Leading vendors in e-procurement services harvested half a billion dollars in 2000

E-procurement service vendors that responded to the hot e-procurement climate and sowed their seeds early are now reaping fruitful returns.

According to IDC, some of the leading vendors in the management consultant and systems integration groups harvested up to half a billion dollars in e-procurement services revenue in 2000 and expect even greater returns in 2001. The market intelligence and advisory firm says exceptional e-procurement services growth in 2000 and the presence of pure-play e-procurement service firms confirm this market`s value as a standalone services opportunity.

"A mere two years ago, e-procurement services did not exist," said Nelly Zaharinov, senior analyst for IDC`s Supply Chain Services program. "Since then, however, the argument in favour of e-procurement has become compelling. Looking forward, vendors who target indirect e-procurement services should expand their expertise beyond MRO goods to include a large spectrum of other indirect goods categories such as printing services, labour, and media to establish a firm position in the indirect e-procurement market. Broad product category expertise is emerging as an important success factor in indirect e-procurement."

IDC identifies four major types of players in the e-procurement services market: management consultants, systems integrators, pure-play e-procurement services firms, and selected software vendors. According to IDC, the revenue generated by consulting and implementation services far exceeds the revenue from other services lines. However, pure plays, which are newcomers to the market, come with a promising value proposition centred around affordable solutions and ease of use of their service.

Although the impressive financial results of the established e-procurement services firms signal opportunity for all players, several challenges exist. "Keeping abreast of software development becomes a very demanding task, even for large management consultants, while the first and most important challenge for pure plays is to build credibility, gain traction in the market, and achieve profitability," Zaharinov said.

According to IDC, both large and emerging e-procurement services vendors are primarily targeting large companies. However, some vendors are slowly developing lower-priced, less customisable solutions for mid-tier companies.

IDC`s recently published report E-procurement Services: Management Consultants, Systems Integrators, and Pure Plays Compete in a Developing Market (IDC #B24378) analyses the e-procurement services market. Target markets and types of projects, number of customers and e-procurement services revenues, strengths and opportunities, challenges, and strategic direction are examined for each category. Additionally, industry trends and market metrics are discussed. Recommendations for vendors competing or thinking about competing in this market are provided.