CombineNet – advanced sourcing pushes ahead

We welcomed CombineNet as a sponsor recently, so I caught up with two of their senior team, Greg Holt and Jennifer Sikora, recently for a chat. The timing was good, because they’ve just released the results of an interesting survey into how organisations are using advanced sourcing platforms. We’ll come back to those survey results over the next couple of days.

To recap on our previous posts on ‘optimisation’ or similar tools, I’ll borrow Jason Busch’s explanation of their features:

  1. They allow the sourcing organization to collect a virtually unlimited number of data points from suppliers, including gathering bids and offers in multiple ways (both buyer-recommended and creative supplier offers) in addition to required responses (e.g., "bid this lot or grouping of items")
  2. They allow procurement organisations to apply constraints against all offers and run scenarios to understand the impact of price and non-price based decision factors and criteria; note this is very different than the weighting models that many traditional eRFX tools enable

CombineNet have had an exciting last 12 months.  After a major investment a year ago from a private equity firm, they’ve shifted focus from a consulting / software licensing model to a subscription and self service model, with pricing to client based on number of users in most cases. This included a major redesign of their platform, and since its Q3 re-launch, they’ve picked up 28 new customers; pretty impressive by any standards. And as Jason Busch said,

...a quick analysis of recent customer wins and upgrades CombineNet shared with Spend Matters suggests that roughly 70% of their customers fall into the "innovator" or "early adopter" camp -- a very high number.

“Combinatorial optimisation’ processes power their product, and gave them their name, and this type of product has, as the words suggest, been seen perhaps as something a little esoteric and suitable only for the most complex, high value sourcing exercises.  And indeed, that is what attracts many customers to their – and competitors' – products in the first place.

Certainly, in many organisations, these platforms often sit alongside more basic sourcing tools that are used for less complex contracting.  But the increased user–friendliness of the CombineNet platform, and (we suspect), the increasing sophistication of users, is leading customers to use it for more and more sourcing events, even the less complex or high value examples.

That’s one of the issues that comes out strongly from the survey; as the tool becomes easier to implement and use, then it's being applied to a greater and greater portion of total spend. And as well as benefits flowing from better commercial outcomes from these exercises, there’s a productivity gain internally in terms of execution of the procurement process – a key factor as organisations still keep a close eye on their hiring policies.

We wrote about what this ‘optimisation’ technology might mean for procurement processes and roles in our White Paper here; and the CombineNet survey that we’ll report on in more depth later this week just re-inforces our view that this is a significant step in the development of professional and effective procurement. Stay tuned...

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