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How B2B online marketplaces could transform indirect procurement

McKinsey 27 Nov 2019 12:00

For people who remember when consumers first started using digital marketplaces, the realization that the oldest of those platforms are now almost 25 years old can come as a surprise. Even business-to-business platforms have been around for two decades, becoming an almost invisible engine of commerce at many small and medium-sized businesses.

But there’s one arena that online marketplaces have yet to penetrate to nearly the same degree: large corporate procurement departments. Concerns about scale, quality, and reliability have made leaders hesitant to change their longstanding reliance on dealing directly with suppliers. This is especially true for the more complicated purchases that fall under the label “indirect spend”: everything from IT and telecoms to transportation, professional services, and marketing.

That’s starting to change. A new generation of procurement leaders, who have grown up buying online for increasingly complex personal needs, are beginning to wonder whether buying online also makes sense for business. Powerful digital and analytic tools are also contributing to the new mind-set, opening new avenues for procurement departments to generate value in areas outside their traditional focus on transaction management.

As a relatively new phenomenon, how marketplaces will evolve—and their impact and implications—remains to be seen. What purchasing executives need to understand now is their potential effect on the procurement function and the role of the CPO—and, more broadly, on the supply chain and spot markets. In this early stage, leaders may have fewer answers to guide them, but knowing which questions to ask can help better prepare them to capture maximum strategic advantage.

The implications of online B2B marketplaces

Savings.

The remaining features, many of which benefit buyers and sellers equally, span the sourcing-to-procurement path.

The impact on CPOs and the procurement function

As more services become available through online platforms, the procurement function will initially focus on three roles: finding marketplaces that offer the required specialty services from high-quality providers; maintaining vendor relationships; and—perhaps most important of all—managing risk. For example, the rapid increase in tech spending by non-IT business units suggests that IT services might be an important category for marketplaces, particularly for controlling quality. Industry analysts project that by 2021, indirect spending will be led and directed by tech-procurement people at up to 60 percent of large enterprises.

Will marketplaces really take off?

How might these changes play out among the three archetypes?

At this stage, it’s hard to foresee how far and how fast B2B online marketplaces will develop. As with many things digital, once there is a critical mass of users, the playing field can explode. The biggest payoff will come to those who approach this new channel not merely in terms of transactional convenience, but as a strategic opportunity.

About the author(s)

Pierre de la Boulaye is a partner in McKinsey’s Paris office, Mauro Erriquez is a partner in the Frankfurt office, Alejandra Jiménez Iribarren is a procurement specialist in the Madrid office, and Fabio Russo is an engagement manager in the Milan office.

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