Neil Barton

Friday, August 08, 2008

A Step Change In The Benchmarking Market

Alsbridge's announcement that they have acquired Nautilus and will be actively marketing their ProBenchmark offering is the biggest step change in the benchmarking market since Gartner acquired META Group in 2005.

It's not just that the combination of sourcing advisor and price benchmarker would seem such an obvious one. It's not even the fact that Alsbridge "plan to dramatically expand the market for benchmarking via an e-commerce initiative" and say that "the secure online delivery of pricing benchmarks at a radically different cost structure will disrupt the accepted norms". I parse this to mean that Alsbridge's benchmarks will be done over the net, much cheaper than existing offerings, and therefore likely to sell more widely.

What they have constructed in ProBenchmark is not a conventional benchmark where you compare your prices with a group of other customers. Instead, ProBenchmark is a predictive tool which can calculate what Nautilus think your price will be, based on your particular combination of price drivers. They let you play with an example for managed storage pricing. This is why it is cheaper than conventional price benchmarking. They don't have to spend time searching for comparable contracts and adjusting them to match your case. They've done it already, right there in the tool.

Nautilus was founded after that acquisition by some of the most respected and experienced META Group price benchmarkers, and have become a viable third option for benchmarking in the US, behind Gartner and Compass America. (In Europe, your third choice would be more likely to be Maturity or possibly Metri.) I think the experience of Nautilus on how suppliers are likely to price is as good as anyone elses.

But the big question is: will this predictive approach be an acceptable source for executing contractual benchmark clauses, or will customers just use it as a quick and cost-effective indicator on whether their pricing is in-line or not? Most benchmark clauses are quite explicit in saying that the benchmarker is expected to go out and find comparable contracts. I wonder how long before we see customers proposing to drop this language and replace it with "in the judgement of the benchmarker" phrasing. I can't speak for any outsourcer, including the one I work for, but I think most outsourcers will strongly resist this. So will Gartner and Compass, since it's their business models that are being disrupted. So it will be nice for them to have something to agree on for once.

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