A Technology Revolution: Where is the Spend Management Technology Market Going? (Part 1)

I recently spent quite a bit of time thinking through the historic evolution of the sourcing, procurement and supply chain technology markets and where the overall sector could be headed -- including how individual technology areas will consolidate based on how customers and channel/consultants are beginning to think about solutions today. Spend Matters will be publishing a report on this topic later in the year, but I wanted to present a few early takeaways that I think Spend Matters readers will find interesting and potentially useful, especially as it pertains to making highly targeted technology investments today relative to broader ones in the not-so-distant future. The most important takeaways that I see involve the consolidation of Spend Management technologies into three key market segments (of course there are individual areas, like services procurement, which do not fit neatly into either of these three, and they will continue to stand alone).

The first uber segment we see forming is one that you could refer to either as supplier information management or, as Gartner recently did, supply base management (though we don't see anyone issuing "supply base management" RFPs just yet). More important than the name, however, is what the sector includes. I believe that in the coming years, customers will begin to look for integrated solutions in this area that combine elements of supplier enablement, supply risk management, supplier performance management, supplier diversity, vendor file management/audit recovery, data enrichment and, to be controversial, spend analysis. In fact, I'd wager that in the future, companies, especially manufacturers, will want to see item-level details about their spend, suppliers, risk, inventory and all related information in a single place -- which requires that spend analysis becomes part of this broader sector (even if certain organizations still buy it as a stand alone). Stay tuned for further analysis and background on the joining of these disparate market segments into a single solution area, as well as exactly which providers are poised to lead the charge in consolidating the market.

The next sector I see forming is one we could loosely describe as either next generation sourcing or collaborative sourcing. It encapsulates strategic sourcing toolsets like those from Ariba, BravoSolution, Emptoris and Iasta while combining these capabilities with advanced sourcing decision support including optimization (mind you, some of these providers already have these capabilities). But it goes a step further than this, in combining next generation direct materials sourcing and collaboration capabilities from providers like Co-Exprise (which are like nothing you've seen before), creating a sourcing driven data and total cost management environment that looks like a hybrid of sourcing and PLM designed for the next generation of manufacturing. The last element of this sector includes commodity strategy and trading tools from providers that have historically been sold to trading functions inside companies (e.g., SolArc, Triple Point) but are increasingly used by companies in the energy, CPG, food, metals and related markets where commodity inputs form a bulk of company spend.

The final sector that I'll profile in the next installment in this series of posts is what I'm tentatively labeling "finance-driven purchasing." Think of it as P2P on steroids with a finance/treasury/working capital orientation. If you believe that ERP providers or Ariba have this segment tied up, think again. It's bigger than you think, and new providers -- and banks -- want their share of it as well. It's also where the greatest number of start-ups have formed in recent years, driving innovation from the bottom up.

Jason Busch

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