Beware of investing in industry e-buying portals, says Gartner

The vast majority of e-procurement exchanges will be out of business within a few years, according to analysts

The vast majority of e-procurement exchanges will be out of business within a few years, according to analysts

Guy Campos

Researchers at the GartnerGroup have forecast that there is only room in the market for around three vertical portals in each industry, even though as many as 10 could be competing for IT managers' investment at the peak of the predicted boom in e-purchasing.

This cautionary advice is one of four working assumptions about the future of e-procurement that Gartner has drawn up.

The guidance comes as IT managers are under pressure to take part in mega-exchanges - such as the £20bn e-procurement network unveiled by British Airways and five other airlines last week.

Gartner's other three assumptions are:

  • as many as 80% of application service providers that launch catalogues and other e-purchasing aids will fail to reach critical mass in the next few years, according to the analysts

  • 90% of all staff involved in purchasing will be linked to five or more vertical portals by the end of next year

  • four in five manufacturing companies will be spending as much time on e-procurement as they do on enterprise resource planning.

    Mahmud Husein, director of European business measurement at Gartner, said, "We believe e-procurement will not just be a project, it will be a large programme that needs to be co-ordinated."

    Husein plans to invite IT managers from the UK's top 100 companies to establish an e-procurement benchmarking club.

    "We are looking to go beyond the hype that says per-order costs can be reduced from $140 to $20," says Husein. "We don't want to pre-define what our charter members want to look at, but we do expect problems to arise in pre-contractual areas such as design, engineering, order processing and pricing."

    Husein was speaking after BA said it was looking for a technology partner to help it make savings on purchasing in alliance with Air France, American, United, Continental and Delta airlines. But he warned that no one firm - not even leading suppliers such as Commerce One or Ariba - could supply all the solutions the airlines needed.

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