Trade Extensions — Spend Analysis as an Extension to Sourcing Optimization? You Bet

In late June, Trade Extensions, a provider previously focused exclusively on the sourcing optimization market, unveiled an integrated data acquisition and spend analysis capability that directly interfaces with its core platform. In the press release announcing the news, Trade Extensions claims that "Unlike other spend management solutions where data has to be exported and imported at each stage, Trade Extensions' spend analysis is inherently compatible with the sourcing and bid analysis application so users can switch instantly between the data sets and make comparisons". Earlier this week, I had the chance to take a look at the demonstration of the application and here's what I found.

Despite some of the rhetorical claims in the announcement, the Trade Extensions spend analysis tool remains a highly targeted application that will never replace broader spend analysis implementations. In fact, they're giving it away for free to those that license the Trade Extensions sourcing optimization toolset on an annual -- versus project -- basis if that says anything. In other words, it represents a great stand alone tool for acquiring and analyzing data for specific sourcing projects (e.g., logistics) but in my view, it's unlikely it will ever directly compete against the broader spend analysis solutions from companies like Ariba, Emptoris, Zycus, BravoSolution, SAP and others (or targeted analytical tools like BIQ).

Seriously, you can't argue with "free" even if it does come at the cost of licensing their core application -- roughly 140K euro per year for up to ten users. Trade Extensions will also sell their spend analysis application (along with data acquisition and classification assistance) for 10,000 euro on a one-time category specific project basis or independently for 15,000 euro for a stand-alone annual fee (separate from the sourcing optimization license). These one-time fees also include data cleansing/classification services. Today, there are no multi-lingual capabilities resident in the toolset but Trade Extensions does plan to globalize the application at some point in the future.

After going through a demonstration of the application, it occurred to me that this is really a tool that primarily solves one of the biggest challenges in large-scale optimization projects today -- data acquisition. Trade Extension's spend analysis capabilities not only help automate and accelerate data acquisition on a project basis -- they also provide a single data structure and model from the upfront cleansing of the data through to sourcing optimization project completion. Rules creation for cleansing is very straightforward though not overly advanced (but it does not need to be for data acquisition on a single category level).

Reporting and analytics is not shabby either, especially as it pertains to putting category power users in control of their own projects. The ability, for example, to analyze a combination of spend data, payment data and allocation data in a single environment and then migrate immediately into an optimized sourcing project in the same environment is quite novel indeed (though the OLAP environment is about as run of the mill as it gets). Granted, it's not a perfect strategy development environment, but it should do the job for most of the categories companies opt to use it for.

At the end of the day, Trade Extension's foray into spend analysis is about as unsexy and counterintuitive a move as any vendor could make. Viewed from a superficial level, they're joining an extremely crowded market where new entrants (e.g., SAP) are investing small fortunes to build products and gain market-share. But dig below the surface and the move is smart and prescient indeed. Trade Extension's spend analysis package is really about lowering one of the key barriers to using an optimization toolset (versus simply outsourcing the running of optimization projects to others). It's not advanced, it's not pretty, but it does the job. And I suspect it will go a long way to helping Trade Extensions drive self-service adoption deeper into the sourcing optimization world. However, I'll caveat this final statement by noting that there are no available references for the tool just yet. But I am hoping to speak to some this summer when they're available.

If you're curious about Trade Extensions' recent progress in the market, here are a few recent things I've learned. From a customer perspective, they now count the following organizations, among others, as clients: AT Kearney, Schneider (Smartbid), Hubwoo, Dow Chemicals, BP, ExxonMobil, Mars Incorporated, Coca-Cola, Ineos, Whirlpool and Kimberly-Clark, Danone, and Siemens (where the former CombineNet European team uses their solution). Overall, they expect revenues to increase around 10% this year and project volume is up (even if average spend volumes per project are flat or down because of the economy). Trade Extensions is also in the process of establishing a beachhead in the US. But perhaps most interesting of all, they shared with me that customers are using their solution to optimize on a range of factors -- both price and non-price. This year so far, "supplier stability and longevity" have been "perhaps the most sought after attributes buyers value right now."

Jason Busch

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