I’ve had a string of inquiries over the past few weeks from smaller organizations that are keen to invest in procurement technologies – to improve their sourcing processes, to support requisitioning, and to connect online with suppliers. For me, these calls are often a source of deep frustration. (Remember I am and forever will be a procurement professional at heart!) This is because I see that low-end tools do lack important, useful features that higher-end tools have, but those higher-end tools are often still out of reach from a pricing perspective.
For example, a client cited to me today that their low-end e-procurement tool doesn’t allow for multiple accounts to be charged on a single purchase order. Not a fatal flaw, but one of many shortcomings. And so what do these smaller organizations do? They often solicit proposals from the same enterprise-class vendors that their larger brethren work with, because they want access to the same sophisticated capabilities that they their colleagues using. And who can blame them?
More often than not, the higher end tools are priced way above what makes sense for a smaller company. For example, I’ve seen large multinationals get less than $1000 per seat per year for a top-notch strategic sourcing tool – and I’ve seen a $1 billion organizations quoted $15,000 per seat per year for the exact same solution. And I guarantee you that the larger company will generate a lot more savings per seat because their size will create rationalization opportunities and economies of scale that the smaller organization will never have.
While I fully realize that enterprise vendors need a certain minimum deal size to make a new customer worth the effort – I also see a major disconnect in the market. There is some progress forward towards bridging this gap – but IMHO, a lot more progress needs to be made.