The electronic purchasing software market will grow 12 percent in 2011 to $4.4 billion with e-procurement and e-sourcing remaining the two largest product categories, according to a Forrester Research Inc. report. The study, which highlights opportunities, suggests increased activity for new companies entering the market to support the high-tech industry.
Makers of enterprise resource planning (ERP) platforms may dominate the market today, but accounts-payable electronic invoice presentment and payment (AP-EIPP) and supplier network services will continue to grow in acceptance. Andrew Bartels, the lead Forrester analyst for the report, says contract life cycle management (CLM), automated spend analysis, services procurement, and supplier risk and performance management (SRPM) will also grow by leveraging niches.
Aside from the uptick in e-purchasing software market revenue, Forrester predicts e-procurement will lag behind the overall e-purchasing market; e-sourcing will slow to an 8 percent growth rate after a 2010 rebound, and the gap between large and midsized vendors will narrow in 2011. And both large and midsized companies in the sector are forecast to make acquisitions.
Mergers and acquisitions will become the biggest challenge facing companies in the e-procurement software market this year. Since many companies involved in e-purchasing will grow at a faster clip this year, they could become acquirers or acquisition targets. Forrester points to acquisitions by larger vendors as the best exit option for investors in small startup vendors. 2011 is also considered a good year for midsized vendors with growth ambitions to buy smaller vendors with complementary software products. This means, though, that every acquisition could potentially disrupt the flow of services to clients.
For companies offering e-purchasing platforms, Forrester suggests two strategies for above-average success in 2011. First, Forrester urges support for the professional services industry with e-purchasing platforms for sourcing, contracts, purchasing, and managing purchases. This could create growth opportunities, especially in advanced economies such as the US and the UK, Australia, Canada, Benelux, and Scandinavia that spend more on software than any other regions.
Second, the researcher says software vendors should focus on building vertical offerings for specific industries. Purchasing needs and requirements differ per industry because of unique spending patterns, supply chains, and relationships with suppliers. The report points to crafting solutions for specific industries similar to those offered by Achilles, GHX, SciQuest, and TradeCard.
Meanwhile, strong growth in e-purchasing is expected to trigger opportunities in other sectors such as cloud computing, as well as what Forrester calls "smart computing," products combining analytics and content to aid collaboration and achieve key business objectives.
Services procurement, supplier risk and performance management, spend analysis, and contract lifecycle management are examples of areas where opportunities exist in smart computing. The marketing and advertising industries lack smart computing products, and, for companies looking to expand into other markets, this could become a niche.
In my opinion, opportunities exist for platform manufacturers in other sectors, too. For instance, as more advertisers begin to optimize advertising campaigns across channels such as search engine marketing, display ads, and Facebook, the industry will require more collaborative tools to run promotions. For the most part, few collaborative tools exist in the ad industry.
Forrester suggests tools for suppliers that will review and provide feedback on a buyer's assessment of their performance through an SRPM product; or a service provider and a buying organization collaborating to define the scope and deliverables of a consulting project using a services procurement tool. Perhaps, it's something to consider.