VRM Systems Put Power in Hands of Buyers –Disrupting Sellers

The Internet Continues to Shift Power to People –Away from Institutions. Four years ago, I had the fortune of meeting with one of the god fathers of the internet industry, esteemed Doc Searls you may know his contributions to the book The Cluetrain Manifesto. Doc invited me over to the uber think tank, the Harvard Berkman Center which focuses on how the internet impacts society and. Over lunch, Doc shared with me his woes of how each medical provider (from Pharmacist, to PPO doctor, and beyond) lacked any comprehensive data records capabilities, or how sales people would contact him when he wasn’t ready to buy.

Understanding VRM Systems
As a result, he started to explain to me about Vendor Relationship Management systems (VRM) are designed to put the buyers and people into power over institutions. What’s a VRM system? It’s a continued trend in the social business space that puts the power in the hands of the people: It allows for buyers to submit anon bids to sellers, and forces sellers to bid for business based on the terms that buyers want. No more intrusive sales calls have to be accepted, no more spam has to be reviewed, and it allows buyers to quickly force vendors to bid against each other in real time –dropping pricing as well speeding up the sales process.

Simply Put: VRM systems put power in the hands of the buyers, forcing sellers into their process, and shift power away from sellers.

Consumer Space Yields early VRM Forerunners
About a year later, I made some predictions with my former employer that we’d start to see VRM systems appearing, and while we were directionally correct, it happened slower than we predicted, but now, we’re continuing to see growth. It’s been several years since the VRM space has been predicted to grow, and now we’re seeing movement. First of all in the home owner space, we’re already seeing Red Beacon, FindaPro, and in some form, Angie’s List which allows home owners to put out a request for quote to local handymen and servicemen. Yet unlike a ‘wanted list’ on Craigslist, these systems are designed to put the buyer in control, by allowing for a systematic process to emerge to allow the buyer to quickly sort and organize the quotes, not just be swamped with a variety of sellers.

For the IT Community, Spiceworks launches a VRM, called “RFQ”
Fast forward to today, I was briefed a few weeks ago how one of Altimeter’s clients (read our disclosure page, on how and why we disclose) the growing IT community¬†Spiceworks is launching the first (or one of the first) examples of VRM for the IT industry. This allows their community members (IT Buyers) to use the Request for Quote (RFQ) to identify which lower cost products (like laptops, printer ink, and other commodities) they need to purchase into their RFQ process, and it can anon send quotes to sellers, who will then provide bids. There are four key feature areas for buyers including: Anonymous Quote Requests, this empowers the buyers to avoid getting spammed outside of channels they don’t want, putting power in buyers hands, secondly, the RFQ system provides multiple vendor support so any vendor who wants to harness this channel can. Lastly the RFQ templates provide a way for buyers to save their RFPs and then share and learn from other buyers.

What it Means:

  • Buyers will assert control over the buying space –potentially reducing margins. While this systems is currently being offered for lower cost technology goods (not expensive multi-year IT deployments) expect this trend to continue up stack, and then into other enterprise markets such as facilities, marketing goods, and sales operations.
  • However savvy sellers could benefit by streamlining ¬†friction in sales process –reducing sales costs. While there’s been a continued shift towards buyers and people from internet technologies, savvy sellers can leverage this by finding prospects that are in consideration and intent stages
  • IT Vendors and Sellers must assign sales resources to monitor and manage. It’s key that your sales team assigns a sales operations and appropriate sales reps to monitor these channels, quickly respond, and triage requests to the right teams.