SmartBiz IT Research Library

In January 2005, when the last iteration of this Magic Quadrant was published, the market for strategic sourcing solutions was populated by survivors of the dot-com bust of 2001 and a handful of enterprise-class, entry-level ERP sourcing products. A few of the more successful industry consortiums, including Quadrem and Exostar, were just entering the sourcing market, licensing best-of-breed products on behalf of owners/members. Leading vendors were closing million-dollar deals for their applications and services, because the primary use of strategic sourcing tools was to underpin large sourcing events. Through these events, private-sector organizations could leverage their size by rationalizing suppliers across broad categories of spending and multiple stakeholders.

The prices that vendors commanded for their sourcing solutions and services during the earlier years of the market were unsustainable, because the model did not support the use of these tools for smaller projects. Furthermore, organizations that were growing accustomed to the automated sourcing process wanted to carry out more of the work themselves, rather than being forced or pressured to pay top dollar for services and support. By January 2005, the market began to show signs of stress. Vendors found their revenues shrinking, and consolidation began, with Ariba acquiring reverse-auction pioneer FreeMarkets, and Verticalnet scooping up competitor B2eMarkets. SAP followed suit, acquiring Frictionless Commerce in 2006, and Emptoris bought Mindflow in the same year. During the past four months, Ariba closed on its acquisition of Procuri, and BravoSolution bought Verticalnet.