Business

I recently just completed Ronald Cohen's book, The Second Bounce of the Ball (hat-tip: Greg Mark). The book is a great study in what it takes to be a successful entrepreneur. Perhaps most important in this regard is being able to read what Cohen refers to as the "the second bounce of the ball". After all, when we enter a market for the first time, it's easy to anticipate initial demand, interest, expectations, etc. But after the ball bounces a second time -- as it always does -- it's not always as clear which direction things will go in. Iasta is one of those companies that successfully read not only the second bounce of the ball, but the third as well. After migrating successfully from being a low-cost full service auction provider into a SaaS vendor with a strong e-sourcing mousetrap, they've once again listened to and read the market, moving in a new but logical direction.

Iasta's latest foray is into the world of what I'll term value-added sourcing and procurement services. Relatively speaking they're not breaking any new ground here. But just as they did in the past, they're copying and adapting an existing business model and delighting customers with both their price points and level of service. And they're doing so successfully, down to working with customers on broad- scale procurement transformations. Yes, you read that correctly. Iasta, that niche Indianapolis sourcing vendor, is competing against the Accentures and AT Kearneys of the world in the area of procurement transformation. And they're doing so successfully.

One of the secrets of their model is maintaining a relatively small full-time consulting team. In fact, nearly all of their team members are contractors with excellent reputations from past roles as consultants at major firms. Iasta is giving them far more autonomy and marking up their services significantly less than what other firms tend to do (e.g., I spoke with one of their procurement transformation leads with significant Big 5 experience who had also worked as a contractor for Denali and Accenture doing similar engagements). With Iasta, he was able to take home a significantly larger percentage of the overall client billings for his time and was also able to save the client material amounts over what bigger name firms would have charged (most likely to put in place more junior resources).

But what class of new services is Iasta offering specifically? For one, they're looking to define and bring to market offerings that, in their words, can help "new customers who aren't in a position to successfully use our software for 12 months until we can get them up to speed". If this requires dropping in more senior team members to drive initiatives in almost an interim management capacity, they'll do it. They'll also do more traditional opportunity and organizational assessments and follow through with customized programs designed to bring companies up to the next level of maturity (interestingly on this note, a number of other services providers in the market use Iasta as their sourcing platform and I suspect they might begin to see Iasta as potentially competitive -- the same problem that Ariba has had with its channel partners in the sourcing area).

In addition to procurement transformation offerings, Iasta is embracing the term "cloud sourcing" to describe a range of other services they bring to bear. These include what they're calling strategic initiatives in the form of energy sourcing and management, green supply chain consulting, MRO transformation and procurement outsourcing. But they're also productizing other cost reduction services based around what they're terming Zero Budget impact programs. These are, in Iasta's words, "8 indirect categories that are difficult to source and are not conducive to auctions".

Zero Budget categories include pharmacy benefits sourcing (delivered via a coalition / GPO model) which delivers, on average, 8-10% savings). They also include non-medical benefits and telecom (both delivered via sourcing events with 7-22% and 15-30% average savings respectively). Other categories that fall under this umbrella include software contracting, MRO/safety supplies, print, fuel management and relocation services.

Iasta has not abandoned more discrete service programs in the least, however. They continue to deliver what they term "tactical sourcing" programs in the form of spend analysis services, sourcing services, optimization services and user training. They're also offering spend analysis as service (including data classification, report and spend assessment surveys), fully managed source services, and staff augmentation around category-specific opportunities. To deliver all of these capabilities, Iasta is leveraging a network of "some 100 consultants" many of whom bring either specific category experience (e.g., print) or other areas of expertise.

Stay tuned for additional analysis of Iasta -- including software enhancements and pricing trends / observations / levels -- as this series continues.