A recent TPMA (Trade Promotion Marketers Association) Outlook contained an article by Bob Houk (of the TPMtoday blog) that expounded on the two-per-channel theory that refers to the idea that retail channels are consolidating to the point that there will eventually be only two significant players in each channel. The article also discussed the two-per-category corollary that states that as retail channels consolidate, and as shelf-space decreases and increases in cost, the suppliers to the few remaining retailers will also consolidate.

This reminded me of my recent post on why Marketing is Not Optional and how, as a result of too much inaction on the part of too many vendors and a lack of faith by too many buyers, this prolonged recession is likely to accomplish what years of M&A activity couldn’t, namely, condense the market to a small handful of key players for each technology and services offering. And I got to thinking, what happens if the space over consolidates and we see the two-per-category theory take effect in core e-Sourcing and e-Procurement offerings? What would happen then? We already have the situation where the suite solutions offered by the big providers are essentially the same solutions offered five years ago, with a few more “bells and whistles” in the UI that really don’t offer much in the way of value improvements. Would we have any innovation at all? And more importantly, even if we don’t see the two-per-category, but only see a small handful of providers … would they all centralize on a “value system” like SAP or Microsoft? What value would there be if all the savings they offered up had to be pumped into (ridiculously?) high license fees and maintenance fees with “empty-calories“? Good questions. Scary questions!

And questions we’ll have to ask unless the more innovative vendors wake up and small the espresso, double down, show you the value, and find a way to sell it to you with essentially no up-front cost — which is very realistic with a SaaS model where they can give you a free 30 day trial and not bill you until the end of month two, giving you enough time to get your first quick wins, demonstrate value, and justify the low monthly service fee that you’ll pay for the 3, 5, 7, and 10+X ROI that these solutions will deliver.