Amex: Smock Gets the Scoop (yet again, and again and ...)
As I've told Doug Smock on many occasions, there is no -- and I mean no -- replacement for good reporting in the trades. I don't care how good blogs get, how popular analysts become, or how interested the traditional business press gets in certain topics -- good trade reporting of procurement and supply issues will always remain invaluable. That's why we're all fortunate that Doug -- who used to edit Purchasing -- has continued to crank on stories and maintain his outstanding reporting relationships with senior practitioners and providers alike. Recently, Doug had the chance to sit down with Rion Needs, American Express' Chief Procurement Officer and the leader in charge of the purchasing operations division, about his organization's strategy both internally and externally as a provider.
Among other things Rion reveals in the interview is Amex's plan to offer a leveraged buying model with its catalog. As I read into it, think of it as an offering that incorporates a pre-populated hosted eProcurement application with negotiated contracts. But what remains unclear to me is the revenue model here. Will Amex, like GPOs, skim a margin off of suppliers, or will they charge buyers based on a percentage of their spend amount in a similar way to outsourcing models? I supposed we'll have to wait and see.
- Jason Busch
Among other things Rion reveals in the interview is Amex's plan to offer a leveraged buying model with its catalog. As I read into it, think of it as an offering that incorporates a pre-populated hosted eProcurement application with negotiated contracts. But what remains unclear to me is the revenue model here. Will Amex, like GPOs, skim a margin off of suppliers, or will they charge buyers based on a percentage of their spend amount in a similar way to outsourcing models? I supposed we'll have to wait and see.
- Jason Busch
Hosted, multi-tenant e-procurement platform - check
Tied to Amex Services and P-Cards - check
Negotiated leveraged buying-club contracts - check
Easy sign-up and implementation - check
Amex signs hunderds of customers - oops, no check
There certainly was plenty of intention on Amex's part to make this succeed, and they tried for years while exerting total control over Ketera. But... they just couldn't sell it!
It was very painful for all involved.
Now you tell the supplier he has to discount his pricing and then owes you a commission on a sale?
On the other hand, Amex has a very large community of card holders that they can leverage as both buyers and suppliers, and there's a ton of value (and incremental revenue) if they could find the right business model.
I would think that if they can find a way to reduce the cost and eliminate the complexity of the catalog process, and then use the service to increase card usage, which creates incremental revenue for Amex,and create incremental sales (as compared to "displaced sales" moved from another channel to the Amex channel) for suppliers...it can work.
Additionally, the interview states that this is a mid-market play for them, and I believe that's a great market for this type of solution, done right.
Now you tell the supplier he has to discount his pricing and then owes you a commission on a sale?
On the other hand, Amex has a very large community of card holders that they can leverage as both buyers and suppliers, and there's a ton of value (and incremental revenue) if they could find the right business model.
I would think that if they can find a way to reduce the cost and eliminate the complexity of the catalog process, and then use the service to increase card usage, which creates incremental revenue for Amex,and create incremental sales (as compared to "displaced sales" moved from another channel to the Amex channel) for suppliers...it can work.
Additionally, the interview states that this is a mid-market play for them, and I believe that's a great market for this type of solution, done right.