Magic Quadrant for Strategic Sourcing Applications

Transcription

1 Service Name RAS Core G A. Kyte, C. Eschinger, A. White RN Research Note Date: 31 January 2005 Magic Quadrant for Strategic Sourcing Applications, 2004 Competition intensified in 2004 as vendors tried to differentiate themselves in a market characterized by acquisitions and increasingly sophisticated products. This document can help you pick the right supplier for you. Core Topic ERP and Supply Chain Management: Supplier Relationship Management Key Issues How are the markets, products and vendors of SRM solutions changing? How should enterprises select vendors and solutions for procurement, strategic sourcing and contract management? What deployment strategies will offer results most rapidly with the lowest risks? Note 1 Mergers, Acquisitions and Divestitures FreeMarkets merged with Ariba. Covisint's auction business acquired by FreeMarkets. Perfect Commerce acquired by escout. SupplierInsight acquired by Procuri. B2eMarkets acquired Adaptive Trade. Diligent Systems acquired by B2eMarkets. Tigris Consulting acquired by Verticalnet. Zeborg acquired by Emptoris. Goodex acquired by Ariba. Informatica left the sourcing applications market. B2eMarkets acquired by Verticalnet. PeopleSoft acquired by Oracle. Strategic sourcing is no longer in the experimental or early adopter phase. The market has been changed forever by the "commoditization" of basic reverse-auction and electronic RFx (including proposal, information and quotation) functionality. The early days of e-procurement and auctions have made way for sophisticated sourcing solutions, incorporating functionality like spend management, supplier performance and life cycle analytics to support contract management. For this reason, the criterion for this Magic Quadrant is biased toward more complex solutions integrating a number of sourcing functions. Competition in the strategic sourcing market intensified during 2004, driven by merger activity and a renewed focus from vendors of multisuite applications (see Note 1). The rapid change in the vendor landscape meant that some have not executed well and so have not been included in this update (see Note 2). Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 Note 2 Vendors not Included BasWare, a Scandinavian strategic sourcing provider, failed to achieve a number of thresholds in the published criteria. Davaco, a U.S.-based strategic sourcing provider focusing especially on the retail industry. When this research was conducted, it had not yet achieved the revenue threshold for inclusion. But it has continued to gain market share in its selected industry and may be included in future updates. Iasta, a U.S.-based strategic sourcing provider, failed to achieve a number of thresholds in the published criteria. Notable mergers and acquisitions included Ariba and FreeMarkets, Verticalnet and B2eMarkets, and Oracle's recent acquisition of PeopleSoft. In many cases, these acquisitions led to the release of unified or combined products that have not been available in the market long enough for Gartner to assess them. Because of this, the Magic Quadrant does not rate vendors on their post merger potential although we have commented in the text on vendors who have only recently released unified products. The high levels of merger and acquisition activity seen in 2004 will stabilize during An updated Magic Quadrant will be published by the end of Intenda, a South African strategic sourcing provider, failed to achieve a number of thresholds in the published criteria. MatrixOne, a U.S.-based strategic sourcing provider, is not included because of lack of inquiries from users. SynerDeal, a French strategic sourcing provider, failed to achieve a number of thresholds in the published criteria. Verticalnet. Before it acquired B2eMarkets in July 2004, Verticalnet was not included in this Magic Quadrant because of the lack of inquiries from customers. After acquiring B2eMarkets, it released a unified product Verticalnet XE in October This has not yet been rated by Gartner. For further information, see "Criteria for Strategic Sourcing Applications Magic Quadrant, 2004." Date 31 January

3 Figure 1 Magic Quadrant for Strategic Sourcing Applications, 2004 Challengers Leaders Ability to Execute Niche Players Visionaries As of January 2005 Completeness of Vision Source: Gartner Research (January 2005) The Leaders No vendors are ranked in the Leaders quadrant because none has achieved the stated criteria (see "Criteria for Strategic Sourcing Applications Magic Quadrant, 2004"). The Challengers FreeMarkets Despite Ariba merging with FreeMarkets under the Ariba brand, they are rated separately in the Magic Quadrant. FreeMarkets Date 31 January

