Over at SpendMatters, Jason has a topic-opening post discussing Ariba's new "free" e-sourcing platform titled "Ariba StartSourcing: Just How Good is Free". As usual, for an introductory post, Jason does a nice job of providing his first impressions.

However, we took slight offence to his comment "Still, as far as we're aware, Ariba is the first provider in the Spend Management sector of any material size/market share in a given product area to make a product free for buying organizations." Why are we offended? Well, Jason himself reviewed our free e-Sourcing offering over five years ago, with a similarly titled post: "When it Comes to e-Sourcing, How Good is Free?". I of course left a comment on his site pointing out the oversight, in which Jason replies "WhyAbe is a small offering from a boutique firm. I do not consider either to have material size / marketshare. "

The point of this Strategic Sourceror article is not to compare WhyAbe.com and Ariba StartSourcing; Jason was not attempting to compare the two either.  In reality, both tools have positives and negatives... No, the point of this article is to demonstrate a major failure in the procurement and sourcing process, as demonstrated by Mr. Busch.

Jason's comment just demonstrated one of the main reasons why Strategic Sourcing initiatives fail to achieve the optimal saving potential: Making Assumptions with Poor Market Intelligence.

Jason concluded that WhyAbe is a small offering from a boutique firm. BUT, As far as we know, he has never conducted any activities to qualify this statement. In fact, SpendMatters often criticizes "traditional" analyst firms for making statements just like that. In five years, Jason has not once followed up and asked about adoption rate, who uses the tools, what kind of feedback we receive or asks about what features we are rolling out. He also never mentioned that Source One's technologies powers more sites than just the WhyAbe.com public facing site, because he probably did not know that. He doesn't know how many registered users there are, nor how many events have been conducted. Jason has formed his own opinion on what he expects from a e-sourcing solution, and feels that if you don't have a household name, your solution is not mainstream.

So what's in a name? Apparently to Jason, it is a company that exclusively sells to the Fortune 500 market and might be pushing "downstream" into the mid-market world (a world, we at Source One, have been successful in for almost 20 years). To others, it is recognition of a logo, a story, or remembering that funny or impactful commercial. Most commonly, having a household name simply means having a level of familiarity with a company/product/service.

So, what's the problem with always going with a "name"? Well, you could be missing out on the best solution for your business. One of the main reasons a company in a non-consumer facing industry may have a big "name" is simply though marketing. That is to say, pumping money into logos, trade shows, literature, banner ads, sponsorships AND constantly assigning resources to communicate with and direct/guide analysts and bloggers. So, who is paying for those marketing costs? - YOU ARE, the customers..- Go with someone that isn't as much of a household name, and chances are, they may offer a lower cost of doing business, and can provide an overall better value.

So, in his recent post, Jason made an assumption that WhyAbe.com does not have a material market share. He did this based on WhyAbe.com and more specifically, Source One, not having a household name, or them not fitting into what he considers the right fit for his clients. Well, in fact, Source One has a client list that rivals some of the biggest consulting firms and certainly has a deeper experience base than "general practice" firms that are trying to capitalize in a hot market of Strategic Sourcing. Source One has their fair share of the Fortune 500 space as well in both their consulting practice and users of their e-sourcing tools. The Source One technologies have thousands of registered buyers and multiples of that in registered suppliers. The technologies have jointly hosted thousands of sourcing events, mostly conducted in "private" , ranging from local governments procuring fuel to retailers procuring light fixtures and display cases. Not a single user, buyer or supplier, ever paid a dime.

The purpose of this article is not to correct Jason about Source One's marketshare. The point is to stress the importance of having proper market intelligence when sourcing every category, no matter how much you think you know about it. Case in point, while Jason may not consider our marketshare to be substantial or noteworthy, thousands of others do. When you are sourcing any spend category, no matter how simple, or how unique (like sourcing your e-sourcing tools), make sure you check more than one source, ask more than one person, and click more that those first couple links on your first query in Google.

If you need some tips on collecting market intelligence, we have a chapter dedicated to it in our book, "Managing Indirect Spend".

As an aside, we were asked by someone else what we think about the Ariba offering. We don't want to get into a feature comparison, but our position is that if it is not free for both parties (buyer AND supplier), it really is not free. So if a supplier has costs to join, are you really getting the best price?  The market is beggining to get flooded with paid marketplaces, and we are already hearing from some suppliers that their long term strategies do not include paying commissions or subscriptions to multiple marketplaces or catalogs.
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William Dorn

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2 comments so far,Add yours

  1. I can recall Jason's furious and somewhat indignant response when I had made the suggestion in a post that he was perhaps out of touch with the market for ironically the very reasons that you have cited above.

    But the bigger issue is not one that is tied to a lack of research but one of familiarity that often times blinds even the most experienced of pundits. This is after all why Colin Powell in his famous PowerPoint presentation indicated that while it is important to seek out expert advice, it is equally important to recognize the fact that even experts can and do hit a knowledge plateau that renders their opinion less than relevant in a dynamically changing world. Especially within the context of comfortable relationships with the very vendors one seeks to cover.

    Sadly, this myopic vision was illustrated in a September 2nd, 2010 post I had written titled "While Rome Burns, Jason Busch Talks About Remodelling The City (http://wp.me/p4HrB-1zz)," and again in a September 7th, 2010 post "Spend Matters’ Recent Guest Author Post Underlines How The Industry Has Lost Its Objectivity through Familiarity (http://wp.me/p4HrB-1Al)."

    As previously written, I like Jason. The problem is that he has surrounded himself and in the process become a part of the fading oligarchical interests of a closed procurement community that no longer carries the weight of influence it once did in the market. I guess an 85% initiative failure rate will do that.

    The long and the short of it was highlighted in a 2000 software industry report which predicted that traditional vendor models were ultimately numbered, as emerging vendors (many like Source One I might add that have been in existence for more than 20 years) were going to become the new industry titans.

    There is no way anyone could miss this unless they chose to look the other way or ignore the obvious.

  2. I completely agree with both the article and the comment.

    The blog topics on Spend Matters do focus far too much time and attention on the behemoth organisations who require enterprise-scale e-procurement solutions.

    There is the Fortune 500 market who would be the main benefactors of Jason's insight, yet from 2008 data there are approx. 108,000 other firms in the US with 100 or more employees.

    In our view, it is these companies that should equally have their e-procurement needs and wishes addressed. I think the viewpoints on the Spend Matters posts need to come down a peg or two to be more in tune with your average purchasing professional, who won't be waking up every morning to conduct 'bid optimisation' and 'expressive bidding' projects but will be more focused on just doing the job well in an easy and effective way.