplier suggested by blur, whether that is because it didn't find one, or you don’t like the one proposed, or you simply change your mind about the project.  This is the main source of allegations around the websites, that there are ‘unexpected’ fees even if no suitable supplier is identified. (By the way, we don’t necessarily think it is wrong for there to be some fee for blur, even if the deal doesn’t go ahead. But the client needs to understand what that is before they commit to the arrangement.)

3.  Don’t get talked up into advertising your requirement at a higher value than you really want to – not good practice and you may be into a fee based on a percentage of the value.

First Voice

  1. Nick @ Market Dojo:

    I find blurGroup a really interesting company to follow. The focus on sourcing for services is smart, as it can be a tricky area in comparison to commodity goods.

    One thing that didn’t really come across in the Spend Matters coverage on the company is that the 20% commission on the project value is in return for their strategic sourcing services, i.e. approaching the market as a whole and qualifying suppliers against the specific statement of works, soliciting commercial offers from those suppliers, undertaking a scorecard analysis and compiling the individual pitches from each shortlisted suppliers. So there is a fair amount of manual work involved. Initially, from reading the coverage, I had assumed that the 20% was just to give the client access to some pre-registered suppliers that could do the job.

    The challenge blurGroup faces in my opinion is how they demonstrate to their clients how they are providing best value. On the one hand, it’s clever that their solution bypasses Procurement, who tend to already have their own eSourcing tools & teams, and instead targets the individual departments, i.e. marketing, design, legal, IT, etc. Therefore the watchful eye of (Sauron) Procurement may not have this spend under their remit, and may not be able to ensure that the ‘market price’ for the services has been ascertained.

    How does blurGroup help to solve this problem (which has always been a problem with or without blurGroup)? I think we are all in agreement that ‘3 bids and a buy’ does not constitute a hard negotiation. Given the spend values of some of these projects, I would suspect that significant money is being left on the table. Furthermore, it would be a conflict of interest for blurGroup to press for negotiation, since it would reduce the project value and hence their fees. And so I see blurGroup becoming an enemy of the CPO who would even further wish to bring this maverick spending under control. If blurGroup were able to demonstrate that the market price was acheived via their sourcing exercise, then it would help the CPO sleep better at night. Then we’d be looking at a service that provides long-term value.

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