Reinventing Supplier Data and Intelligence Businesses: The Premise

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The supplier data and information business is broken. The Spend Matters analyst team came up with this premise when we saw that a number of well-known supplier content and enrichment providers had no reason being on the 50 to Know and 50 to Watch lists this year. We also began to explore the topic in a recent post that provided commentary on the 50/50 this year, noting “the disappointment of content providers” generally:

Supplier content and market intelligence is becoming increasingly important to procurement organizations staying on top of supply markets, enriching supplier records and managing supply risk. Yet some of the oldest names in the sector (and some that made our list in the past) are underinvesting in products and innovation, riding old coattails and milking legacy models. A surprisingly few number of these providers made the cut this year, and we eliminated a number from our 2015 list.

Our research and discussions suggest that incumbent providers in this sector have lost the confidence of the market, their clients and even members of their organizations in their ability to deliver solutions that hit the mark. Time has stopped for some — they are selling solutions better suited for the year 2005 than 2015.

This is a shame not just for the providers but also their customers. We should be clear, though. There has been some innovation in the sector:

  • From smaller providers such as EcoVadis, which have specialized in specific areas such as capturing information on supplier practices and compliance around corporate social responsibility (albeit without any innovative technology components of the business model)
  • From aggregators such as riskmethods, Resilinc, Sourcemap, Thomson Reuters, Supply Dynamics and others, which take supplier information (even down to the bill of materials-level information in certain cases) and provide geospatial risk and other alerting across single or multiple tiers of the supply chain
  • From providers such as Avetta, Browz, Vendormate/GXS and others that take supplier credentialing down to the individual site and worker levels
  • From large software providers such as SAP (with the Supplier InfoNet product, a pioneering though not yet mainstream collaboration solution that leverages the collective information of different participants in overlapping supply chains)
  • From platform vendors such as Tradeshift, which have encouraged riskmethods and others to weave risk management “apps” into their infrastructure
  • From providers like Rapid Ratings with new assessment and predictive methodologies

Yet for all of the providers here on these lists, the notion of being an originator of supplier data, either in traditional or using new approaches, is typically of secondary focus (except EcoVadis, which is following traditional data collection approaches and largely replicating existing business models and solutions for new types of supplier information).

The best aggregation and predictive capabilities will mean little if we fall flat when it comes to novel ways of originating information, structuring and classifying it, creating associated metadata and pushing it to all of our users and systems that need to take advantage of it on a real-time basis. And this is where we need new approaches to supplier data and intelligence the most.

In 2016, the notion that some of the best-known content providers are still providing flat files as one of their primary delivery means of classified and enriched content is as ludicrous as printing out a PO and faxing it to a supplier. Yet this is the norm, not the exception, when it comes to what we accept when it comes to getting information into our spend visibility tools, supplier management applications (e.g., for diversity spend) and related areas.

I think there are three keys reasons for this:

  • Data businesses typically require significantly more scale to get off the ground (and benefit from network effects) more than cloud application companies. This makes it harder to get started and makes the risks significantly higher for upstarts, which in turn limits choices for customers.
  • Legacy brands can live off their legacies longer. If Ariba or BravoSolution (to pick on two long-term names that deliver procurement technology applications) delivered vastly inferior products, nearly all of their customers would have all changed out a long time ago. That’s not true with data originators and providers, whose names provide brand security walls even if their products are living in the dark ages.
  • Investors and sales/marketing buyers will pay more for information first (compared with procurement or supply chain professionals) — although this still does not explain why legacy providers are loathe to disrupt their existing business models by pursuing new approaches to originating or delivering content and insight for higher-paying customer sets.

As this series continues, I’ll offer up some suggestions for how we can move supplier data businesses and offerings from the Paleolithic era into modern times.

Stay tuned.

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