Event Summary
GoCo-op began by providing purchasing services for the hotel and restaurant industries. Working for most of the major hotel chains and dealing with tens of thousands of individual suppliers they realized quite early that the Internet was likely to be a major change driver and that they themselves could use Internet technologies to bring their own business under control.
They launched what they believe to the very first industry specific portal back in 1995, when most people couldn't even spell TCP/IP. They subsequently began to build an internal system for managing their supplier catalogs. Early into this project one of their large customers, the Renaissance hotel chain, got a look at it and requested access. GoCo-op recognized that it had struck ore.
The company made a number of strategic decisions early on. One was to work in total secrecy. They issued no press releases for four years - and in fact swore the whole company to secrecy - until they had their first customer, Papa John's restaurants, in 1999. So intense was their secrecy that when the news of their major marketplace reached the trade press, it was reported as the signing of a development agreement rather than as a completed business.
The second decision was to recognize that their customers would find little use in a solution that merely presented catalogs and enabled purchasing. They knew that a full range of supply chain capabilities, including requisitions, routing, and analytics, would be required. Finally, they formed a comprehensive business vision that is beginning to come together as a powerful approach within their own vertical and a possible challenge to better-known competitors. The approach ties their product, Procura, with a vertical marketplace and strong industry-specific partnerships and services.
GoCo-op is implementing a three-tiered approach to a vertical marketplace. The top tier consists of the huge buyers, companies that purchase billions of dollars each year, many if not all of which will be partners in the venture. GoCo-op has announced the participation of Marriott International Inc. (NYSE: MAR) and Hyatt Corporation. Not only will these two companies do the bulk of their purchasing through the marketplace and participate as partners, they are contributing expertise that is unparalleled in the industry.
Marriott owns Marketplace by Marriott, a 150-person company that specializes in purchasing food, supplies and operational goods. Marriott is contributing this widely regarded purchasing operation to the new venture. It will be complemented by Hyatt's 50-person operation that specializes in purchasing related to construction activities. Marriott is also bringing its own 5000 suppliers to the new marketplace. Marriott can get preferential pricing from its suppliers because, besides buying in huge quantities, it follows well-defined procedures and payment schedules that simplify the transactions.
As part of its participation in the marketplace Marriott has guaranteed to its suppliers that it will police the other buyers in the marketplace to ensure that they follow its own stringent procedures. This allows the marketplace to offer to the mid-tier, companies that purchase between $20 and $100 million worth of goods, the kinds of prices that Marriott attracts. To persuade vendors to bring substantially the same prices to even smaller companies, through a public portal that is part of the venture, a modest markup will be applied and shared with the vendors.
The marketplace also has participation from Guest Supply, an intermediary that sells to 19,000 hotel companies - over 68% of the hotel market. Although Guest Supply is a participant in three different existing marketplaces, they initially selected GoCo-op's technology as the basis of their own solution. They have chosen, instead, to join this marketplace and carry its message, together with on-site training, to their own customers. This will be combined with a free PC program to ensure that the marketplace, and the training to use it, will be in place in every possible hotel, motel, nursing home or other participant in the hospitality industry. Marriott alone has, in all its subsidiaries and operations, about 100,000 employees.
Both the private and public portals will contain a wide range of content from industry trade magazines and value-added services from various kinds of third party's, such as logistics specialists. This reflects GoCo-op's strategy of offering a complete solution across the industry. They also believe that suppliers will in the long run not put up with the need to support different kinds of platforms. So, while there is no restriction on suppliers participating in other marketplaces, the company believes that the combination of its purchasing professionals, training and content will make it the obvious first choice for sellers to reach the middle and lower tiers.
GoCo-op built this system entirely by itself, using Microsoft tools and Microsoft servers. Their solution is entirely server-based - no client software besides a browser is needed. Since all of the system was built in a single language and to a single vision, GoCo-op claims to have an advantage over competitors that have accreted capabilities by merger. For example, to bring the first hotel client, the Wyndham hotel chain, online took 87 days from the signing of the contract. It took only six weeks to develop a complete interface to Wyndham's SAP/S3 system, a feat that earned GoCo-op a visit to Germany to discuss their approach with SAP's management.
Market Impact
GoCo-op's major competitor within this industry is PurchasePro. GoCo-op believes that it has nearly precluded the entry of the more general MRO marketplaces into this vertical market. They state that one major hotel chain is abandoning a 1400 license agreement with one of the major pure-play procurement vendors to adopt the GoCo-op solution, largely because this chain felt after seeing GoCo-op's solution that there would be no participation by other major hotel chains in the general market.
It's natural to ask where GoCo-op plans to go next? Although their solution was built upon their specific knowledge of the hotel industry, they point out that this industry is so complex as to structurally subsume almost any other. They therefore believe that they can port their software and their model of a content rich, multi-tier marketplace to other vertical industries. Two that they mention as likely possibilities are Construction and Government Purchasing.
GoCo-op has yet to validate its approach in two ways. First, it has to show that it can leverage its huge start in the hotel industry to pull in the numbers of middle and lower tier participants it is predicting. Second, it must demonstrate that it can recreate its full model in industries where it doesn't have years of prior experience and Rolodexes full of contacts. If GoCo-op can do these two things it will become a major player in a very short period of time, and could well steal a large amount of the vertical business that other procurement companies have been counting on.