4 was a leader in the delivery of services for category, process, project and global operations, but not a leader of sourcing software. But FreeMarkets has made substantial inroads in the applications market. It is the installed base leader, with over 200 customers, predominantly with its QuickSource product, used for RFx and reverse-auctions (now the basis for the entry-level Ariba offering). The uptake of its other products, Spend Visibility (for spend analysis) and ES (the "enterprise" version of its sourcing application) has been markedly weaker and they have effectively been replaced by the new Ariba offerings. FreeMarkets' considerable success is down to its strength in negotiation and sourcing expertise. Its innovative approach still persists inside Ariba and existing FreeMarkets customers should continue to have this type of relationship with the new Ariba. The Visionaries Ariba Although Ariba has merged with FreeMarkets under the Ariba brand, they are rated separately in the Magic Quadrant. Before the merger, Ariba had a firm vision of the functional requirements needed to support procurement professionals. It has a strong applications suite, including sourcing, contracts, spend analytics, supplier ratings, category management and contract management. Although they are not all functionally mature, they are better and more integrated with every release. The quality of Ariba's customer implementations has improved in the past 12 months, as onsite implementations have increased. Confidence in its functional superiority has enabled Ariba to hold its prices, while its smaller competitors and major multisuite vendors have been offering big discounts to win business. Large organizations seeking solutions to underpin procurement transformation should consider Ariba. Existing customers should ensure that they re-evaluate Ariba's full range of solutions, including the components and services acquired from FreeMarkets, especially its commodities expertise. The merged Ariba and FreeMarkets companies are potentially very strong, due to the combined installed base, product portfolio, industry presence, broad regional presence, and strength in sales and marketing. Emptoris Emptoris continues to have strong growth, good customer references and high market momentum. Emptoris 5, released in May 2004, enhanced the functionality for complex bids. It is one of the few vendors able to claim differentiation in this area, with user cases of bids containing over 40,000 line items. Emptoris Date 31 January

5 acquired Zeborg (for data quality and spend analysis) and is positioning it well as a tool for "driving compliance." Emptoris has done well to keep the functionality of strategic sourcing moving forward in its developments and is seen by major purchasing users as bringing innovation to their processes. Emptoris' functional strength has led to it being selected as the strategic sourcing platform inside a large European procurement business process outsourcing (BPO) deal, an increasingly important domain. Large organizations with complex bid and lot structures should evaluate Emptoris 5's supply management solutions, as should those seeking complex spending and supplier performance functionality. i2 Technologies This vendor remains unrivaled in its ability to deliver spend analysis for highly complex environments. Coupled with content services, i2 can provide visibility into the attributes of parts and items, especially in high tech, automotive, aerospace and defense, and in industrial maintenance, repair and operations (MRO). It has an excellent vision in the role of structured product data within highly complex sourcing environments and is extending its vision to multitier sourcing. Its negotiation functionality has improved. The company has suffered lackluster growth due to its restructuring in early It has yet to demonstrate a sustained corporate focus on the sourcing marketplace as opposed to its main focus on supply chain management. Despite these challenges, we recommend that organizations needing spend analysis in industries targeted by i2, should shortlist it. MindFlow In terms of market share, MindFlow is one of the smallest vendors included in the Magic Quadrant. But it is there because of its unique vision and functionality, which focuses on the optimization of the "system cost" of sourced goods and services. MindFlow has refocused on the catering and consumer packaged goods industries and embraced consulting services as a key element of its delivery. But MindFlow's focus has come at the expense of mass-market appeal and users say that its tools are inappropriate for less sophisticated buyers. Catering and consumer packaged goods companies should evaluate MindFlow. They should balance the need to learn the specialist tools for use by expert procurement managers against the needs of the mainstream buyers that are the majority of corporate procurement offices. Date 31 January

6 Oracle Oracle remains the only major enterprise resource planning (ERP) vendor with significant deployments of strategic sourcing applications. Its vision is strong and it positions sourcing as part of an "advanced procurement suite" that links sourcing with backoffice technologies like vendor masters, item masters, purchasing, supply chain planning, product life cycle management and requisition management. Oracle's 11i.10 is promising now that it has a procurement contracts module and incremental features like improved project management, bid award and supplier interaction. Oracle still lacks service partnerships for category expertise or data quality services. Customers of Oracle Purchasing should shortlist Oracle Sourcing. Oracle Purchasing customers that had previously rejected Oracle's strategic sourcing offering, should re-evaluate the functionality of version 11i.10. Users should monitor how the acquisition of PeopleSoft by Oracle affects Oracle's plans for strategic sourcing. Niche Players Agile A new addition to the Magic Quadrant, Agile is visionary as a vendor of product life cycle management (PLM) software with a deep understanding of product-centered sourcing. It has progressed well beyond the basics of "sourcing in design for cost reduction." Agile has grown through acquisition and now has a diverse technical architecture. Although its vision is robust, few customer references can validate functional claims across all stages of the product life cycle. Agile has yet to articulate how it will support, or coexist with, non-engineering sourcing. Agile's customers in the high tech and automotive industries should evaluate Agile's Sourcing product. But Agile's customers should also consider buying separate tools for non-design sourcing requirements. AT Kearney As a consultancy, AT Kearney has been synonymous with excellence in strategic sourcing for a long time. It has moved all application development and maintenance to its partner, UGS. AT Kearney's procurement business is all consulting based, although it re-sells the UGS solutions. Its partnership terms with UGS are stronger than most typical vendor partnerships; and execution remains strong in the niches into which AT Kearney sells. Date 31 January

