Daily Archives: February 4, 2007

The Sorcerers of Sorcity

Another stop on my whirlwind tour of North Dallas was
Sorcity. My goal was to find out if they were an on-line auction platform, an e-marketplace, a combination of both, or something entirely different … since their site left me asking as many questions as it answered.

Founded in early 1999, it is possibly the oldest surviving stand-alone on-line reverse auction platform in the sourcing space (as most of the early major players have been acquired). [As a side note, Procuri is probably number two as it was founded in 1999 as well, and Iasta is probably number three, as it was founded in early 2000]. In addition, it also serves as a marketplace with over 620,000 registered suppliers where you can potentially find hundreds of suppliers that could meet your needs. However, the real differentiator between the other online and on-demand SaaS reverse auction providers and other e-marketplaces is its managed services offering.

When you get right down to it, even with the best tools available, with finite resources, you can only conduct so many sourcing events on your own. The only way to conduct more events is to augment your team, either by hiring consultants or outsourcing part of the process – that’s where managed services comes in. With Sorcity’s platform, you can use Sorcity to assist with as much of the executable sourcing cycle (Preparation / RFX / Auction / Negotiation / Award) as you like … anywhere from just automating all of the time-consuming administration, negotiation, and analysis to having Sorcity conduct the entire event for you end-to-end.

With their tool alone, they claim you can save 1-12 days on the auction component alone, an additional 3-66% on price paid, and get anything you need with their very large supplier network. So they are definitely competitive with the service offerings of the on-demand providers like Iasta and Procuri. But as I just said, the real power is their managed services where you can outsource entire categories and events. Under this model, provided your bid is for 100K or more, you can successfully complete an event with just 1-2 hours over 1-2 weeks! Furthermore, it does not cost you anything – the fees are paid by the vendor who is awarded the business! (I believe they also have a consulting model, where they will help you for fixed fee, but, unlike most vendors, you only have to pay if they save you money. How can they do it? Years of experience has taught them where considerable savings are, and where they aren’t. So if they don’t think you can save enough money on a category / event to make it worth your while, they’ll help you find one where you can save enough to make it worth your while.)

So although I would hesitate to recommend their solution for in-house purchases (and I still believe all high-value and strategic purchases should be managed by a core team in one center of excellence under a center-led purchasing model) as I believe those should be executed under a platform that covers the entire sourcing cycle (and not just the executable sourcing cycle), I would certainly not hesitate to recommend that you consider them for those categories that are not critical to your business (and when you get down to it, the vast majority of your purchases are not, despite what you might think – if ten suppliers can make a part, it’s not strategic – only those components that can only be provided by a handful (< 5) of vendors or those components that can be, and often are, in short supply are critical, and therefore need to be classified as strategic). After all, the best way to do strategic sourcing is to strategically outsource everything you do not have a core competency for and everything you just do not have time to strategic source in house.

So check out Sorcity and check back to see if I am successfully able to convince their white-paper writer to guest author a post on why a managed services platform may also be appropriate for certain high-spend or strategic purchases.