2007 - The e-Sourcing Crystal Ball
|2007 - The e-Sourcing Crystal Ball
by David Bush
December 26, 2006
At this, the end of the year, I decided to look forward to 2007, as best I could. My perspective is not as an analyst or professional prognosticator, but as an e-Sourcing software company. My opinions are shaped by what I hear from our active clients, what I hear from prospective clients, what I read, and other random inbound data points. Who knows if I know anything but that has not stopped me before.
- Plan on more M & A activity and I believe at least one major vendor will be acquired outright. Frictionless was the last major tectonic shift in the e-Sourcing space and SAP is still trying to pull together a technology and marketing message that can beat BoBs. From our first-hand experience, that has not been close to perfected. Also, what is going to happen to VerticalNet? Forrester has them commented as "on the block" in their recent web cast. It is well known from the SEC documents that there are still outstanding financial commitments, spiraling losses, and; therefore, it is not difficult to imagine another Frictionless-SAP style acquisition, if the debt extension is not approved. Is this IBM's acquisition to lose? Lastly, I have always been impressed with vendors like Nextance that maintain autonomy with a tight focus, can they make it through 2007 without being acquired?
- Optimization will gain more mainstream traction in strategic sourcing. Advanced sourcing optimization is still on the periphery of standard best practices for purchasing teams and the technology is sometimes intimidating to the average buying teams. However, tools are becoming more user friendly and configurable with much more functionality than the current tool of choice - Excel. For instance, I spoke to a small retail chain recently that has 14 regional centers of operation and suppliers that can provide services to some or all locations. Optimization can help this company allocate business while maintaining the delivery constraints of each supplier as an individual rule. If this technology can be valuable to a small retailer, it can be useful to almost any company of size with semi-complex bid variables.
- Expect to see more alignment in the triple crown of supply management (Spend Analysis, Strategic Sourcing, Contract Management). Aside from some obvious projected acquisitions, there should be more stand alone solutions banding together to compete against broad suites. These will come in the form of announced (and unannounced) alliances and cross-selling.
- Assume the trend of expanded functionality coupled with flat pricing curves will continue. New releases are happening consistently and most technology is automatically delivered to the user communities. As e-Sourcing providers reach economies of scale with development and features, the users of e-Sourcing technology will benefit without incurring additional costs. Additionally, pricing pressure will strip margin from software sales, forcing high-margin e-Sourcing vendors to focus on services to maintain revenue levels.
- Will worlds collide? Here I am referring to the unrelated - but yet still related - industries of CRM + SRM and PLM + SRM. It is a well-known insider secret that one particular e-Sourcing vendor would love to be acquired by Salesforce.com and has actively lobbied their position in San Francisco. This presumably would allow SF to compete on even stronger footing against nemesis, Oracle. The same theory goes for PLM giant UGS who, not-so recently, gobbled up the old ebreviate technology and re-wrote it. Does the billion dollar software company try to devote resources to a stand-alone sourcing solution to compete head to head in the market? Or, does the technology get buried deep in the UGS tool set and we never hear from our lost brother in arms again? Their existing, seasoned sales team, is not going to be very motivated by relatively small e-Sourcing deals and UGS will absolutely need to reload with sales reps that are tasked with selling SRM as a focus.
- There will be an emphasis, driven by practitioners, on concrete value and short term results -- with a de-emphasis on unquantifiable process savings. This is directly correlated to an intense focus on driving better adoption and spend throughput in e-Sourcing tools. Although many e-Sourcing tools have vast and deep functionality, the reality is most companies use a small subset of the overall feature set. Getting the most out of what drives the value proposition will get more, well-deserved attention. This is equally the responsibility of the practitioners and the vendor/evangelists.
- Offshore BPO providers will undercut the traditional leaders in the space with significantly more cost-effective direct offerings. I have seen the Infosys' of the world make beach heads here in the US and expect to see massive growth and marketing efforts which will directly target Accenture, IBM, ICG and others. We have already seen strategic alliances formed, like Ketera + Infosys, and I expect to see this trend continue with voracity.
- An increasing pace of global e-Sourcing adoption will keep growing in both the private and public sectors. Southern Europe will finally get e-Sourcing after years of slow growth and the high cost of employing talent will finally force countries like France to look outside French vendors to deliver high quality sourcing software. Europe is a highly insular continent with German companies wanted to work with German vendors, French with French, etc, etc. However, we are seeing an opening up in this philosophy which means that American e-Sourcing providers are growing their mainland European revenue. I still believe Northern Europe will far outpace countries like Spain and Italy, but progress is being made.