SOURCE:
http://www.technologyevaluation.com/research/articles/does-someone-you-never-ever-heard-of-hold-the-keys-to-the-e-commerce-kingdom-15799/
GoCo-op began by providing purchasing services for the hotel and restaurant industries. Working for most of the major hotel chains and dealing with tens of thousands of individual suppliers they realized quite early that the Internet was likely to be a major change driver and that they themselves could use Internet technologies to bring their own business under control.
They launched what they believe to the very first industry specific portal back in 1995, when most people couldn't even spell TCP/IP. They subsequently began to build an internal system for managing their supplier catalogs. Early into this project one of their large customers, the Renaissance hotel chain, got a look at it and requested access. GoCo-op recognized that it had struck ore.
The company made a number of strategic decisions early on. One was to work in total secrecy. They issued no press releases for four years - and in fact swore the whole company to secrecy - until they had their first customer, Papa John's restaurants, in 1999. So intense was their secrecy that when the news of their major marketplace reached the trade press, it was reported as the signing of a development agreement rather than as a completed business.
The second decision was to recognize that their customers would find little use in a solution that merely presented catalogs and enabled purchasing. They knew that a full range of supply chain capabilities, including requisitions, routing, and analytics, would be required. Finally, they formed a comprehensive business vision that is beginning to come together as a powerful approach within their own vertical and a possible challenge to better-known competitors. The approach ties their product, Procura, with a vertical marketplace and strong industry-specific partnerships and services.
GoCo-op is implementing a three-tiered approach to a vertical marketplace. The top tier consists of the huge buyers, companies that purchase billions of dollars each year, many if not all of which will be partners in the venture. GoCo-op has announced the participation of Marriott International Inc. (NYSE: MAR) and Hyatt Corporation. Not only will these two companies do the bulk of their purchasing through the marketplace and participate as partners, they are contributing expertise that is unparalleled in the industry.
Marriott owns Marketplace by Marriott, a 150-person company that specializes in purchasing food, supplies and operational goods. Marriott is contributing this widely regarded purchasing operation to the new venture. It will be complemented by Hyatt's 50-person operation that specializes in purchasing related to construction activities. Marriott is also bringing its own 5000 suppliers to the new marketplace. Marriott can get preferential pricing from its suppliers because, besides buying in huge quantities, it follows well-defined procedures and payment schedules that simplify the transactions.
As part of its participation in the marketplace Marriott has guaranteed to its suppliers that it will police the other buyers in the marketplace to ensure that they follow its own stringent procedures. This allows the marketplace to offer to the mid-tier, companies that purchase between $20 and $100 million worth of goods, the kinds of prices that Marriott attracts. To persuade vendors to bring substantially the same prices to even smaller companies, through a public portal that is part of the venture, a modest markup will be applied and shared with the vendors.
The marketplace also has participation from Guest Supply, an intermediary that sells to 19,000 hotel companies - over 68% of the hotel market. Although Guest Supply is a participant in three different existing marketplaces, they initially selected GoCo-op's technology as the basis of their own solution. They have chosen, instead, to join this marketplace and carry its message, together with on-site training, to their own customers. This will be combined with a free PC program to ensure that the marketplace, and the training to use it, will be in place in every possible hotel, motel, nursing home or other participant in the hospitality industry. Marriott alone has, in all its subsidiaries and operations, about 100,000 employees.
Both the private and public portals will contain a wide range of content from industry trade magazines and value-added services from various kinds of third party's, such as logistics specialists. This reflects GoCo-op's strategy of offering a complete solution across the industry. They also believe that suppliers will in the long run not put up with the need to support different kinds of platforms. So, while there is no restriction on suppliers participating in other marketplaces, the company believes that the combination of its purchasing professionals, training and content will make it the obvious first choice for sellers to reach the middle and lower tiers.
GoCo-op built this system entirely by itself, using Microsoft tools and Microsoft servers. Their solution is entirely server-based - no client software besides a browser is needed. Since all of the system was built in a single language and to a single vision, GoCo-op claims to have an advantage over competitors that have accreted capabilities by merger. For example, to bring the first hotel client, the Wyndham hotel chain, online took 87 days from the signing of the contract. It took only six weeks to develop a complete interface to Wyndham's SAP/S3 system, a feat that earned GoCo-op a visit to Germany to discuss their approach with SAP's management.
Market Impact
GoCo-op's major competitor within this industry is PurchasePro. GoCo-op believes that it has nearly precluded the entry of the more general MRO marketplaces into this vertical market. They state that one major hotel chain is abandoning a 1400 license agreement with one of the major pure-play procurement vendors to adopt the GoCo-op solution, largely because this chain felt after seeing GoCo-op's solution that there would be no participation by other major hotel chains in the general market.
It's natural to ask where GoCo-op plans to go next? Although their solution was built upon their specific knowledge of the hotel industry, they point out that this industry is so complex as to structurally subsume almost any other. They therefore believe that they can port their software and their model of a content rich, multi-tier marketplace to other vertical industries. Two that they mention as likely possibilities are Construction and Government Purchasing.
GoCo-op has yet to validate its approach in two ways. First, it has to show that it can leverage its huge start in the hotel industry to pull in the numbers of middle and lower tier participants it is predicting. Second, it must demonstrate that it can recreate its full model in industries where it doesn't have years of prior experience and Rolodexes full of contacts. If GoCo-op can do these two things it will become a major player in a very short period of time, and could well steal a large amount of the vertical business that other procurement companies have been counting on.
SOURCE:
http://www.technologyevaluation.com/research/articles/does-someone-you-never-ever-heard-of-hold-the-keys-to-the-e-commerce-kingdom-15799/
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