The Source of E-Procurement Opportunity: Page 2

Posted December 12, 2000

Kip Martin

(Page 2 of 2)

The impacts of improving sourcing processes will greatly outshine those generated by indirect commodity e-procurement solutions (i.e., moving from simple buy-side EC toward holistic commerce chain management [CCM]). Concomitantly, the costs of the more complete solutions will multiply as each new component is added, driving demand for SI and consultancy assistance, as no one vendor will be poised (realistically) to offer a "complete" solution (through 2005), and the addition of each new component or system will accelerate the complexity and scope of the project(s).

This will also represent a strategy augmentation for e-business vendors (e.g., Ariba, IBM Corp., application service providers, in general) that have publicly identified penetration of the mid-tier (e.g., annual revenues of $100M-$1B) as an important next step. As a counter to the goals of e-business market domination of the large players, many newer vendors (or new to the e-procurement world) are looking to encapsulate the successes of the Aribas and Commerce Ones with solutions/services that will complete (or at least augment) the heretofore incomplete (i.e., catalog-to-order) e-procurement offerings. This will represent increased competition with the buy-side EC market, as well as increase the complexities of vendor/service-provider selection.

While the large IT vendor that manages to successfully service the mid-tier market will reap considerable fame and fortune (so far, none have), this will further enable G2000 companies to more completely integrate their e-business solutions with smaller trading partners (bringing them to a more comprehensive CCM solution). G2000 user organizations will be well served to examine current (and typically) rudimentary e-business solutions for extension opportunities (as opposed to solely investing in new discrete initiative) as a means to mitigate the risks associated with both business process re-engineering and commerce chain management efforts.

Business Impact: By improving supplier management and streamlining buy-side processes, the combination of sourcing and procurement solutions will enable companies to reduce costs.

Bottom Line: E-procurement solutions (as currently offered/implemented) do not address the complete catalog-to-payment cycle, and (despite marketing hype) do not at all address the sourcing (or "strategic sourcing") processes. In addition to more strategic commerce chain management plans, Global 2000 user organizations should continue to expand/extend their e-procurement solutions from an internal perspective to maximize benefits and minimize incremental risks.

Copyright )2000 META Group Inc. ELECTRONIC BUSINESS STRATEGIES is published by META Group Inc., 208 Harbor Drive, P.O. Box 1200061, Stamford, CT 06912-0061. Web: http://www.metagroup.com. Telephone: (203) 973-6700. Fax: (203) 359-8066. This publication may not be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval systems, without prior written permission. All rights reserved. Reprints are available.
EBS 1 December 2000.1015

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