Catalog Commerce Explored

E-procurement for IT assets is a growing trend that enterprises cannot afford to ignore. E-catalogs play an important part in the process. We explore three catalog options.

E-catalogs offer significant advantages over more-popular and ubiquitous print catalogs. Buyers can easily locate the latest version of the catalog and have the benefit of computer-assisted searching, rather than trying to use the index in a print catalog. If the catalog is connected to an application enabling products to be selected and ordered, end users in the buying enterprise have a powerful new tool at their disposal — and the buying enterprise has a management tool for understanding and controlling expenditure.

Essentially, a buying enterprise has three ways to interact with a large number of catalog suppliers. The three approaches are not mutually exclusive; they can and will be used in parallel.

Supplier-Managed Catalogs: The buying enterprise uses catalogs that are provided by individual suppliers (either hosted at the suppliers' sites or on the buyer's premises, but updated by the suppliers). Supplier-managed catalogs are a good choice when, for instance, the supplier's catalog has a number of special features — such as search or configuration facilities — that are specific to the goods or services being provided by that supplier (e.g., Dell Premier Pages). These catalogs have the added advantage of being free to the buying organization. However, the disadvantage is that the buyer's finance department, procurement team and IS organization face new process and interface issues with each supplier, eventually overwhelming them as the number of suppliers increases. Finally, the process to approve purchase orders and the capability to get the information into the asset management system is costly and takes too long.

Buyer-Managed Catalogs: The buying enterprise creates an internal catalog that it populates and aggregates with content provided by many suppliers. From the perspective of the buyer's finance and procurement departments, this catalog approach can have merit as it seems to place the buyer firmly in control of the catalog. However, it poses serious challenges for the technical team faced with implementing the approach. Creating and maintaining large aggregated catalogs is neither simple nor cheap. The process requires specialist tools, processes and people. Enterprises that have started creating large buyer-managed catalogs report major problems in attracting and retaining the necessary skilled resources, and large unanticipated costs in hardware, storage and software tools.

E-Marketplace-Managed Catalogs: There are two primary variants of the horizontal marketplace — the "public" model and the "personalized" model. In the public model, the intermediary creates a single catalog with aggregated content from many suppliers, and makes that catalog available to many buyers. In the personalized model — the dominant model for intermediaries targeting large enterprises — the aggregated catalog contains additional data, provided alongside the content by suppliers, that means that individual buying enterprises have access only to selected content within the aggregated catalog (e.g., Ariba Commerce Services Network and Oracle Exchange). This ensures that any special prices, or restrictions on the range of products manufactured by the supplier, can be reflected in the view given to an end user from a specific buyer enterprise.

Small enterprises will eventually be capable of satisfying a high percentage of their procurement needs through a single e-marketplace-managed catalog. Midsize enterprises will be capable of satisfying some of their requirements from these offerings but, as the volume of their procurement needs grows, they will need multiple services, including some seller-managed catalogs and some buyer-managed catalogs. Large multilocation enterprises will need to use many of each class of catalog. From a technical perspective, those enterprises must select a buy-side application that has the flexibility to use multiple catalog services using different interface "standards" at an acceptable price. Large enterprises using multiple instances of each of the three classes of catalog will need to make a choice about the preferred mechanism for interaction for each supplier. Those choices will be determined by a range of criteria, including the initial cost of e-trading and the ongoing cost of interactions.

Bottom Line: A balanced catalog-selection strategy is a key success factor when implementing e-procurement. Buyers should ensure that they deploy buy-side applications that provide the flexibility to access multiple catalog services at an acceptable price.

Gartner's Enterprise Application Packages Commentary COM-13-5273, 26 April 2001.

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