Intesource Shares Some Fascinating Numbers

A couple weeks back, I had the chance to catch up with Intesource to get a company and product update. For those who don't know Intesource, they fall into one of the best-kept vertical secrets category in the Spend Management world. Just as SciQuest has established an expert position in the higher education and life sciences verticals, Intesource has succeeded in capturing significant marketshare in the grocery sector (even though they have serious ambitions to build on this beachhead, branching out into other retail areas).

In fact, they've bid out over 539 "non-branded" categories in the grocery sector creating identified savings in the 100 most actively sourced categories of over 30%. Intesource will be increasingly leveraging this cross-category supplier market content in their software solutions later in 2007, fusing market intelligence with the application and workflow itself.

While I find their strategic direction to embed supplier and market content into the sourcing applications absolutely fascinating, what really struck me about the conversation were some of the numbers they were able to share regarding incumbent and new supplier participation in competitive negotiations. In Intesource's experience, the incumbent supplier is only awarded the business after a reverse auction 30.68% of the time. When the incumbent is not awarded the business, they are 41% higher than the winning bid.

The low incumbent award percentages (relative to other industries) shows how willing grocers are to change suppliers because of the razor thin margins in their business. My experience in virtually all other sectors in competitive bidding events has been very different -- in a majority of cases the incumbent tends to keep at least some of the business.

On another note, I found it fascinating that Intesource has been able to work with some small organizations on their sourcing initiatives. One smaller customer, with only 11 stores, realized over 31% savings on a bid for plastic bags. It is stories like this -- where a single negotiation can improve EBIDTA by over 10% -- that give credence to the type of value that Spend Management can bring to even small middle market organizations.

In the coming weeks at Spend Matters, I also plan to take a look at SciQuest, another vertical-specific success story in the Spend Management world. Clearly, it's not just been industry sponsored exchanges that have been able to go deep on the industry level and achieve significant success.

Jason Busch

Share on Procurious

Discuss this:

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.