E-Sourcing Forum is pleased to bring you commentary from Aberdeen Group’s new Vice President and Research Director of Global Supply Management, Sudy Bharadwaj. Before joining Aberdeen, Sudy brought with him extensive industry experience in the strategic sourcing and supply management space from his experience at MindFlow Technologies, i2 Technologies, and Hewlett-Packard. Sudy can be reached at sudy.bharadwaj@ aberdeen.com.
My personal take in on-demand
First and foremost, we need to realize that a business decision should be made before an “on-demand” vs. “license” vs. “asp” vs. “…”. The business pressures must be realized and understood by the different stakeholders in the organization. The business pressures are not “disparate” IT systems; these are executive-level issues that affect the income statement and the balance sheet and the CFO understands these pressures. Once we have the actions, capabilities and enablers to effectively manage these business pains, meeting the objectives of the enterprise, we can then determine how to deploy the overall solution to the problem – business process, change management, and finally, a technology enabler. This is where an On-Demand solution comes in: the technology challenges which exist with license solutions are reduced in an On-Demand solution. New challenges do come up, but for certain business-processes; the benefits of On-Demand far outweigh these new challenges.
What I saw when I was in the industry
The supply-management space has great potential for taking On-Demand as a discipline to the next level; much like CRM brought it the initial attention. Let’s look at a specific area such as strategic sourcing. An enterprise can apply a strategic sourcing On-Demand solution to a specific category (such as packaging). This is a good way for the enterprise to determine if the solution and solution provider can achieve the objectives of the category. The providers do need to be careful, some enterprises will take advantage of a category sourcing event, but never have the intention to utilize the solution. This is simply a drain on the vendor’s resources; so vendors must be more careful about the opportunities they pursue. What is the right business model for the vendor, which corresponds to the right business proposition for the enterprise is always a challenge and all parties need to review this carefully.
Where is it going?
This model is not a passing fad – it is here to stay. Some On-Demand providers are offering innovation by focusing on very complex problems, requiring sophisticated algorithms and large amounts of computing horsepower. The value-proposition to the enterprise is solving the complex problem without the IT investment required to apply the computing horsepower. Other companies are offering the model as a very low-cost alternative to license and, thus, offering supply-management capabilities to enterprises that may not have had the budget for a license solution. This will provide supply management capabilities to the masses. This can be a similar evolution the PC provided – offering compute capabilities on the desktop.
An innovative capability includes community benefits similar to Web 2.0 concepts like myspace.com. In the supply-management space, members can join a provider’s community and execute business activities (sourcing events, E-procurement). As the members execute these activities, the provider can gather certain non-confidential statistics and provide benchmarking data for the entire community. Some early community metrics I have seen are rudimentary and do not expose confidential information.
Aberdeen will be releasing a study – On Demand Supply Management. We found the top areas for deploying supply management solutions On Demand are: contract management, sourcing, supplier enablement, and spend analysis. We also found a delta on the amount of realized value between license and On-Demand deployments. The study will be available June 30.