e-Sourcing is here to stay

November 20th, 2006 at 09:10am David Bush - Iasta

Purchasing’s annual benchmark e-sourcing survey found that the spend going through e-Sourcing tools almost doubled from 16% in 2005 to 31% in 2006 and that buyers are shooting for 50% in 2007. In addition, respondents indicated that they ran an average of 160 online events in 2006 vs an average of 45 events in 2005.

Based on these numbers, to meet their goal of e-Sourcing 50% of their spend, buyers are going to have to run an average of 260 events in 2007. That’s a lot of events. To do it, buyers are going to need an industry leading eSourcing tool that can handle the executable sourcing cycle from initial RFI to final award, including RFQ and RFX, reverse auction, and decision optimization. Furthermore, these tools are going to have to be implemented in a single interface to streamline process and institutionalize best practices to allow these events to be conducted as efficiently and effectively as possible.

These suites are also going to need to be well supported, maintained, and updated regularly to allow purchasing efficiency to continue to improve to the point where a buying organization can have the majority of its spend (over 80%) under management. This will probably not be possible if you rely on traditional installed software due to the rapid pace of maturity of the e-Sourcing marketplace. Fortunately, many buyers are seeing the advantages that SaaS delivers, 22% of respondents are now using on-demand solutions, and 35% of buyers are now comfortable with corporate information outside the company firewall. Considering that service providers probably know more about network security than your average internal IT team in a non-IT company, this is good, progressive thinking.

We hope the trend for increased utilization of eSourcing tools, especially SaaS eSourcing offerings, continues since we continue to see the remarkable results clients can achieve with an integrated best-practice based on-demand solution where they can decrease sourcing cycle time by over half and still gain a savings of 10% to 20%, or more, the first time a category is subjected to eSourcing.

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Entry Filed under: Analysts/Research, Functionality, General, Supply Management Best Practices, Technology / SaaS, e-Sourcing Marketplace