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Evolution of Sourcing Technology and Platforms

As practitioners and analysts in the procurement market, it's amazing to think about how much tools and platforms within the sector have evolved in little over a decade. Speaking in historical evolutionary tools terms, it's as if we combined the Stone, Bronze, and Iron Ages into a single human lifespan. Consider that in less than six years from the advent of online reverse auctions conducted via private connectivity networks – with the remainder of the process conducted entirely offline using face-to-face meetings, Excel, Word, FedEx, phone calls and fax machines – that self-service e-sourcing tools incorporating negotiation tools and market feedback mechanisms plus broader RFI, RFX and award-analysis capabilities entered the market in the same period of time.

Even more surprising in terms of a punctuated equilibrium is just how quickly even more advanced quantitative approaches that incorporate massive data-gathering automation capabilities and Excel upload converters (e.g. comprising thousands, hundreds of thousands, even millions of individual price points), scenario analysis, supplier-defined bidding criteria/ discount structures and award-optimization analysis featuring any number of constraints – all conducted via web browser – would have entered the market. And let's not forget how recently both basic e-sourcing and more advanced quantitatively focused sourcing tools leveraging optimization have begun to be supplemented by additional platforms focused on the management of forward commodity positions (e.g. hedges) as well as more focused direct materials sourcing efforts.

This paper explores the evolution of sourcing platforms from the basic reverse auction/RFX/e-sourcing capabilities of yesteryear to the more advanced sourcing and commodity management platforms available today. In the analysis, we recommend different solution types and packages based on overall company sophistication, maturity, and spend portfolio mix (e.g., complex vs. raw material, direct, indirect, services, etc.). It also provides shortlists of vendors that offer different types of solutions.

Among other observations Spend Matters makes, the Compass paper suggests:

  • In today's e-sourcing market, basic functional parity exists across major best-of-breed and ERP providers. Granted, there can be significant differentiation among solutions at the fringes of basic capabilities and certainly in more advanced areas such as optimization and scenario analysis. But for the basics, most of the better-known providers are predominantly on the same page
  • Your advanced sourcing/optimization partner may very well not be the vendor you've chosen as your e-sourcing platform of choice. For example, Ariba, Oracle and SAP, all of which have solid yet basic e-sourcing capabilities, bring an optimization toolset that is probably too limited for full consideration in this area where anything more than basic constraints and capabilities are required
  • Commodity management tools have lacked general awareness within the great majority of procurement organizations until recently, but these tools, which can help organizations implement and manage commodity strategies including demand aggregation, hedging, accounting for forward positions and scheduling/logistics are growing in favor today.

If you're looking for a primer on the sourcing and commodity management technology market — from high-level solution segmentation and analysis to vendor shortlists — this Spend Matters analysis should prove invaluable.

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