Friday Rant: How Will the Spend Management Technology Landscape Look in 2013 (Part 2)

In the first rant in this series, I proffered an opinion about how the Spend Management P2P technology landscape might look in 2013. Today I'll turn my attention to the e-sourcing and related category management, advanced sourcing and commodity management software markets. For those who track the e-sourcing market closely, I think you'd agree that the area has seen some seriously good progress in the past five years. I personally remember when most of the tools out in the market (including FreeMarkets own self-service toolset) were pretty pathetic. Less than a decade ago, e-sourcing apps crashed during events on an all too regular basis, had inconsistent features, were somewhat intuitive (at best) and were designed almost exclusively around negotiation itself with far greater limitations for broader category, commodity, data and vendor management. And lest we forget, many companies built business cases for investing in e-sourcing and ended up using tools far less than they ever intended, thereby wasting their money (or at worst, damaging supplier relationships because they relied on reverse auctions alone as a crutch for poor negotiation and vendor management skills).

Flash-forward to today and the market is in much better shape. You pretty much can't go wrong when it comes to basic sourcing enablement with companies ranging from Ariba to SAP to Emptoris. Add to this list a dozen or more others (e.g., BravoSolution, Emptoris, Iasta, Ivalua, Co-Exprise, Zycus, Pool4Tool, Siemens/UGS and Oracle) which all present solid (if not superior) capability and it becomes clear that the market for these solutions is quite saturated and competitive, at least on a foundational level. Yet by 2013, I think we're going to see the landscape fundamentally change on a few fronts.

For one, Ariba has a track record of playing consolidator in this market. It originally purchased Trading Dynamics (a waste of money), FreeMarkets (don't get me started) and later Procuri (a smart purchase). Given how it has behaved in the past, it would be logical to see Ariba step up to the plate and expand their basic capability in this area with the purchase of an optimization/advanced sourcing specialist like Trade Extensions or CombineNet (with which it has currently partnered because its own internal capabilities limit its ability to compete against Emptoris, BravoSolution, Iasta and others). Personally, I think it's only a matter of time before Ariba picks up one of the two vendors listed above, and by 2013, it will be a foregone, implemented conclusion that they should have done it long before they did.

But more interesting than Ariba continuing to consolidate aspects of the traditional and advanced sourcing market is the potential for entrants in the commodity management and related demand aggregation spaces to begin to grab more attention. For example, for commodity management (e.g., Triple Point, EKA and Brady) will no doubt begin to get more attention in procurement departments. And for multi-tier demand aggregation for direct materials, we'll see folks like Supply Dynamics (in metals today and potentially broader areas tomorrow) and Co-Exprise capture greater converts as well. Both classes of providers will further link the physical and financial supply chains across multiple tiers, participants, parties and even counter-parties together.

In other words, look for e-sourcing to become part of a much broader class of solutions that will incorporate not only advanced information gathering and decision support in the form of optimization, but also new areas as well. These will range from tools that enable greater risk management of commodities through financial scenario modeling tools, hedging, position valuation, financial/operational integration, automated accounting and reporting of positions, etc. to solutions that enable greater visibility and support of multi-tier supply chain sourcing, commodity and demand management to both reduce costs and risk.

In all of this, you may ask where "category management" may end up in 2013. Personally, I think the notion of category management tools is and always was a fad designed to enable procurement vendors to push software on people who didn't need it, and then it would sit on a shelf. What's really needed in the market is not just a slight commercial extension of RFX capabilities and focused templates, but broader platforms that take a category/spend-type specific approaches, starting with the incorporation of data analysis/analytics and progressing through to post-sourcing support that will include savings implementation and program management capability. And potentially even supplier information management incorporated in SPM (e.g., vendors like Hiperos, Aravo, Achilles, Xcitic, Rollstream) and savings tracking (e.g., Sievo, ICG Commerce, etc.) as well.

- Jason Busch

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