2015 Spend Matters Prediction: Let’s Buy More Together

Despite the baggage, "leveraged contracts" doesn't have to be a naughty phrase, signifying that procurement skipped out on sourcing and managing a category on its own behalf. Moreover, technology is about to make leveraged buying that much more effective for both sides of the buying equation – not to mention the intermediaries capturing a fair commission in the middle.

In 2015, Group Purchasing Organizations (GPOs) will finally start partnering with technology providers in earnest. And they’ll bring additional value to their members as a result.

All this makes sense. GPOs are also like marketplaces of buyers and sellers, but they’re not e-marketplaces. They just need an "e" – and good e-procurement on ramps similar to our Amazon prediction. 

This is an old topic of discussion – at least 15 years old to be precise. Remember the old ICG Commerce? Even if you don't, the GPOs and the tech providers aren’t going to party like it’s 1999. But, we do expect to see some real partnerships emerge. The technology now exists, and for e-procurement providers wanting to sell to the mid-market, the value proposition of GPO pricing enabled in pre-loaded catalogs is a no-brainer.

Moreover, with certain tech providers, the line will blur between traditional offline – or now e-enabled GPO models – and their own leveraged contracts they present to their customers in catalog format.

It’s 2015 friends. Lever up.

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First Voice

  1. Mark Usher:

    I must have had hundreds of conversations with procurement folks over the last ten years or so about e-procurement systems with ready-to-go/pre-negotiated pricing. One concern I’ve heard (a lot) is that buyers will only see that pricing and not have an opportunity to either “shop around” or at the very least compare it to pricing in the market (or to internal pricing that already exists from previous sourcing initiatives). Now, we all know the ability to browse same spec pricing across different vendors is a mature eprocurement functionality – this isn’t the issue – but a GPO is not going to want it’s eprocurement partner to make it too easy for buyers to check out alternative sources. The GPO could theoretically offer multiple contracts for the same spend category to at least allow price comparison across these but that would dilute its pricing leverage with individual contract suppliers (besides, the GPO could never offer enough suppliers for most buyers to shop from). One solution might be for the GPO and its e-procurement partner to at least allow some form of price benchmarking or price checking capability so that a buyer can satisfy themselves that the ready-to-go pricing is in fact the best in the market. When all is said and done the most pragmatic solution might be for the GPO to recognize that it can still “partner” with an eprocurement provider but that the buyer must always be offered choice, i.e. the buyer can purchase easily from either the GPO contract, an internal contract, or any other vendor via a spot buy. I personally think GPO/eprocurement partnering will move forward in some fashion, but these issues will need to be grappled with strategically if buying organizations are to accept the model broadly.

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