Sourcing Innovation: Next Generation On-Demand

Yesterday, I posted a blog describing the potential to securitize direct materials buying and selling. Today, I will tackle an unrelated subject, but also one that I've thought -- and blogged -- about in the past: next generation On-Demand. In a previous post on the subject, I wrote that future On-Demand approaches will "incorporate external content and insight as a fundamental part of their value proposition. For example, rather than just include the capability to configure a business process for global sourcing and category management, they'll include insight into supplier capabilities and supply market conditions on a continuous basis." But this sort of thing is just the start. The real power of On-Demand will come when providers learn how to leverage the user network as the strategic advantage of the application itself. Early examples like this already exist. Consider how Open Ratings, for example, aggregates supplier financial, operational, and performance data from many sources -- including the users themselves -- to better predict supplier financial viability. In this case, the distributed eyes and ears of dozens of customers play a critical role in improving the predictive nature of the solution.

The Open Ratings approach collects, centralizes, and analyzes information, and only then pushes out its supplier viability predictions to users. But other next generation approaches will probably rely on decentralized information query, retrieval, and analysis. In this context, I was blown away by the agent-based search approach that Vinimaya already deploys to search, aggregate, and pull disparate punch-out data in real-time, accomplishing a level of extended catalog search and information presentation which the eProcurement and network providers cannot begin to achieve with their current technology. Note to Ariba, Ketera, or Perfect: one of you should pick up Vinimaya, as their punch-out search capability would be a huge competitive asset on the network side. At a conference I attended earlier in the year, Hackett's Pierre Mitchell posited a similar decentralized search model that could revolutionize the spend visibility and analytics market.

But next generation On-Demand will offer more than just network intelligence and better access to decentralized information. They will also enable a new type of decentralized service delivery – a virtual knowledge and action network, if you will. As I wrote in an earlier post on the subject, "Consider how an On-Demand platform could enable the creation of virtual shared services teams between organizations based on processes, skills and availability. A castings category manager from a non-competitive automotive company could identify and work with her counterpart from an industrial manufacturer to share or barter processes, information, and even available capacity and on-the-ground global resources through an On-Demand application or hub. Consider this an On-Demand "skills punch-out" and shared services business process network if you will, made possible by entirely by On-Demand capabilities."

I chuckle when I think about the power that first generation exchanges such as Covisint might have gathered if they were able to embrace the power of new On-Demand approaches to leverage the collective intelligence, skills, and distributed information and sensing ability of their member participants. Truth be told, 99% of first generation (i.e., current approaches) On-Demand models only deliver value through reducing the cost of ownership for member participants of existing types of technology offerings -- or customers -- rather than offering a new value proposition entirely. Granted, there are other small benefits as well, such as reduced deployment risk, frequent updates, ease of use, etc. But nothing in the current model delivers a fundamental new type of value. There's nothing wrong with this -- and I say this as a card carrying member of the On-Demand camp -- but I believe we're all leaving far too much on the table if we continue to treat On-Demand as just a shared-services approach to defraying application deployment and delivery costs. The potential is so much greater!

Jason Busch

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