Self-service sourcing applications gain momentum

Strategic sourcing providers are responding to the current pressure on corporate budgets by offering their enterprise customers...

Strategic sourcing providers are responding to the current pressure on corporate budgets by offering their enterprise customers self-service e-sourcing applications, rather than full-service solutions.

In July Dealigence, a strategic sourcing technology company, will launch its Dealigence Sourcing self-service application targeted at both sourcing solution providers and enterprise-level companies.

The Dealigence strategic sourcing engine will have a number of features that enhance the ability for companies to manage the bidding process on their own, according to George Eberstadt, vice-president of business development at Dealigence in New York. Features enable companies to aggregate purchasing, such as for shipping needs, across a company's divisions to take advantage of volume discounts.

In a reverse auction the Dealigence technology will also allow suppliers to bid on individual items or bundle multiple items into a single bid. Using analytics, the Dealigence engine will determine the best offer.

The system allows buyers to weigh each component on importance and express it as a value.

"Bidder A may bid on items one through to three but bidder B bids on items two through to four. Dealigence Sourcing figures out the optimal way to split up the award across all of the suppliers," said Eberstadt.

Technology that puts the expertise back into the hands of the company rather than forcing a company to go to an outside sourcing service to run the auctions is accelerating, according to a number of industry analysts.

"Companies are moving to the self-service option because they are more comfortable with what online e-services are and they don't need to pay for the handholding that strategic sourcing providers usually provide," Christa Degnan, a senior analyst at the Aberdeen Group, said.

According to Degnan, self-service applications create an automated discipline in approaching a supplier base and in negotiating for optimal terms. Instead of a single employee with the expertise on a particular commodity, e-sourcing tools make that knowledge base transparent to everyone in the organisation.

"Once companies become comfortable they want to take back control and bring it in house and avoid paying for the providers domain expertise," said Degnan.

Meanwhile FreeMarkets, one of the earliest providers of strategic sourcing services, is also offering more self-service technology to its customers, according to Nikki Sikes, director of product management at the company.

"The trend towards self service is very logical as you move across the adoption life cycle. In a company's pilot deployment there is a heavy services and software component. Companies want help from people who have done it before. But, as a company moves into broad adoption and puts an e-sourcing tool on every buyer's desktop it becomes more of a self-service design," said Sikes.

FreeMarkets launched its QuickSource self-service application last year. The software gives buyers templates for RFQs, an integrated collaboration and messaging tool, and the ability to weight or handicap individual components of the bid such as quality, meeting shipping schedules, and price.

Aberdeen research indicates companies can negotiate about savings of about 14% through strategic sourcing tools, Degnan said.

Significant savings can also be achieved when a promised product or supplier cannot meet commitments and a new source is needed in a short amount of time, Jon Derome, a senior analyst at the Yankee Group, said.

In the future Eberstadt said Dealigence intends to incorporate Web service standards in its technology in order to automate the selection of suppliers posting on a UDDI (Universal Description, Discovery, and Integration) directory.

"If you want to ship a package from point A to point B, you could go to every possible shipper and figure out what they offer, get quotes back and compare them, and then select the best supplier. But with Web services once you know what your object is, the Dealigence engine will be able to negotiate with each Web service and come back with the best fit," Eberstadt said.

The two major hurdles to make Web services work is the directory and negotiations component, he said.

"While UDDI has its hands around the first problem, the Dealigence engine is awaiting a Web service standard for the negotiations component," Eberstadt said.

Read more on Web software