“Il mercato mondiale del software dedicato al procurement e al supply chain management è cresciuto del 7,3% nello scorso anno, toccando 8,9 miliardi di dollari nel 2013.” – Gartner, crescono le soluzioni IT per il procurement 18 Giugno 2014
No I haven’t been taking lessons in Spanish – on a good day I have enough trouble with my native tongue of English.
So why the apparent lesson in multilingualism?
The reason is fairly simple . . . reading the above excerpt from a June 18th, 2014 article from ICT4 Procurement titled “Gartner, crescono le soluzioni IT per il procurement” makes no more practical sense than reading it in English. Oh by the way, the rough translation is Gartner, growing IT solutions for the procurement, in which the article itself talks about the fact that “The world market for software dedicated to procurement and supply chain management grew by 7.3% last year, reaching $ 8.9 billion in 2013.“
Now that you know this why, as a procurement professional, is news regarding market share of any practical value? More specifically, what does it really mean to you in terms of your day-to-day duties whether you are a buyer or a CPO?
Honestly, I have been around a long time and covered this industry from top to bottom, and I still have trouble grasping the relative value of stories such as the one above.
Why should we care that SAP is the market leader with a growth of 24% and 23.9% market share, equivalent to $ 2.14 billion in revenue, or that Oracle is in second place with a 16.3% market share, followed by JDA Software? How is this helpful?
Even the reference to the smaller best-of-class or “BOC” vendors having “grown more than twice the average of the market,” doesn’t immediately clarify why this information is important. Nor does the suggestion of a window of between 12 to 18 months for these smaller players, as a result of the large traditional players consolidating their positions through acquisitions resonate.
So once again, why are articles such as this meaningful?
Does it for example encourage a CPO to champion an SAP procurement solution based on the vendor’s existing market share and its leadership position? Is it an indication that an initiative will be successful, or that there is a growing market recognition that procurement’s importance is exponentially increasing?
Maybe to a certain degree, but so what!
Any knowledgeable CPO is unlikely to, as my father would say, jump off the Brooklyn Bridge just because 23.9% of the market has. And I doubt that the associative revelation pertaining to procurement’s growing strategic importance is going be a big surprise to anyone even indirectly involved with the industry.
Perhaps the answer lies in the fact that there is no point in looking for a intrinsic value from the standpoint of a procurement professional.
According to an old Fast Company post from 2005, Market share is the most important metric that marketers can use in order to judge the effectiveness of marketing campaigns. So it is all about the marketing? The fact that the publication expressed surprise at the number of enterprises who “ignore market share” to focus on “internal metrics like satisfaction, awareness, loyalty etc.” speaks volumes. The problem I have of course is that this raises a serious question; is market share a reflection of true customer satisfaction, or the result of a superior advertising campaign?
Perhaps within the answer to this last question is finally the explanation as to why for so many years the vast majority of all eProcurement initiatives failed to deliver the expected results. Salesmanship and sizzle over true expertise and performance.
Of course everything has now changed with the advent of SaaS cloud-based solutions, in which the heavy up front capital costs associated with the traditional solution providers has been replaced by a pay-per-perform model that ensures rapid deployment over weeks as opposed to years.
In this context, news regarding market share only matters in that it provides an indication as to how long the transformation from the old capital model to the pay as you go model ultimately takes. Now this is news that is worth reading!
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Procurement Insights 
Alun@MarketDojo
June 19, 2014
Market Share gives the buyer and software vendor a nice feeling of confidence. However, it does not mean a better solution or that any position is protected. The old adage that no one got fired for buying from IBM seems to be fading away and just look at how Google has taken the market share from microsoft.
Many companies are realising that one of the true differentiators is support. If a company does it well then this can increase market share rapidly. The growth of market share in that case is very important. However, once the market share gets very large, the support generally suffers.
piblogger
June 19, 2014
So is it reasonable to conclude Alun that there is a point that you reach in terms of market share that could actually be viewed as a negative as it relates to service capability?
Alun@MarketDojo
June 19, 2014
Now THAT is an interesting question. If you look at a telecoms company or utilities company, their customer service always seems terrible. In fact if you look at any large company you see the same. Does it mean it is just too difficult for a large company to provide good customer service, or do they just become complacent. Generally the trend seems to hold true. However there are companies bucking the trend. Again I can refer to Google. They take a different approach which I believe will become the norm. Instead of a support rep just answering the question, they seem empowered to actually resolving the issue and will even call you back to make sure it is finished. In other words they make it the responsibility of the rep who takes the call to resolve the issue.Hopefully when their market share becomes very large they wont stop this trend. Is it proportional to the market share growth rate? Obviously when you are small you can be more dynamic but being large shouldn’t result in the bad service that we all see today.
Seth
August 5, 2014
I disagree. This is useful information. One application is this: Suppose you are a challenger company and are contemplating entry into a specific market. You’ll want to assess the competitiveness of that market in order to formulate your entry strategy.If there are several strong competitors (e.g. 4 companies with a 20% marketshare each) in a specific market, your chances of success in that market are low; however, if there are many week competitors, your chances of success might be comparatively better. Finally, if there is a single dominant player, your strategy might be to absorb the competitor in order to obtain market dominance.