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SCRC Article Library: The Evolving World of E-Sourcing

The Evolving World of E-Sourcing

Published on: Oct, 04, 2004

by: Rob Handfield

SCRC

A recent white paper by the Gartner Group provides an assessment of e-procurement and strategic sourcing software providers. The authors of this article note that “Strategic sourcing applications have traditionally focused on structured negotiation, but this is changing as functionality broadens and users seek more-integrated, more-complete solution. The market’s transition beyond structured negotiation (such as reverse auctions) challenges vendors to accelerate development, extend value propositions, and in some cases, create critical mass. However, given the market’s instability, many are wondering why the strategic sourcing arena is doing so well. It’s because applications are providing the triggers for cultural change, higher productivity and – above all – return on investment.”

E-Sourcing software providers Ariba is delivering applications that are functionally competitive with smaller vendors (which have focused historically on negotiation). Ariba is leveraging its installed base, creating links with procurement, expanding functionality and developing complementary services. Although deployments are limited to negotiation, and functional gaps in analytics remain, Ariba’s strong sales and development bode well for the future.

I2 Technologies provides some of the most-comprehensive spending analysis offerings on the market. Coupled with content services, i2 can provide unrivaled visibility into part-and-item attributes, which are necessary for detailed analysis. I2 demonstrates an excellent vision in the role of structured product data within highly complex sourcing environments, but it lags in structured negotiation. Enterprises that need spending analysis in manufacturing or high tech enterprises with complex maintenance, repair, and operations spending should consider i2.
Sincerely,

Emptoris is making the fastest progress in delivering functionality to customers – especially in the area of bid analysis / optimization. It continues to improve in several areas, including technology, functionality and data exchange with legacy applications. However, challenges remain, including the deepening of Emptoris’ data model and decision support functionality to help customers analyze the impact of highly complex, nonmaterial costs. Enterprises that process bids with large numbers of line items and complex discount structures should consider Emptoris.

Mindflow Technologies applications provides negotiation similar to its competitors, and provides optimization to conduct modeling, trade-off analysis and to expose the cost drivers of logistically complex supplier relationships. Food services, food and beverage organizations, and those with large numbers of replenishment locations should put MindFlow on their short list.

SAS Institute is increasing its emphasis on applications with the addition of SRM, which provides spending analysis through the use of data mining and data quality management. SAS has leveraged these to provide tools that are aimed at supporting process, spending, and supplier visibility. SAS must respond to increasing levels of analytics capabilities with broader sourcing applications. It must also respond to customers’ preferences for integrated sourcing solutions, and propose a range of options to “sourcing challenges” as opposed to “data analysis challenges”.

Oracle is the only major ERP vendor with deployments of strategic sourcing applications, but generally only in simplistic hosted modes. Oral has a substantial opportunity if it can deliver on such promises as integrating sourcing to the item master, purchasing, supply chain planning, product life cycle management, and iProcurement. Enterprises with a corporate commitment to Oracle ERP or purchasing applications should put Oracle’s strategic sourcing applications on their short lists – including the analysis product Purchasing Intelligence.

PeopleSoft can be lauded for its broad approach to supplier relationship management (SRM) as well as its rapid introduction of sourcing application – including Supplier Ratings, which are part of the Supply Chain Warehouse. PeopleSoft also lacks product life cycle management capabilities. Enterprises with high aversion to vendor risk should include Peoplesoft in selection cycles, but consider delaying final selection until reference accounts become available.

Bottom Line
The Gartner Group report notes that “The market for strategic sourcing applications is emerging. However, it remains fractured along functional lines, and no vendor has yet achieved leadership status. As such, investment in applications – driven by the need for immediate returns – requires a focus on functionality, but it should be informed by the existence of some downside product and vendor risk.”

References:

(1) Baumer and Poindexter. Legal Environment of Business in the Information Age. McGraw-Hill. 2004.

(2) “Principles and Standards of Ethical Supply Management.” Institute of Supply Management.

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