Global Cost Reduction

Aberdeen Group says e-sourcing can save big money

Boston  April 3, 2001  In a report released today, information technology market analysis and positioning services firm Aberdeen Group states that Internet-based sourcing (e-sourcing) could save businesses more than $1.7 trillion on a global basis. In addition, Aberdeen finds that applying Internet-based technologies to strategic sourcing activities can shorten process cycles, lower administration costs and speed time-to-market for new products.

"Strategic sourcing provides the single, largest opportunity for companies to reduce costs and design optimal supply chain structures," says Tim Minahan, report editor and director of supply chain management research. "With the unstable economic environment forcing companies to control costs, Aberdeen foresees significant demand for e-sourcing technologies and services. We anticipate that the e-sourcing market will top $3.3 billion in revenues by 2004."

Strategic e-sourcing describes the process of utilizing Web-based technologies to support the identification, evaluation, negotiation and configuration of products, suppliers, and services into a supply chain network that can efficiently respond to changing market demands. It is during the sourcing cycle that an organization defines the overall cost and structure of its products and its supply network. Aberdeen's research on procurement executives from multiple industry segments finds that deploying a strategic e-sourcing framework can identify and negotiate with a broad range of qualified suppliers. It can also reduce process costs for sourcing engagements; shorten sourcing cycles by 25 to 30 percent; reduce time-to-market cycles by 10 to 15 percent; negotiate 5 to 20 percent unit price reductions, on average; extend strategic sourcing to a wider range of products and services; and enhance collaboration and knowledge sharing.

The report, titled Strategic e-Sourcing: A Framework for Negotiating Competitive Advantage, quantifies the benefits and challenges of strategic sourcing, defines a framework for strategic e-sourcing, and sizes the market and opportunity for e-sourcing technologies and services. The report also includes e-sourcing case studies and profiles 33 providers of e-sourcing technologies and services.

Suppliers profiled in the report include Agile Software Corporation; Ariba Inc.; Clarus Corp.; Commerce One Inc.; Dun & Bradstreet; eBreviate; Elcom International Inc.; Emptoris; FreeMarkets Inc.; Frictionless Commerce; Healy Hudson Corporation; i2 Technologies Inc.; Idapta; Menerva Technologies; Metiom; MindFlow Technologies; Moai Technologies Inc.; Open Ratings; Oracle Corp.; Ozro Inc., Perfect; Procuri; RightWorks Inc.; ShareMax Inc.; Siebel Systems Inc.; Tradeffect Inc.; VerticalNet Solutions; Webango Inc.; Inc.; and Zeborg Inc.

Companies in this article