The Last Word: eSourcing set to remain as hot button

The past couple of years have not been particularly kind to the supply chain application sector — and the sourcing market has surely felt the repercussions.

Enterprises remain obsessive about cost savings. With e-sourcing promising to deliver rapid and sizeable return on investment, spending on such sourcing solutions is on the upswing. Most importantly, enterprises seem ready to make e-sourcing more of a long-term strategy.

The market that is expected to emerge over the next year or so will bear little resemblance to the early e-sourcing environment.

Enterprise requirements and constraints are now driving sourcing vendors to deliver a "whole" e-sourcing solution — one that combines self-service applications with category expertise, methodologies, and sourcing-event management services that can be accessed when needed.

Another interesting facet is that of hosted offerings that are gaining in acceptance. These are surely here to stay — contrary to early belief that long-term viability would require e-sourcing vendors to deliver licensed applications that could be deployed behind a company's firewall.

Hosted deployments account for a large part of all e-sourcing installations. Even the largest of enterprises are making long-term commitments to such solutions.

Thanks to the economy and pressures from ERP vendors, the price for basic functionality say, a sourcing event, has fallen drastically. The fee for similar functions is down to almost half of what it was a year ago.

However, there is mounting evidence that enterprises are willing to spend more on advanced functionalities, such as project management and advanced analytics.

In the past few months, the e-sourcing industry has already witnessed major consolidation with many vendors either being acquired or shutting down.

Skittish venture capitalists and prolonged IT spending drought will make it increasingly difficult for most of the smaller vendors to remain viable or even survive. Analysts foresee a third of the current number of players in the market to be either, acquired or closed down.

Enterprises are now looking to align sourcing activities and systems with other business processes, especially on the planning and design front.

E-sourcing vendors will, therefore, need to develop a sound integration strategy and collaboration with planning and design solution vendors.

Major retailers and high-tech and automotive manufacturers are pushing their e-sourcing solution providers to deliver new global sourcing functionalities.

Though e-sourcing will remain a hot button in the foreseeable future, it is clear that enterprises will favour only those solutions that support a hybrid model and offer advanced collaboration, analytics and globalization support. It is up to the vendor community to deliver these promises.

Pradeep Bahirwani is the head of Wipro Ltd. - 01markets