E-Sourcing Evolves: Looking for Differentiation and Getting Past Basic Functional Sameness

Since I first starting looking at eRFX platforms just over ten years ago, the space has undergone a rapid transformation. Indeed, in only a decade, we've all witnessed significant changes in the market. In many companies, such platforms have moved from ad hoc cost savings novelty (e.g., early stand alone reverse auction tools) to part of mandated standard operating procedure. For many procurement organizations, they've also become somewhat of a commodity product. Even if one size does not fit all, you'd be hard pressed to discern much of a functional difference in the base-level capabilities of an Oracle or SAP compared with an Ariba.

For example, in a recent client study, we concluded that the base level capability for RFI and related supplier and response management capabilities were essentially at parity across Ariba, BravoSoltuion, Emptoris, SAP and Iasta, with Oracle and Zycus trailing slightly. For eRFX data management as part of core sourcing (not as a separate MDM solution), Ariba, BravoSolution, Emptoris and Iasta came out with similar scores; Oracle, SAP and Zycus were slightly behind (but with functionally acceptable capabilities). However, in related but separate solutions areas, such supplier information management/supply base management, spend analysis, performance management, etc., there is a much greater functional and usability gap between solutions.

Still, when it comes to other e-sourcing areas (exempting more advanced or specialized ones like optimization, broader suite integration and supplier discovery), the results of our client analysis mirrored our findings in the two areas outlined above -- general, or close, functional parity between better-known providers. In other words, for basic sourcing enablement across simple categories, you really can't go wrong in the market with the top ten or so providers (complex direct, services, make/buy and transportation present different stories entirely, however).

Granted, companies may rapidly express interest for the specific capabilities (e.g., data integration with SAP, supplier discovery with Ariba, ease of use with Iasta, optimization with BravoSolution or Emptoris, etc.) of one solution or another, but at this stage of market maturity, they can all generally get the basic job done for customers. Perhaps this explains why Ariba, among others, has been driving the market to price-focused decisions by offering aggressive annual price points for tool usage that can materially undercut what we used to get for a single large reverse auction at FreeMarkets.

Given this backdrop and increased price competition, an outsider might look at the e-sourcing market and say that it's generally wrapped up at this point with little new innovation or product differentiation. But behind the scenes, on both a regional and industry basis, newer entrants like Austrian-based Pool4Tool and Pittsburgh-based Co-Exprise are breathing new life into the market by taking a direct-materials centric approach to delivering e-sourcing capabilities wrapped around a specific cockpit of tools designed for sourcing and managing suppliers effectively in a manufacturing environment.

In a series of posts starting tomorrow, I'll begin to showcase some of the background and innovation driving the capabilities in these upstart providers, including the importance of integrated total cost modeling built for an industrial environment, advanced and flexible cost breakdown capabilities, information/master data management, demand aggregation, quality/performance management and related capabilities in these new breed of applications. We'll start first with Pool4Tool and examine other providers, including Co-Exprise, later in the fall.

Jason Busch

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