Suppliers: Don’t Waste Money On Ariba Discovery/Other Networks Unless You Can Play the Game (Part 2)

In the first post in this series, I shared some external thoughts (as well as our own opinion) about what suppliers should consider before selling through an online supplier network or marketplace channel. Now, it makes sense to step back and look at supplier participation in specific marketplaces by putting on a buyer's cap and deciding accordingly which types of networks might make more sense. Perhaps most important, it's essential to understand in what type of tactical buying or strategic sourcing processes a customer may use a supplier network or marketplace to identify new potential vendors.

Consider that if a buying organization is using Ariba Sourcing or an equivalent tool to run auctions or other types of competitive bidding events where they're trying to put in place a long-term agreement with their supply base (e.g., 1 year, 2 years, etc.). In this case -- and I speak from my own experience having been in a sourcing role at one time at a company Ariba acquired -- I can tell potential suppliers considering participating in these events (and paying to do so through networks) that the probability of success is extremely small.

Large buying organizations tend to award business to incumbents whenever there is a strategic sourcing event. It's a fact of life. Unless there are extenuating circumstances (e.g., entering a new geography, past supplier performance issues), there's only a small chance of a new supplier ever getting awarded business in this manner. Yes, exceptions no doubt exist. But the numbers work against you. Trust me. Nine times of out ten the unknown supplier serves the purpose of driving down incumbents.

However, if that same buying organization is using Ariba or another tool for a tactical, one-off buying exercise which will result in the specific issuance of an immediate PO after the event, then the chances they'll consider a qualified new supplier are materially higher. In this case, participation in networks and marketplaces is likely to be greeted with much better success provided suppliers successfully know how to market themselves via a network or marketplace model.

My personal bottom line (having both bought and sold for most of my career) is that unless a relationship -- perhaps not commercial, but definitely cordial -- exists before a strategic sourcing event begins then it is a complete waste of time for suppliers to consider participating. And if you're sold on this value proposition of online supplier networks and marketplaces, be warned. However, if your goal is to get in the line of "tactical buys", prototype parts or one-off initiatives, and to break into new accounts that way, then it's another story entirely and this is where supplier networks can make the most sense for those who want to win new business.

- Jason Busch

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