Tradeshift Innovation Summit in London: A Few Takeaways

Last week, I attended Tradeshift’s new “Innovation Summit” series in London. It was a short event, lasting only an afternoon, and obviously one intended to test the waters to the receptiveness of both the format and the location, but an interesting one nonetheless.

Tradeshift is an interesting company, which began in 2010. According to a 2011 Spend Matters UK article, it was launched to develop a “leading, open, web-based purchase-to-pay platform, built on an open-source UBL (unified business language) so that developers can build apps to work with it,” and for years it struggled to gain a foothold in the P2P marketplace, especially in North America (and still struggles to some extent, but that is likely to change).

However, probably due to the charisma and single-minded determination of its CEO, Christian Lanng, it has never failed to inspire analysts and, most importantly, investors (as evidenced by its recent $250 million Series E, bringing its total funding to over $400 million), who see the promise of its approach and Tradeshift as the next Amazon (or maybe Salesforce is a better analogy) of the supply chain world.

Platform of the Future

From a vision perspective, Tradeshift is almost dead-on in terms of what the platform of the future has to look like, and from a marketing perspective, it makes perfect sense. But when there are still a large number of organizations using Excel and email, and a larger number still who remain on first-generation best-of-breed procurement applications, it’s hard to sell a true “Procurement 3.0” solution approach when the majority of the world hasn’t even caught on to “Procurement 2.0” solutions.

Tradeshift has also been growing substantively in terms of commerce. The network is heavily used, and over $72 billion of trade per month is taking place on the platform (which is quickly trending toward $1 trillion of trade per year), but to date, platform use is still heavily skewed toward I2P. And when you consider global GDP is approaching 100T, with trade being more than 25% of GDP in most countries, that’s still only a fraction of the global trade that Tradeshift is aiming to capture.

As a brief history lesson, “Procurement 1.0” can be thought of as breed apps that generally sat in silos and pushed data to a central data warehouse on a quarterly basis for after-the-fact analysis, which was usually too late to react to. “Procurement 2.0” was integrated suites, which is a big step in the right direction, but the reality is that even if all of your internal S2P data and capability is in one platform, most of the data you need to make good sourcing decisions exists in other enterprise platforms and outside the four walls of your enterprise. That’s why we need “Procurement 3.0”.)

In Tradeshift’s view, Procurement 3.0 features a network-enabled marketplace platform where anyone can transact on the marketplace in any capacity they want to and also build their own custom apps to enable specific workflows or processes. They can sell these apps on the network and basically use it as their cloud platform, just like you can deploy your applications on AWS. The difference being you are writing apps on their platform using their predefined objects and services (in their UBS), which allows for much more rapid application development than having to write everything from scratch. (They have dozens upon dozens of predefined objects that correspond to supply chain entities to simplify app development and over 150 native and third-party apps on the platform that can be integrated with or built on.)

And this is definitely one valid aspect of what Procurement 3.0 is, although one might argue that an open platform that connects to many suppliers and networks is more buyer-focused than a network focus that is heavily advantaged to the network provider’s own procurement applications (a.k.a., the “walled garden”). In Procurement 3.0, we will move from a suite to an integrated ecosystem where all required data can be brought into, and analyzed by, one or more central applications.

We won’t go back to a point-based best-of-breed landscape where you have the best app for everything (as the data and communication complexity becomes a nightmare), but will instead move to a centralized platform model where you have a core S2P application suite (the next generation of the suite you have today).

This suite manages the majority of your day-to-day activities in tune with your processes and business rules, but also allows for open integration to any data source you need to make informed strategic decisions and for open integration to any best-of-breed app to handle specific categories or complex workflows that aren’t handled by your day-to-day “home base” application.

In other words, if someone (or Tradeshift itself) built an S2P home-base “suite” on Tradeshift that covered the day-to-day 80% of S2P functionality, it would be easy for a customer to link into best-of-breed sourcing workflow apps, analytics, optimization, trade document management, trade finance and logistics application services on Tradeshift to extend functionality and share data and truly enable 3.0.

Taking on the Suite Players

And Tradeshift could more effectively go head-to-head with the big suites like Ariba, Coupa, GEP, Ivalua, Jaggaer (albeit more “semi-suite”), Synertrade and Zycus as it would do most of what they do and also allow for deep best-of-breed specialization from these partner “XaaS” offerings.

This is easier said than done though. While there are a lot of apps on the platform, the Tradeshift native apps really only stand out in P2P, and more specifically, I2P and AP. And the partner apps for sourcing are weak, the analytics apps are few, and the contract lifecycle management (CLM) virtually non-existent.

And while a number of smaller best-of-breed vendors in analytics are looking to provide apps on the network, we don’t know how much functionality they’ll actually recreate and how much the partnerships will remain stable (e.g., consider what happened to Apttus when Salesforce decided to acquire its own native CPQ functionality into its core application suite).

So, until Tradeshift can persuade strong partners to build on top of the Tradeshift platform, they’ll struggle to use this strategy to effectively compete in full S2P deals, and will remain within the I2P / marketplace app niche that has gotten them to where they are today. This isn’t bad, as their global invoice processing and payment capabilities, as well as their financing support (including that of integrated third parties), can be argued to be top-notch globally, but it still limits the rate at which they can offer a more strategic value proposition.

However, they are developing both platform capabilities and partnerships fast and furious, and expect to have more to announce at their next Innovation Summit in Copenhagen in June, and this is one provider that we’ll of course be watching closely this year.

The message is right, the direction is right, and it’s just a matter of how well they can execute and when the majority of the market will eventually catch on. And, as I’m sure Tradeshift has found out over the years, the hardest part of being a thought leader is sometimes waiting for everyone else to catch up!