Sourcing vendors say acquisitions aim at one-stop data cleansing and analysis
By Malcolm Wheatley, senior contributing editor -- Manufacturing Business Technology, 9/1/2005 6:00:00 AM
Materials procurement was supposed to be among the first business processes to be transformed by the Internet. Vendors even created a catchy name—strategic sourcing—for what was billed as a revolutionary method of cutting procurement costs. Yet while Internet-based business processes have become commonplace, most industry experts argue that strategic sourcing has not fulfilled its early promise.
Recent acquisitions within the sourcing space could change that. Two prime examples are Ariba's purchase of Softface, and the purchase of Intigma by Emptoris. These deals are expected to make it easier for companies to thoroughly analyze overall spending before launching strategic sourcing initiatives.
As Pierre Mitchell, head of the e-procurement practice at Atlanta-based Hackett Group, points out, spend analysis traditionally has been a multistage process that often requires looking at data pulled from multiple systems. In most cases, this disparate data must be put in a common format—a process known in IT circles as data cleansing or rationalizing—before any real analysis can take place.
This, Mitchell says, can be a significant hurdle for executives seeking funds for strategic sourcing projects, because they have to justify purchasing two applications—one to cleanse the data, and one to analyze it.
Softface has technology for cleaning, formatting, and aggregating spend data to make it amenable for analysis, says Ariba Senior Manager Paul Noel. By bundling its existing spend analysis capabilities with the Softface technology, Noel says, Ariba has created a new set of tools called Ariba Visibility Solutions.
Intigma deployed proprietary mathematical algorithms to cleanse and classify data. Its product was sold primarily to other vendors, including Emptoris. These vendors would take spend data from their customers, dump it into the Intigma processing engine, and it would emerge cleansed and neatly classified.
Both Ariba and Emptoris believe these new capabilities will finally allow their customers to reap full value from strategic sourcing programs. And there is early evidence to support that belief.
Midland, Mich.-based Dow Corning is expecting annual returns of 20 percent to 30 percent on its investment in the combined Emptoris/Intigma package, according to Procurement Program Leader Michael Lanham.
PPG Industries—a manufacturer of specialty chemicals, coatings, and glass products based in Pittsburgh—finds it much easier to consolidate spending with fewer vendors, thus getting better-quality materials at lower overall costs.
James Polak, director of general purchasing, says it used to take at least nine months to analyze the spend on a given set of materials. Even worse, many items often were overlooked, which reduced the possibility of getting better deals on those items. Today, by using Ariba Visibility Solutions, all vendor consolidation efforts are finished within 90 days, with the analysis portion consuming only a fraction of that time.
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