e-Three: Proof of the Commoditization of High-Quality, Low-Cost E-Sourcing

When I first got a peek inside a full service e-sourcing process in the late nineties, I quickly realized that, despite all the posturing and spin behind how FreeMarkets and others positioned it, the process was really more science than art. Granted, back then, everyone still thought that you needed expensive and analytically driven MBAs to do much of the work behind the sourcing magic. In retrospect, this was obviously not true -- you certainly needed smart team members but, provided they had the right people and quantitative skills, it did not even matter whether they graduated from high school, let alone Harvard. Fortunately today, full service e-sourcing has evolved to a stage where established processes and reliable, low-cost technology have lowered the barriers to entry such that nearly anyone who has done it before can pull together an organization and team to do it well without charging an arm and a leg for their services. Such is the case with UK-based e-sourcing firm e-Three, run by FreeMarkets alums James Anthony and Jenny Saward (Draper).

Earlier this year, I had the chance to catch up briefly with James in London over a sly half (pint). Now, as James reminded me, a sly half inevitably turns into a full one, but that's almost beside the point because it's the intention that counts. (Unless, of course, you're an American or United Airlines pilot flying from LHR to ORD, as recent Heathrow arrest records will attest. But I digress.) Catching up with James and checking on the progress of his and Jenny's venture reminded me of what I feared most when I was working at FreeMarkets (besides having a can of Iron City foisted on me). And that was the fact that it would ultimately be straightforward for someone with the right skill set to train and build a team -- not to mention to license and use the right technologies -- to do exactly what we did, at a fraction of the cost. Which was precisely the business model behind e-Three initially.

Now, if you're a larger provider trying to intimidate a prospect out of using a smaller firm, one of the oldest tricks in the competitive sales book is to suggest checking their references. However, with e-Three, this tactic won’t work. Trust me; I tried it. I spoke to one of their long-time clients this fall that suggested that he worked with e-Three because of the combination of cost and quality. Moreover, smaller was better in comparison to more established firms: This gentleman drew a direct comparison to larger providers, noting that because e-Three was "not a huge organization like Accenture, their flexibility and focus on my activities and overall responsiveness was better." In past roles, this person had hired e-Three to source a range of categories including financial products and construction services/materials.

I loved what this person had to say about Jenny in particular (remember, Jenny is an MD of the firm). In her client's words, "We love her enthusiasm – she and her team work 12-hour days for us and go the extra mile. Her flexibility and customer orientation was great." I can count on one finger the number of partners I know at larger consultancies who still get their own fingernails dirty in e-sourcing work (e.g., supplier strategy, convincing incumbents to play ball, lotting strategy, auction formats, post-bid analysis, cost breakdowns, etc.), let alone do so in such a committed, consistent way for clients. This, to me, is the difference that a boutique firm can make, especially in commoditized areas like e-sourcing. For this reason, I'd almost suggest that larger organizations are better going with established smaller firms for commodity e-sourcing engagements than with larger, established consultancies, both from a cost and implementable-results perspective.

That's because with such a boutique they're more likely to get an experienced team led by an owner of the company who will sweat the details for them (and who knows the difference between PowerPoint savings and bottom-line results). Moreover, chances are that if this person is like a Jenny or James, they've been in the sourcing business longer than most Accenture or IBM partners have been drinking single malts with clients, let alone reading Spend Matters to learn what technology providers they should partner with. With full service e- sourcing, experience should never be confused with the size or brand of a firm. Trust the individuals and their experience rather than whether or not they have Tiger Woods all over their PowerPoint decks. (Hmmm ... I wonder whether Tiger stays in Accenture’s supply-chain decks, given his “transgressions”?)

Perhaps this is why Oracle has chosen to continue to invest in their partnership with e-Three, giving more time to them than many of the global household-name firm brands we’ve come to associate with procurement and supply-chain cost reduction. Stay tuned for further analysis of e-Three and their Oracle relationship later this week, not to mention what Oracle’s partnership strategy in the Spend Management sector means for other firms and ultimate beneficiaries of the technology as well.

- Jason Busch