7 Over the last 18 months, the products have all been re-written by UGS in.net and will take time to stabilize in the market. Users should shortlist AT Kearney for strategic sourcing projects and PLM-driven businesses (supported by UGS). Businesses that are centered around manufacturing should consider AT Kearney. Frictionless Commerce This vendor has increased its installed base, more than doubling its customers. Reference customers attest to the application's flexibility, document orientation, project capabilities, use of workflow and dashboards. Frictionless has improved its focus, targeting the financial services, utilities and life sciences industries. Frictionless' architecture has enabled it to expand into contract management, although its contract capabilities will require further development before it can compete with best-ofbreed providers. Organizations that are driving deployment, longterm transformation, and that require workflow and workbench functionality should evaluate Frictionless. All organizations should look at the Frictionless' tools to develop a benchmark of what is possible with templates, workflow, projects and configuration. PeopleSoft Its vision for strategic sourcing is credible and has been reinforced with commitments for functional capability to be added to its supplier relationship management (SRM) suite well into Over the last two years, PeopleSoft has struggled to execute on its vision, and has weakened its comparative market position. While other vendors have steadily progressed, PeopleSoft has gained little ground, although the building of a specialized sales force and a revised vision communicated to Gartner in mid 2004, are all directionally good. With the acquisition of PeopleSoft by Oracle, customers of Oracle's Enterprise offering should consider the SRM solution, but only if it fits their immediate need. EnterpriseOne customers should be more cautious, as the longer-term direction of this product is less certain. Both customer groups should review statements from Oracle-PeopleSoft closely, as the agreed acquisition moves toward integration in 2005 and PeopleSoft no longer exists as a separate company. Procuri This vendor has the second-largest installed base of any sourcing provider. Although its customers are hosted and focused on negotiation, Procuri boasts a highly referenceable customer base with high levels of customer satisfaction. Date 31 January

8 Procuri's emerging channel strategy bodes well, especially if it can execute on delivering a contracts module and integrating with back-office environments. Procuri is smaller than many of its competitors, but its financial risks are relatively low given its history of near profitability and a recent infusion of $10 million in venture capital. Organizations that are interested in auctions and erfx with short payback cycles, should consider Procuri. Small and midsize businesses interested in sourcing should shortlist Procuri because of its easy implementation and value-oriented pricing. SAP It struggled to bring functionally for integrated strategic sourcing to the market in early 2004, disappointing many customers with the slowness of new releases. The release of mysap SRM 4.0 in April 2004 addressed many basic needs, but, throughout 2003 and into 2004, SAP's customer base has been a good hunting ground for the best-of-breed strategic sourcing providers. Many committed SAP users have found the gap between the inbuilt e- sourcing functionality of mysap SRM 4.0 and the available bestof-breed functionality to be large enough that they can overcome their reluctance to go outside the SAP portfolio even if the task of integration is increased. The move from mysap SRM 3.0 and the need for product-focused customers to use newer releases of SAP's Master Data Management solution has delayed the adoption of mysap SRM 4.0. SAP saw better market traction within its base in 2H04, thanks to an aggressive sales campaign that highlighted the importance SAP gives to this market. SAP is a viable choice for organizations willing to act as co-development partner, or that will make a larger mid- to long-term commitment to SAP's SRM vision. Organizations should continue to consider licensing bestof-breed niche offerings for spend analysis, negotiation or RFx, given the near-term benefits of adopting such solutions. Bottom Line: Market differentiation for strategic sourcing applications is characterized by deepening and broadening functionality, and a race to reach critical mass. Although functionality remains fragmented, the availability of spend analysis and contract management is increasing, with analytics being seen as the tool by which procurement managers become sourcing professionals. Users are advised to watch how the postmerger best-of-breed vendors evolve their solutions and how the business application heavyweights use their strength to gain rapid market share in this fast-moving market. Date 31 January