Tuesday, 3 February 2009

e-procurement marketplaces - and one to watch

Following on from Monday’s post on pure play e-procurement suppliers, I was asked about e-procurement marketplaces, how they fit into the e-procurement market and how well are they performing.

The dot.com boom saw the rise of a plethora of e-procurement marketplaces - too many – and it was inevitable that there would be a severe rationalisation. I believe that now there are only two marketplaces/suppliers that will survive long term....

E-Government Solutions (EGS) did well to partner with IDeA to create the IDeA Marketplace, and see off most of the other public sector marketplace suppliers in England & Wales. They seem to have continued to grow on the back of developing partnerships with both customers and suppliers, although I’ve always thought that their partnership with OGCBuying.Solutions would give them more problems than benefits. However, EGS appear to have managed to get that all important critical mass – processing over £1bn of transactions each year – and developing specialist marketplaces for specific markets - that should see it survive long-term – provided it keeps meeting it customers’ and suppliers’ needs.

eProcurement Scotl@nd (ePS) appears to have achieved the same in Scotland – but only on the back of a massive investment by the Scottish Executive. The PR coming out of ePS is strong – “The eProcurement Scotl@nd service is one of the most comprehensive and successful Public Sector eGovernment initiatives in the world” – and take-up by both suppliers and organisations appears to have been good. But I keep hearing doubts raised by senior Officers in some customer sites that ePS is not delivering the benefits that they want to see – partially on purchase prices, but particularly in the area of back office processing.

I continue to believe that the way for any marketplace to succeed is to partner effectively with all parties involved. EGS has done this, and in particular has partnered with Financial Management System (FMS) suppliers rather than try to compete with them. ePS, meanwhile, seems not to have partnered so well with FMS suppliers, but seeks to replace their procurement systems – i.e. rather than be a true hub-like marketplace, it is seeking to extend its footprint too far into the customers’ sites – meaning that their customers cannot achieve the full back office integration.

My personal opinion is that ePS needs to adopt a more open approach to partnerships if it is to survive. Also, I would doubt that ePS could survive long-term if The Scottish Executive removed its very active support. Meanwhile, EGS has a business model that should let it survive, indeed thrive, long term.....

One to watch – is
Due North, a subsidiary of AIM-listed Access Intelligence – which supplies e-sourcing systems on a hosted basis to a small number of local authorities, emergency services and other Public Sector organisations. Although a very small business that had no clear focus to date, Access intelligence has just had a cash injection by Elderstreet Investments, appointed Michael Jackson (former Chairman of Sage) as Executive Chairman, announced the divestment of most of its acquisitions of the past few years, and a focus on SaaS.

I always regarded Due North as a strong supplier on the few occasions we met them in tenders – their solution is liked by its end users, is seemingly quick to implement, and providing it on a SaaS basis is the right way forward. I doubt that they will develop their “portals” into serious competitors for IDeA Marketplace (nor ePS), but will aim to stay in their e-sourcing niche and no doubt aim to work with the established marketplaces. And if they have access to additional funds, perhaps they may seek out an acquisition or two to help them build on what is currently a very small base. They may be a minnow at the moment, and have quite an uphill struggle ahead of them – but I suspect that they may have the ideas and the funds to become a significant player.

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