Friday Rant: How Will the Spend Management Technology Landscape Look in 2013 (Part 3)

In the first two rants in this series (Part 1 and Part 2), I explored scenarios for how the P2P and sourcing landscapes might look in 2011. Today, I'll continue this forward-looking analysis and raving disquisition by examining the market for supplier networks and broader supply/buyer connectivity in 2013. Such an analysis would be wrong to start without mentioning how SAP and Oracle underserved their own customer base when it comes to supplier connectivity for catalog management, document exchange (PO, ASN, invoice, etc.) through taking a partner approach that did not reach deep enough into their base or educate their own sales team enough about potential partners and other enabling applications (e.g., Hubwoo, IBX, Transcepta, Vinimaya, etc.). It would also be wrong to start with neglecting to describe how Ariba is building a network business off the backs of the very largest (top 5%) of suppliers in its market, who are subsidizing all of the smaller suppliers in a twisted version of Obamanomics applied to what Spend Matters believes is largely a commodity connectivity service. Yet rather than go into greater detail about how the largest players in the market have blundered and left the door open for others to eat their network lunch in more granular terms, I'll jump to the main course that I think innovative players will be serving up in a couple of years.

For one, I think we'll see the market for basic e-invoicing and related PO/transactional document exchange begin to face aggressive price pressure. New entrants from TradeShift to Pagero will help tear down the silly volume-based toll booths for what amounts to the virtual pushing of paper where no inherent additional value is delivered for basic connectivity for a $1 transaction compared to a $1MM one (I do agree that when it comes to working capital management, discounting, new factoring/financing models, etc. that value-based pricing can work, however). More important, Spend Matters is aware that several large suppliers paying increased transactions fees are quietly telling their enterprise customers that the long-term situation of rising network fees benefits no one. Even though many large procurement and A/P organizations might look at any rebilling of fees back in higher prices as a small rounding area, I know that enough are passionate and upset enough about having to pay any more than in the past that they'll investigate all of the options at their disposal.

Perhaps more important to the evolution of this marketplace than the simple push-back of suppliers and greater buyer investigation of alternative free or fixed-price connectivity services (either all you can eat or by transaction, not transaction volume) is the rise and interest of supplier network models that do more than merely push virtual paper back and forth. In addition to the financing aspect of transactions and the incorporation of electronic invoice presentment payment (EIPP) tools as a direct extension of the network equation, I also think that we'll see a greater rise in networks as tools for suppliers to market their wares and buyers to identify potential vendor sources. But network marketplaces won't stop at this point. Rather, they'll also allow companies to research and learn more about vendors from objective third-party ratings organizations (e.g., credit/supply risk insight, CSR data, diversity data, etc.) while also driving the initial on-boarding of suppliers and continued management of supplier information and credentials.

So in short, in 2013, the network of the future will begin to take shape, looking like something of the following: Take a connectivity service like the Ariba Supplier Network and put it at the core. Strip out value-based transaction fees for commodity document exchange (and potentially make basic connectivity free). Add fees back in where value is actually created (e.g., financing) by taking a reasonable cut. Combine supplier discovery services that go beyond publishing an RFX to providing detailed insights on suppliers in the manner in which a buyer wants to see them as part of search capabilities that combine and aggregate third party information sources. Then toss in basic supplier enablement and supplier management and registration tools for suppliers to manage profile, financial, certification, credential and other data in a many-to-many matter.

- Jason Busch

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