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Today’s guest post is from Chris Newton of Ketera.
At Ketera, we think of sourcing as the activity of getting suppliers together, letting them know what you need, and then having them provide you with the best possible solution (product or service or a combination of both) at a price that is competitive in the market. Everybody does this, right?
Sometimes, yes. But sourcing as an organized activity, built around applications and formal processes, has been typically limited to relatively few large companies. There are many other organizations out there (mid-market and large) that have yet to benefit from such solutions. In conversations with customers and prospects, we hear time and again of the same two blocking concerns. This first often boils down to inertia and fear of the unknown, while the second usually comes back to the cost to get started. Most companies find it easy to continue with their manual (primarily email centric) process of collating supplier responses and bids before arriving at supplier contracts, and many have been scared off by historically prohibitive costs to acquire new technology systems. We believe that more and more companies will start using sourcing solutions to manage their purchases more efficiently as sourcing solutions become broadly accessible – in terms of both initial investment and ease of use.
Why do we believe this will happen? We look at Google AdWords – when it started out, very few people knew how to use it. So, few companies invested in it, and even fewer did well. It seemed too technical and too complex to understand the demand for search words, then apply pricing and figure out what was working and what was not. And it looked expensive as an entirely new marketing budget line item with questionable benefits. When the results achieved by best practice early adopters became widely known, however, and new sources of information on search words, pricing, geographical information became broadly available, the use of Google AdWords exploded. Today, it’s becoming hard to find a company that doesn’t participate. By making such relevant information available, Google has taken the mystique out of the technology and made it friendlier and less scary for marketing folks to try these technologies.
We believe sourcing will follow a similar path of adoption once sourcing applications are viewed as having less to do with technology and more to do with helping a sourcing manager do their job efficiently and effectively. We think this will be driven by solutions which are available like any other instant online purchase – immediately, easy to use without any fear of complex technology or requiring intensive training. They will be fully integrated with a complete suite of spend management applications and based on a strong member community of buyers and suppliers. They will be truly affordable to companies of any size. And they will allow a continuum of behaviour, ranging from simple “strategic shopping” actions, through structured “RFx” interactions, to advanced “Auctions” and optimizations.
So why do so many folks think sourcing is complex and solutions are expensive? Because the enterprise software industry has trained them to think that. To successfully sign big contracts for software licenses and consulting services with large enterprises, it’s critical to provide examples and demonstrations that make sourcing appear very complex to justify the expense. Some companies have done this so well, that it’s easy to overlook the fact that only a small percentage of actual sourcing activities occur in such situations. Greater benefits are available to those that apply sourcing solutions and best practice processes more often, rather than in only the most sophisticated scenarios. This requires pushing these capabilities further out into the organization, which in turn drives the need for affordability and ease of use.
Real usability means no training required. Should you need training to do things online that you already do manually? Did you get trained on Amazon before you bought a book? Once unnecessary layers of complexity have been removed (and useful complexities have been set aside for power users), the objective of widespread usage becomes realistic. Step-by-step “wizards” that walk new or infrequent users through familiar processes can be just as effective an on-the-job trainer. (An example sourcing wizard.) New buttons in procurement applications that generate sourcing events in a single click mean that buyers no longer feel they must be locked into published prices or offerings. Use of familiar terminology and abundant online tips makes the browser interface comfortable. So comfortable, in fact, that we believe that many new companies trying out these solutions to run a few test events will find them so easy to use that organizational adoption goes viral. Usage mandates aren’t required when technology really make someone’s job easier and makes them look good at the same time. (With this adoption path, vendors will be well served to offer free trials of their solutions – a welcome alternative to countless sales presentations and follow-up phone calls for folks on both sides of the transaction.)
The previously cited hurdle around inertia and fear of the unknown also crops up beyond new software user interfaces in the realm of supplier management. Old supplier relationships are easy to rely on, but companies are often best served by extending sourcing events to enable a wider range of responses. Not just to extract a lower price, but also to collect more information about the products and services that you are buying. Researching new suppliers to participate need not be a challenge. We believe in creating a ready community of buyers and suppliers that build operational history, ratings, certifications and relationships over time. This large and growing (daily) network of actively transacting suppliers who work with many other buyers then quickly becomes a valuable resource. The community then becomes the foundation for ongoing business transactions and the integrated technology that supports them within established best practice processes.
We are now seeing many of our beliefs begin to prove out in the market as this example shows: A multi-channel home shopping leader conducted a free Google search for sourcing solutions, found the Ketera site, evaluated and then signed up (themselves … self serve … using a credit card) for our on demand sourcing application. They were able to search our network of 140,000 suppliers and within a few weeks had conducted a reverse auction event for freight services that will save them over one million dollars in the next year or two. All for $500 in annual subscription fees. We think this is just the beginning of the direction this market is headed.