Trade Extensions and the blurring of the auction / optimisation divide

We’ve featured Trade Extensions before, and of course they sponsored our White Paper on optimisation (available here).  Jason Busch and I recently had a session with Garry Mansell, their MD, and Arne Andersson, one of the founders and a Computing Science professor in Uppsala by background – hence the very clever algorithms and technology that sit behind the leading platforms in this area, of which theirs is certainly one.

The reason for the update was the latest release from Trade Extensions; improvements to make the product both more powerful and easier to use for clients, with benefits such as enhanced dashboards, improvements to the auction capability, ‘project wizards’, and more reporting options.

Garry confirmed the trend we’ve been noting for a while; more clients are choosing, perhaps after some initial support, to run optimisation tools themselves rather than on a managed service basis. So the balance of Trade Extensions sales (which continue to grow steadily) are now strongly software licensing rather than consulting – it’s switched round from 50:50 to almost 80% of revenues from software over the last couple of years.  And that, in itself, is indicative of how these tools have becomes much more user-friendly and intuitive.

We also spoke about another trend that Jason and I highlighted recently. It appears that optimisation technology, which has been seen previously as appropriate really only for the most complex sourcing problems, is being used for more and more of the sourcing events run by the client organisations. “It’s not just logistics or even procurement people using the tool; it’s a wide range of business executives using it for a wider and wider range of spend areas” as Mansell says.

And they’re also seeing a blurring of the lines between what we might have defined as an optimisation exercise and a reverse auction or conventional RFX.  “Some clients use the tool extensively for auctions; but they may include within that some elements where supplier responses are invited, as we would see in the case of optimisation exercises”.   And that again is in part because of the greater capability and greater ease of use of the tool.

We’ll look in more detail about some of the new and improved features, and the related benefits, in our next post on this topic – and Jason will also bring his superior technological analysis skills to bear! But for now, two strategic points stand out.

Firstly, if you haven’t looked at optimisation tools – you should.  As we’ve noted before, they offer benefits and real competitive advantage over and above even strong category management and RFX-type processes and tools.

And secondly, don’t think about them any longer as being purely for brain-achingly complicated categories, such as international logistics tenders.  The basic principle of these tools is that suppliers can suggest better ways of structuring the market and meeting your needs than you can in isolation. It may surprise you as to the range of spend categories for which that principle can deliver major benefits.

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