In late February 2002, Glen Meakam, founder and CEO of FreeMarkets, the online auctions company, aggressively defended his company against criticisms from e-marketplace software rivals Commerce One and Ariba.

FreeMarkets, whose business model relies on providing customers with access to an army of procurement consultants backed-up by hosted auction software, would be increasingly forced into a pure software model they said. As the technology behind auction and procurement software advances, there will be less demand for the consultancy services on which Freemarkets has built its so far very successful business, they argued.

Meakam counters that FreeMarkets' model is based on the ‘here-and-now' reality of most companies' supply chains, not a distant concept of seamless, automated electronic supplier sourcing. Software can never replace the in-depth domain expertise that consulting services provide, he says.

However, FreeMarkets does provide customers with a hosted, self-service product: QuickSource. This software product runs auctions without the need for add-on consultancy services. And now the company has also unveiled plans for a new enterprise sourcing platform.

Is this an inherent contradiction of Meakam's claims? Forrester Research analyst Laurie Orlov thinks so. She claims that one third of FreeMarkets customers have purchased QuickSource, and that more will migrate to the platform. However, she warns that FreeMarkets will have to partner with integration suppliers, build interfaces to enterprise software packages and recruit consulting partners if it is to maintain its lead. "As vendors like Ventro, e-STEEL, and Verticalnet Software can attest, the service-to-software move can be daunting," she says.