Unimarket networks buying effort
Published in New Zealand Herald, July 2, 2008
Spend management is one of those shiny ideas for which organisations are willing to spend more to spend less.
Electronic procurement systems can avoid unnecessary multiple purchases. Better prices can be negotiated from suppliers. Fraud and waste can be detected more quickly.
It’s not easy though. Procurement systems have to be integrated to back end financial and asset control systems. Cultural change may be needed so staff go along with the programme. Systems need to be simple to use, so staff don’t have to wade through multiple screens to buy another packet of pens, or wait for days to get a purchase order approved.
It’s an area a lot of software vendors have tried to capture. ERP systems modules, online portals and marketplaces, buying clubs, anything to save a dollar off a ream of paper.
The big name in the space is Ariba, which is used by 18 of the top 20 Fortune 500 companies.
But Ariba has always been a high priced option for the New Zealand market, where it is mainly installed at the local branches of multinationals.
“Ariba is the top of the market, but there is 80 percent of the market they can never get to,” says Scott Blackwood, who has built a syndicated network system which aims to capture a big chunk of that 80 percent.
The idea for Unimarket came to Blackwood during the eight years he worked as a consultant in the United States, helping large companies optimise their supply chains
Every project started with setting up a master register of customers and suppliers, and work out how to integrate as many as possible with whatever system was being implemented.
ERP or enterprise resource planning systems are great to run large organisations, but they often don’t communicate well with the outside world. Expensive gateways and data exchangers are needed to make sure messages don’t get scrambled.
Add to that the complexity of large organisations – the division of a large pharmaceutical company Blackwood spent time in had 30,000 customers and more than 2 million SKUs.
“It was impossible to keep customer systems up to date through EDI (electronic data interchange),” Blackwood says.
He came home in 2003 to make a better system.
His first recruit was a former classmate from Auckland University’s computer science department, Damien Hollis, who has also just returned home after developing the back end systems that power the lastminute.com travel site.
After a few years of working in the garage, the pair moved into the Icehouse incubator and started winning customers in tertiary education, local government and the corporate sector, as well as high powered support from the New Zealand IT community. Former gen-i chief executive Garth Biggs chairs the company.
Unimarket works on a software as a service model. That means it’s an Internet application living on Unimarket’s servers, rather than being installed at each customer site.
For buyers, costs are reduced by consolidating suppliers in one place, creating a uniform buying process, and ensuring any requisitions are made and recorded in the buyer’s own systems.
Because of the way Unimarket manages both buyer and supplier information, supplier information is always up to date, so people aren’t buying off out of date catalogues or price lists.
For suppliers like Office Express and House of Travel which have made their own investments into e-commerce, Unimarket presents a window into those systems.
Other suppliers can upload catalogues through a simple interface.
There is no duplication of information in different systems, and invoices always match purchase orders, cutting out the huge number of manual checks and corrections which impose hidden costs on procure to pay systems.
Buyers can team up internally or externally to get volume discounts, and supplier costs are reduced through scale and better business processes.
Blackwood says Unimarket is aimed at organisations that spend over $10 million across 50 or more suppliers, and at companies looking to sell into that market.
It’s also for companies which are trying to move their business more towards e-commerce, networking and collaboration.
Unimarket collects a monthly fee from customers who buy through its electronic procurement and invoicing modules, and if takes a small clip of the ticker from sellers.
He says Unimarket isn’t asking people to throw out their existing investments. They can use the whole system, or just the parts of it which complement what they have.
“If they use ERP solutions, we integrate. If they use spreadsheets and email, we can accommodate,” Blackwood says.
Because it doesn’t demand suppliers use EDI, it can carry a long tail, from the high volume vendors of office supplies to specialist outlets that may occasionally sell a few items to a university laboratory.
And because Unimarket is a syndicated network of suppliers, new customers can take advantage of integration which has already been done.
That means when Victoria University went live, it was able to immediately connect with all the existing suppliers it shared with Waikato University, which was already connected.
Unimarket is now out on the incubator, and has raised extra capital from investors to set up offices in Australia and the United States.
Blackwood says there’s no time to lose, as other firms try to solve the electronic procurement problems of the millions of firms around the world who don’t have the resources to implement Ariba-size solutions.
“There’s a land grab going on,” he says.
©Adam Gifford 2008