Strategic market set to grow

The strategic sourcing market will be worth US$1.8 billion in 2006, according to AMR Research. The analyst house says growth from last year’s figure of US$350 million will be driven by maturing software and the compelling return on investment case.

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By  Neil Denslow Published  July 30, 2002

The strategic sourcing market will be worth US$1.8 billion in 2006, according to AMR Research. The analyst house says growth from last year’s figure of US$350 million will be driven by maturing software and a growing awareness of the compelling return on investment (ROI).

AMR says that the clear ROI and projected growth of the market has fuelled an influx of products from software and service vendors. However, it says that so far none have come up with a complete footprint to match the cross-commodity requirements of large, diverse corporations.

The analyst house evaluated the top 17 vendors in the strategic sourcing market against 200 functional requirements, and found all of them to be lacking. It assessed them in six major functional requirement categories: analysis and planning; direct materials sourcing; RFx; bidding events; bid analysis, negotiation, contract management, and supplier/sourcing performance management. The average score, on a scale of 0-5, was an “anaemic” 2.1, however AMR says that many innovative technology components adopted by leading-edge users are fundamentally changing traditional strategic sourcing practices.

“For buyers, whether the goal is reducing total cost or time-to-market, the automation of corporate sourcing efforts has become a pervasive strategic initiative,” says Pierre Mitchell, vice president and research fellow, AMR Research.

“Although buyers are realising a quick and massive ROI from simple, tactical, event-based e-sourcing tools, their desire for deeper support of systematic, strategic sourcing processes is encountering the hurdles common to a new applications market: lack of verticalization, less than a few hundred installations, incomplete functionality, and many small niche vendors,” he explains.

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