February 17, 2005

In the past three years, sourcing applications have driven a lot of investment, and for a while were mistakenly identified as the elite app of e-business. But Gartner's new Magic Quadrant suggests that B2B sourcing applications are still rather complicated and evolving rapidly.

On the surface, that sounds like an odd assertion. But when you consider that strategic sourcing encompasses far more than, say, basic RFx and auction technology, it makes sense; for strategic sourcing covers direct and indirect goods, services, and a host of adjacent categories, like contract and supplier management, analytics, etc.

Gartner's quadrant had no strategic sourcing vendors in its "leaders" box, and FreeMarkets (now one with Ariba) was the only "challenger." "Visionaries" included Ariba, Oracle, i2, Emptoris, and MindFlow. "Niche players" were SAP, PeopleSoft (now part of Oracle), AT Kearney, Procuri, Agile, and Frictionless.

It will be recalled from past Magic Quadrants that leaders are high in execution ability and completeness of vision while niche players are low in both. Challenges have better execution ability than completeness of vision, and visionaries have more complete of vision than ability to execute.

While strategic sourcing as a category is complex enough to deny mastery to any one vendor, Gartner noted the differing strengths and weaknesses of some vendors as follows:

Ariba/FreeMarkets: Ariba brings a "firm vision of the functional requirements" for procurement, and FreeMarkets contributes a strong services organization. Gartner also likes FreeMarkets' QuickSource application.

Emptoris: Strong on complex bids. Zeborg acquisition good for spend analysis and data quality.

i2: Strong spend analysis and content services. "Excellent vision in the role of structured product data," particularly in targeted industries. However, i2's focus is still more on supply chain management (SCM).

MindFlow: Good for sophisticated buyers, particularly in industries like consumer packaged goods (CPG). "Focuses on the optimization of the 'system cost' of sourced goods and services.

Oracle: The only vendor with roots in enterprise resource planning (ERP) that has "significant deployments" in strategic sourcing, thanks partly to a well-integrated suite that links up to purchasing, supply chain planning, product lifecycle management (PLM), item and vendor masters, and other back-office systems. Potential weakness: Oracle "still lacks service partnerships for category expertise or data quality services."

SAP: The enterprise applications giant, locked in intense combat with Oracle, is behind that company -- and best-of-breeds -- in this particular category. Garner cites a "gap" between SAP functionality and that offered by several competitors, and notes that new releases have been slow. "SAP's customer base has been a good hunting ground for the best-of-breed strategic sourcing providers." Still, those with a long-term bet on SAP are best served with this functionality, but for now can go to other vendors for spend analysis, negotiation, and RFx tools.

Agile: A PLM player whose acquisition and growth strategy now provides engineering-centric for e.g. automotive and high-tech. No vision yet outside this category.

AT Kearney: UGS partnership is exceptionally strong. Also, strong native consultancy expertise.

Frictionless: Strong in many aspects of application functionality, could do better in contract management.

Procuri: Lots of customers and referenceability. Implementation and pricing particularly attractive to smaller and mid-sized customers.

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