Friday Rant: Are Vendors Too Focused on Transactions, Not Supply Chain Domain or Industry Knowledge?

The most curious thing about Ariba's announcement in November in regards to its acquisition plans for Quadrem (See coverage here, here, and here) was not the rationale for the deal, the clear transactional/business models synergies or even what appears to be a reasonable valuation for both parties. No, the most fascinating consideration was that there was no -- and I mean no -- mention either on the conference call, press releases or other statements to the public about anything relating to domain-specific needs and requirements in the mining and metals business. To me, this is fascinating in and of itself and shows how far some providers have come from focusing on domain specific issues in sourcing and related areas to cross-vertical transaction processing and connectivity enablement, while caring less about industry-specific customization and focus.

Procurement and supply chain considerations in the mining and metals business, as our sister site MetalMiner knows all too well, are unique beasts. Yet Ariba has said nothing about enabling the domain specific requirements of this particular marketplace despite the expertise, brains, process-knowledge and network of the current Quadrem team. Perhaps Ariba has overlooked this just in their marketing of the news, but in reality, they'll be missing out on a huge opportunity if they opt not to pursue areas like services procurement and domain-specific MRO and vendor management requirements for mining operations.

Consider Ariba CMO Tim Minahan's initial tweet on the subject: "#Ariba to acquire #Quadrem, creating the world's largest and most global business commerce network." Global business commerce network? Sure, I can buy that in terms of absolute transaction volume -- which is really just a question of sending POs and invoices through the network rather than getting involved in actual payment -- but in reality, the Quadrem network business was really about connecting mining facilities with suppliers for transaction automation (some of which was very domain, specific, but nothing of the sort was positioned as such by Ariba). Incidentally, accounting for the global spin on the deal, these mining facilities happen to nearly always be in developing economies because that's where mining activities are concentrated. But we're only really talking about a small number of buying organizations here in reality so the "largest and most global" network comment is potentially misleading.

More important, however, it's my hope that Ariba and others will not abandon the domain, category and industry specific issues that so often categorize sectors like the mining and metals world. Neither Quadrem nor Ariba, for example, have the services procurement business of the CPO they quoted in the announcement (contingent labor and labor management/safety in a mining context is a much bigger headache and concern than what Ariba solves on the network side, mind you). In my view, Ariba could have a golden opportunity to address broader and more important procurement concerns in markets such as this including industry specific indirect procurement/MRO optimization requirements, asset management/service parts/spares, capital equipment buying, etc. Yet they haven't mentioned these critical vertical areas of focus once nor are their solutions addressing these areas today.

In my view, these are the real areas of value that CPOs in metals/mining see today (and in fact areas that Quadrem brings a degree of expertise in). I still stand 100% by what Lisa Reisman and I said in the Industry Standard in 2000. To wit, "Now more than ever, domain knowledge and information on global supply markets are key. Only marketplaces that can codify and automate their customers' individualized supply-chain and decision-support requirements will create lasting value. Exchanges that simply focus on signing up partners and licensing technology to cash in on capital markets without developing a comprehensive supply chain strategy will be left holding the bag -- one filled only with paper clips and other simple goodies their trade infrastructure supports."

Of course we could forget this and party like it's 1999 again by thinking we've achieved world business commerce nirvana simply by figuring out how best to automate the sending and receiving of generic POs and invoices electronically. Or not.

Jason Busch

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