Friday Rant: The Commoditization of Parts of the Spend Management Technology Market

I've had two different people corner me (either online or in person) the past week to complain about my coverage of Oracle's new spend classification product and how my view painted a perspective that hinted at a commoditization of the market. Which in their view, is anything but a good thing based on where they sit. To one person who moaned in my direction, I responded: "Spend analysis is not rocket science", to which he responded with even more angry barbs and the counter that it in fact was. But regardless of where you sit regarding the complexity of various Spend Management technologies, I do believe that certain areas of the market have already been, or are in the process of being, essentially commoditized for the majority of likely buyers who only care about a certain percentage of absolute capability. Now, this is not to say that differentiation and choice does not exist (see my Rant from last Friday) in the market. But many simply won't care to look for it.

What areas of the market have become fungible commodities for most technology shoppers today? The two simplest ones are basic e-sourcing and spend classification (but not broader spend visibility, as I hinted at previously). For most companies, just about any approach will get them to where they perceive they need to go. Granted, there are differences in approach and absolute capability, but for many, it will come down to buying a Camry or an Accord (or potentially a Hyundai if they're feeling thrifty). Along similar lines, many aspects of eProcurement have also become a commodity product (although supplier enablement, content management and network/direct connectivity remain anything but fungible). A lot of content in the market is a commodity as well, as many buyers view it (e.g., supplier diversity).

The areas that I'd argue are still far from being commoditized in most buyers' eyes are as follows. First, contract management. Here, there's still a tremendous difference, for example, between what an Upside provides relative to someone pushing a Sharepoint-derived toolset (or one that is more an outgrowth of an e-sourcing suite or simply part of a broader Spend/Supply Management toolset). And you'll typically pay for the difference if you value it. Other areas that remain largely differentiated as potential customers look at solutions include supplier information management, EIPP (electronic invoice presentment and payment, including supply chain finance), services procurement (including but not limited to contingent spend), supply risk management (including both content and software) and the data integration, visualization and analytics components of spend analysis.

What do you think? And does it even matter that more and more procurement organizations are looking at certain technologies as largely commodity buys?

Jason Busch

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