The Strategic Sourceror

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Wait...you mean there are procurement solution providers that help companies outside the Fortune 500?
Friday, March 28, 2008
Debbie Wilson and Nigel Rayner recently named WhyAbe.com, Technology Insight and Decideware to their analyst’s list of “Cool Vendors in Procurement and Finance, 2008”. There were other vendors on the list, but I wanted to bring particular focus to the fact that these three companies are all privately held small businesses.

To be honest, I will admit I have special interest in one of these companies, WhyAbe.com, which is part of Source One. I spend a good portion of my time developing the toolset and interviewing users and I am excited anytime it receives recognition. But, back to the topic at hand….

To quote Gary, a commenter over at Spend Matters, “It's vital that Gartner and other influencers recognize small companies that innovate...because that's where the majority of all innovation comes from.” Well, fortunately it seems that Gartner is doing just that, as this is now a pattern of Gartner in recognizing the small players in the big market, as it is not the first year that they have done it. It is not just in the “cool vendor” reports either, Debbie and her colleagues seem to be particularly savvy about identifying non-mainstream providers even when the revenue selection criteria that most research firms tend to rely on so heavily is not appropriate.

However, as a whole I would say the industry publications, bloggers, and analyst firms (except for Gartner) still do a poor job of recognizing any of the small provider’s innovative, or more importantly, effective work in the marketplace.

As many blogs have noted, small businesses and free or inexpensive solutions do several things for the marketplace. Most mainstream providers will explain in their own marketing that they are happy to see the small businesses providing these solutions, as it forces them to “step up their game”, or improve their product. While this is undoubtedly true, most small businesses do not get the recognition they deserve for the results they are producing in the marketplace. They are often considered as a novelty solution instead of a inclusive solution and are almost always overlooked in research analysis.

It is a great marketing position to preach that 200 of the fortune 500 use a particular sourcing solution, but really does that mean the solution is right for a Fortune 1000 business, or how about a Fortune 2000, 5000? Are profit margins any less important to a $500 million manufacturing company? Can a company that size even support a pure technology solution properly? The answer, of course, is probably no.

The fact of the matter is, in most small businesses, the tools, solutions and processes were likely developed by real practitioners that have superior experience in their given areas. They are often entrepreneurs that realized they could do it better faster and cheaper than wherever they came from. When the businesses mature and grow at a rapid rate, the internal resources that are dedicated to producing results often lose focus of the original goals of their business, and the clients suffer with inflated prices and a weaker ROI.

The larger the consulting firm or technology provider is, the more standardized and commoditized their solution generally becomes. Building customized solutions that fit their client’s needs become something they say in their sales presentations, not something that they act upon in the implementation of their solutions.

Most of the users of WhyAbe that I have surveyed expressed the following reasons for using our solutions:
  • We cannot afford to purchase a large provider’s solution
  • We do not have the time to go through training and implementation of a major system
    And the most common response:
  • We did not want to change our processes to support a new solution; we were looking for something that compliments our existing processes.

I think the research firms miss that last point most often. Although there are killer applications out there that can help you become best in class with procure-to-pay and supply chain management, the fact of the matter is most businesses do not need it, or simply cannot support it. After all, most businesses are buying services or solutions because they are short on resources to begin with. When WhyAbe.com was developed, we set out to develop a toolset that gave businesses a plug-in solution to help supplement their constrained resources. We have many users that use the tools as a stepping stone to move on to bigger more robust systems down the road, and many that are happy to use them as they are. I think Deborah from Gartner hit the nail on the head saying that it is a great way for businesses to try things out with low investment.

I am not saying that the big providers do not produce effective solutions for their clients. What I am saying is, that as a percentage of client revenue and bottom-line profits, smaller firms are developing solutions that often surpass even the most recognized consulting firm’s results. However, the coverage in the marketplace is poor. The only stories we see are about a rollout of a new major product suite, big company product enhancements or the announcement of a customer or case study of a fortune 500 company.

Where are the stories and case studies for the mid-market companies?
I suspect I already know the answer; there is no money it in for the firms, bloggers and publications.

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posted by William Dorn @ 1:44 PM  
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