From my perspective, yes…but not now.
IBX, ranked among top innovators in 2006 by the prestigious Supply & Demand Chain Executive, has acquired Portum last year (2006), you may know or remind. Since then, I didn’t notice any major achievement on that side, apart from – of course – some announcement of client acquisition, but nothing compared to Procuri‘s 56% of growth or BravoSolution’s 40%. As I received IBX last newsletter today and perceived their efforts to ‘bold’ their services and to be recognized as A leading one-stop-shop source-to-pay solution provider promoting their “value assessment study” offering, I couldn’t prevent wondering what the core-business of IBX was: e-Procurement? e-Purchasing Consultancy? e-Sourcing? As the question stands as well for Hubwoo, Perfect, Quadrem and Ariba – all of them combining both e-Procurement and e-Sourcing services but most of them not being profitable – I started wondering if it was an idea as brilliant as it looks compelling on paper, to combine both e-Procurement and e-Sourcing in a unique enterprise offering?
Indeed, the one-stop-shop concept was – and still is – really attractive, especially talking about technology and Global Companies.: Simplifying the IT architecture, application integration and implementing an e-Procurement and e-Sourcing application integrated together with each other AND with a back-end looks is making lot of sense obviously, so much sense that being the leading source-to-pay solution house was in Y2K the most beautiful business to target in the B2B world. So did Eutilia and many others.
7 years later, what do I see? A couple of very interesting symptoms:
- Very few players were profitable when they decided to expand in eSourcing: in general, they expected this less-costly solution (compared to e-Procurement) to be quickly profitable and to improve their bottom-line.
- Leading players are either recognized for their e-Procurement know-how (IBX, Hubwoo, Perfect…) OR for their e-Sourcing know-how (Ariba, Procuri, BravoSolution), never for both… so far.
- The key differentiator between players to win business is almost never their source-to pay capability.
- Players are using two different set of technology with no relations with each other
- Integration of e-Procurement and e-Sourcing applications with each other is poor and most often inexistant. The unique strong link I can see between the 2 is the supplier-network database, but interestingly enough, none players so far are benefiting from this synergy; a couple are now investing in this area (Ariba – Hubwoo)
- Few/None technology providers are good in both area,
- Prices have been dramatically cut down and require best in class practices to survice…
… Those symptoms brought me to following conclusion:
- Expansion of services to e-Sourcing was expected to shorlty compensate/improve the big e-Procurement loss-making. It didn’t work within 3 to 4 years, why to insist?
- there are very limited synergies between e-Procurement and e-Sourcing; much less than expected. Having both offering is not a key differentiator; where is the need to keep them both?
- A Supplier Network database connected to both application could change the picture and bring significant value to a provider having both solutions… if this provider can integrate his Supplier Network correctly with his 2 applications.
As a consequence, I wouldn’t myself keep both solutions, unless I have some plan to roll-down a Supplier Network database. I would concentrate on one all sales and innovation efforts, as there is still so much to do!. Even a ‘loose-partnership’ like Hubwoo – Procuri doesn’t make sense to me: interlocutors for e-Procurement are not the same as interlocutors for eSourcing and in general, nobody likes to hear they have to use a specific application here because they have this other application there. Moreover, I haven’t hear of any success story from both Procuri and Hubwoo on their collaboration…
Source to pay is such a broad process, I feel the technology and content currently available are not ready yet for a perfect and compelling integration. So, bottom line, I believe nowadays that the leading players should focus on becoming the best e-Sourcing OR e-Procurement enabler for their customers, extending their offering with killing-features, merging with other players from the same field to be well above the minimal critical size, and wait for better interaction between procurement and sourcing before expanding further…
Pure fiction: What would you think if something was happening between IBX, Hubwoo, Quadrem or Perfect…
That’s my humble opinion. What about yours?
Good post JP. I agree that the notion that procurement and sourcing technologies or services belong together was off the mark, in particular because eProcurement primarily addresses an internal workflow issue (maverick buying), whereas eSourcing addresses a supply chain issue.
I’m not entirely convinced that the supplier database is the missing link between the two. I kind of see the db required for sourcing (lots of new suppliers, perhaps rated and qualified) as being quite different than the one required for procurement (catalog of approved suppliers only, with price & buying information). I’ll be interested to see what IBX and Ariba come up with to bring them together.
Cheers,
Max
Hi Max.
My point was to imagine what would make eProcurement and eSourcing solutions a must to be combined by a vendor. From that perspective, a data management module i.e a structured-for-analysis and dynamic supplier database – enabling supplier ID authentification, data update in real time (reference, performance, contact details, financial data, CSR rating…) – specific to an eProcurement and eSourcing solution WOULD justify the offering of the 2 solutions. I didn’t find anything else make the combination of the 2 offering by a vendor kind of a MUST…
Jean-Philippe
You an interesting and valid point, which I think can be summarised on one word…’focus’
I think the trend will be for companies like Procuri, Ariba etc to focus on their core business, and expand outwards from a sals & service perspective through startegic partnerships.
There is also a trend for ERP vendors (e.g. SAP) to encroach into the e-Sourcing & e-Procurement space – I would say from a that it is the ERP that is common link between sourcing & procurement
The ‘one-stop’ solution (or buyer/supplier portal) idea is again becoming the trend, – it does not mean however that you as a vendor of part of the requirements have to fullfill ALL of the requirements yourself – this is where partnerships can play a key role. As part of the one-stop trend, customers expect integration with their back-office systems.
By way of example…at Achilles the focus is on Supplier Risk Management solutions, – in providing a more holistic procurement solution to buyign organisations in-line with market trends/requirements, we are looking for key startegic partners to provide services in the areas where we have nothing, and to link our supplier data to both these additional services and the organisartions back-office systems such as SAP or Oracle.