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SCMP Reporter

Internet commerce specialist FreeMarkets plans to move its Asia-Pacific headquarters to China as a growing number of manufacturers transform the mainland into a hot spot for online sourcing of products.

Director and general manager of Greater China operations Jack Lee said the company would make this move within the next few years and expected other providers of sourcing technologies and services to follow.

'We see Shanghai emerging as our new regional base after Singapore,' he said, noting that many FreeMarkets customers in Hong Kong, Taiwan and around the region had their products manufactured in the mainland.

'Over the next five years, we expect this presence to pay off as more companies expand their business in China.'

Financial commitments were not disclosed, but Mr Lee said FreeMarkets expected to increase the number of Asian customers.

At present, the company has 30 customers in Asia, eight of which come from Greater China.

Founded in 1995, Philadelphia-based FreeMarkets is a global provider of online sourcing software and services. The company claims to have a database of more than 150,000 suppliers in more than 185 commodity categories.

Its flagship software products, FullSource for large organisations and QuikSource for smaller enterprises, have helped customers source more than US$40 billion in goods and services, and identify savings of more than US$8 billion.

In the third quarter of this year, FreeMarkets has secured contracts from the fast-growing mainland electronics and networking gear maker, Huawei Technologies; and the world's largest chip foundry, Taiwan Semiconductor Manufacturing Co. Prominent local customers include CLP Power Hong Kong and VTech.

'On average, our customers save 18 per cent on the goods and services they source through us,' Mr Lee said.

'But saving money isn't the whole story, as our approach is for customers to get a fair price from the right supplier.'

A recent report from research firm Gartner's G2 service predicted fierce supplier competition, a weak economy and China's liberalised trading environment would force manufacturers to embrace advanced supplier sourcing techniques such as online auctions.

'Procurement in Asia is notoriously slack and often corrupt, with relationships taking precedence over quality and price,' the report said.

Mr Lee said FreeMarkets aimed to help improve the sourcing process in Greater China, either through e-markets or online auctions, based on its avowed 'ethical, well-managed process with enforced rules of conduct'.

Although FreeMarkets was a latecomer to the mainland market, Mr Lee said: 'Timing is everything. It has become more crucial for organisations of all sizes to keep costs down in today's weak economy.'

The early, high-profile expansion into China by rival e-commerce specialists such as CommerceOne, Ariba and i2 appears not to have paid off. These companies now struggle to keep their business-to-business e-market empires profitable since the dotcom meltdown three years ago.

Mr Lee said: 'Strategic sourcing involves more than just creating markets or selecting software to do it. What sets us apart from the competition is that we offer results and guarantee them.'

Stiff competition in Greater China is expected to come from Singapore-based e-market specialist Sesami, which recently tied up with professional commerce information provider sinoBnet in China.

For the second consecutive year, FreeMarkets was rated by research firm International Data Corp (IDC) last month as the best-positioned supplier in online procurement.

IDC analyst Rob Rosenthal said: 'FreeMarkets remains the most successful player devoted solely to online procurement via dynamic pricing.'

Despite a challenging economic environment, FreeMarkets posted a 19 per cent increase in second-quarter revenues to US$47.4 million.



FreeMarkets plans China base