With companies maturing in their own sourcing capabilities and bringing those applications in-house, global supply management software developers find themselves in a quandary: branch out or die out.
Recent acquisitions by rivals Ariba Inc. and FreeMarkets Inc. prove that there is still a breath of life in supply management software, though perhaps only through diversification.
Ariba announced earlier this week its intent to acquire little-known hosted services provider Alliente Inc., a privately-held procurement business process outsourcing provider. The week previous FreeMarkets announced its intent to acquire the sourcing and services arm of Covisint.
With their respective acquisitions, both Ariba, of Sunnyvale, Calif., and FreeMarkets, of Pittsburgh, are moving in the right direction by providing a hybrid model of delivery that includes a technology platform for automating the supplier sourcing process, expert domain knowledge and supporting services.
Aribas acquisition of Alliente will expand its existing spend management and procurement capabilities to include managed procurement services—a subset of the business process outsourcing market. At the same time Ariba gains additional domain expertise that makes third-party sourcing relevant.
"About 30 to 40 percent of [Alliente] employees are specialists—in travel, energy, leasing, marketing, print, IT hardware and IT consulting," said Michael Schmitt, executive vice president of strategy at Ariba. "So these are people who live and die [for their area of expertise]. They study price points, takedowns, supply and can get into the microeconomics of that industry."
What these domain experts do is go into a company and determine the best sourcing options in a given area. They can help a company source a single item or an entire category.