Analyst Insight: For supplier networks, having a critical mass of suppliers with rich information about those suppliers is a big advantage. Buyers gravitate toward the network that already has most of their suppliers in it, with the information and connectivity they need. In 2011, we will see the key supplier networks in a "land grab" trying to out-do one another in getting the most suppliers signed up.
-Bill McBeath, chief research officer at ChainLink Research
The late '90s saw the rise of platforms like Ariba, CommerceOne (remember them?) and RightWorks all of which focused on the automation of requisition-driven procurement processes, primarily for indirect spend. Since that time, we've seen tremendous evolution in these platforms. This includes the rise of deep contract management capabilities, sourcing platforms that include combinatorial optimization to squeeze the best combinations of bids out of huge complex RFQ/bidding events, sophisticated supplier management capabilities managing supplier information, risk, and performance, and whole new approaches to spend analytics.
Of the three companies mentioned above, Ariba is the only one left standing as an independent company and they are a good example of where things are headed. Ariba's Supplier Network is a very important element that has allowed them to enable both sides of buy/sell processes and acquire sellers as customers in the process. We have long touted the importance of the network application model for its ability to lower the barriers to inter-enterprise collaboration. But there can only be a handful of successful supplier networks, because incumbents have a huge advantage when their network reaches critical mass. There are other supplier networks besides Ariba's, such as those from Iasta, Ketera and few others. We expect in 2011 to see the battleground shaping up among the supplier networks - the land grab to see who can acquire the largest and most functional/information-rich supplier network. 2011 could be a very important year, perhaps the decisive year, in this battle to become the dominant supplier network.
Another area that is gaining in importance is supplier financing and supply chain finance. Today, offerings among the sourcing and procurement vendors in this area are rather thin (most have nothing). Ariba partners with The Receivables Exchange to provide the suppliers in their network with a marketplace where they can sell their receivables. This is a good example of the innovation that is possible. The improving economy will ease the cash and credit crunch. In spite of that, the need for both pre- and post-shipment financing is only going to increase. So, we expect to see demand in this area, including the emergence of some buyer-driven programs as well.
Supplier Networks will be a hot topic for 2011. Vendors will not necessarily make a lot of money off these networks in 2011 (Ariba will make some). Supplier and supply chain finance will grow in importance but remain small compared to the overall sourcing and procurement software and services space.
Enjoy curated articles directly to your inbox.