The E-Sourcing Limbo: How Low Will They Go?
While reverse auctions are famous for seeing just how low a
supplier will make an offer, the same can be said of the suppliers
of reverse auction tools. Although the Return on Investment
(ROI) is ridiculously high in e-sourcing--usually greater than
10 times--things are tough these days. Some procurement organizations,
which are just getting started in e-sourcing and want to dabble
in running a competitive bidding event, like a reverse auction.
This is absolutely fine if you pick the right spending category
and run the auction properly. The difficulty of picking the
right spending category really hit home when a procurement
manager cited a horror story of how she was personally trying
to help keep a bathroom clean when the incumbent janitorial
services supplier dropped its service levels in equal measure
with the post-auction price; that is a very bad place to be
Running the auction properly requires that a user be specifically
trained on how to properly prepare for and conduct such an
event. Yet, even though some procurement organizations want
this type of more full-service support, they don't always
want IT involved (which wants nothing to do with such vendors)
and they don't have a lot of discretionary money to spend.
So, what to do? Here are some ideas:
||If it's free, it's me--If that's
your motto, then you can use Sorcity, which will charge
you nothing, but charge your suppliers 2% of the award
value. You could also use Thomas Publishing's MFGQuote.com
site and do free RFQs and supplier discovery (but not
a reverse auction). However, generally free is not good
for the buyer because there is usually poor commitment,
as results have shown.
||Pay by the drink--This method heralds the return
of per-event pricing. Whip out your corporate procurement
card and you're off to the races. Seriously, no baby
step is too small, and some vendors like Moai Technologies,
Global eProcure, Orbis Online, Perfect, and others are
willing to oblige (FreeMarkets and Procuri may do this,
but really for customers they deem serious to eventually
go to the next level). Global eProcure likes to call
itself "FreeMarkets for the mid-market" and
Moai is going downmarket similarly.
We just caught up with Moai, and it's
doing fine, running lean-and-mean, generating cash, and now
trying to target the mid-market with a low-to-mid six-figure
system for the cash-strapped buyer. Moai's OnDemandSourcing is definitely tailor-made for upper mid-market firms that
need a fast, friendly system for their few effective spending
categories, but it's also great for large firms looking to
take one small step toward e-sourcing, but not wanting to
take one giant leap toward a six-figure e-sourcing suite.
Vendors with one eye on the mid-market like Ketera, eScout,
and ICG Commerce should keep the other eye on customers wanting
this type of low-end option.
Larger firms will eventually look for a broader system though,
looking to suite-type functionality (such as automating a
sourcing program, not just bidding events). A really innovative
system is CGE&Y offering up category knowledge packs
implemented in Emptoris's suite. For very low six figures,
you could get, say, a "10 pack" of category workflows,
cost models, RFx templates, supply market analyses, and professional
services support, served up via a term license, on top of
one of the leading e-sourcing suites. Braxton is also working
on something similar with Frictionless Commerce. Users get
their category-specific results and also see the benefits
of a broader suite. Procuri, Ariba, and FreeMarkets certainly
have a terrific opportunity to do something similar as a
community-type initiative directly with their installed bases.
Yet, until that time, some users need low-end offerings--in
these economic times, less is definitely more.