Until now, there have been two basic business models in catalog-based e-procurement:
- The Buyer Pay Model: Followed by Coupa, Sciquest, Tradeshift, Basware, and others. This model charges the buyer a fee and is free to the supplier.
- The Buyer and Supplier Pay Model: Evolved to, and followed by, Ariba and a few others.
But a new player in laboratory management (note they do not call themselves lab e-procurement), Quartzy, is offering an interesting twist on the existing models. It’s a variant on a model I’ve dubbed Industry Catalogs. It’s a brokerage and market-making model.
Quartzy does not offer a complete procure-top-pay system (it does not seem to send POs or receive invoices). But it does offer:
- a free cross-supplier catalog search tool
- integration to Sciquest or Ariba for ordering and invoicing
- inventory management
- and equipment scheduling
Quartzy is free to the buyers (and says it always will be). Quartzy makes money by being a market-maker, broker, and even supplier of record to buyers. The company explains its business model clearly as follows (see here as well):
For labs using the Order Requests Module, Quartzy hunts for cheaper prices on the supplies they are about to buy. If we find a better price we send you a quote, and you can choose to accept or ignore it. If you accept our quote, you buy the item from Quartzy. Our suppliers pay us a commission for sourcing products from them, and you get the product for cheaper. Win-win!
Essentially, Quartzy makes a market for each item and then steps in as the supplier. (I’m presuming Quartzy does not hold any inventory, but instead instructs the supplier drop ship the item to the buyer–though this is not clear.) Quartzy is basically a modified form of AmazonBusiness–but deeper in lab supplies and offering lab management functionality.
Lab Supplies Procurement 3.0?
Lab supplies procurement 1.0 was Ariba. One of Ariba’s initial “power categories” was lab supplies and equipment purchased from distributors such as VWR and Fisher, who were early leaders in e-commerce. (Lab supplies are a great category for e-procurement–highly catalogable, substantial spend, and requiring rich content.) Lab supplies procurement 2.0 was Sciquest. Sciquest provided a catalog solution on top of Ariba e-procurement and eventually evolved into a complete e-procurement solution. Then came a whole bunch of e-procurement vendors, including Coupa. The result is a crowded market of e-procurement systems for any lab products supplier, as this public slide from VWR shows.
Note the prevalence of Sciquest, Ariba, and GHX, a healthcare industry consortium–as well as Other!
Now Quartzy is trying to re-invent the category’s business model for a third time. The questions will be:
- Do buyers want spot quotes which could be seen as working against strategic sourcing efforts and associated volume rebates? Will the proposed savings and additional functionality compel buyers to search in Quartzy before they search in their e-procurement tool?
- Will the flow-through of spend and associated commissions fund the business?
Traditionally, strategic sourcing organizations have created “walled gardens” of content for their employees to shop from or “punch-out” to. Will these walled gardens be replaced by more open systems of procurement of catalog items which make a market? Quartzy, along with AmazonBusiness, and Tradeshift Buy appear to be attempting to scale those walls with more open solutions.