Making a comeback: supplier management issues revive e-sourcing market

After a rocket-fast start in the late 1990s, the e-sourcing software market suffered a crash landing, largely because the solutions’ primary selling point—the ability to continuously uncover lower-cost suppliers—didn’t generate large enough returns on what for many companies were multimillion-dollar investments.

Recently, however, several e-sourcing vendors have reported surging sales. And not surprisingly, they attribute the trend to new solutions that are supposed to help companies find the right suppliers—not just the cheapest ones.

“This market is reaching a certain level of maturity,” Burton Goldfield, CEO of e-sourcing supplier Ketera , said in a recent interview with MBT. “Most companies have processes in place to address their basic procurement needs. Now they are trying to focus on the business issues connected with procurement.”

Those
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With vendors working to address these issues, the e-sourcing software market grew more than 10 percent in 2006, according to Cambridge, Mass.-based Forrester Research , which projects the market exceeding $3 billion in total sales in 2008.

If recent history is an indicator, most of those sales will go to companies choosing to deploy e-sourcing in the Software-as-a-Service (SaaS) model. One vendor, Emptoris , reported that 65 percent of the companies purchasing its solutions in the second half of 2006 adopted the SaaS model.

User preference for this model has caused virtually every vendor in the space to offer a SaaS option. It also prompted Ariba , the company that started the e-sourcing movement, to purchase Procuri, which offered e-sourcing solutions exclusively in

Ketera also is a SaaS-only supplier. Goldfield says the model appeals to customers for two reasons:
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While SaaS clearly has become the e-sourcing deployment model of choice, the vendors contend the recent upturn in sales is driven more by users’desire for functionality that helps manage supplier relationships.

Goldfield notes that supplier management issues are more critical than ever with manufacturers routinely adopting global sourcing models. In response, he adds, Ketera has unveiled a new solution known as Supplier Connect.

Goldfield says Supplier Connect fills gaps that exist in most other e-sourcing offerings by giving users more capabilities for managing supplier catalogs as well as grading supplier performance.
Emptoris released a new version of its e-sourcing suite this week that also contains new supplier management functionality. Kevin Potts, Emportis’ VP of marketing, says the new offering contains tools to improve buyers’ ability to negotiate the best possible deals with suppliers, in addition to monitoring suppliers’compliance with contracts after they are signed.

For companies seeking to guard against the risk of any single supplier failing to deliver as promised, Potts says, the new Emptoris suite makes it easy to allocate orders across multiple suppliers of the same parts.

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