The New State of Normal: eProcurement
Newsletter: September 2009
By Robert Fox, Engagement Manager
While many of the analysts and leaders in today's economy are tentatively declaring that the recession is 'most likely' over, companies that are positioned for success are already planning for the next recession. The strange truth in our economic engine is that while everyone knows recessions are cyclical, very few companies actually take action today that guarantees survival tomorrow.
If I could be ordained as minister of The Church of Economics I would start my sermon with these words:
"My brethren, in the past year we have lost many friends, the Brothers Lehman, our Washington mutual friends, and many more. But faith in economics has brought us out of the darkness and faith will lead us forward. Look to the economy to guide you and you will be saved."
Of course my church would not be around long. Faith and economics do not make good companions if you don't have a solid plan.
One Piece of the Pie
The topic of restructuring all the elements of your business to make sure you survive the next recession is a little out of the scope of this short article. What I do want to focus on is one element that is getting a lot of attention lately due to its potential impact on saving a company a lot of money in a short period of time - procurement.
When electronic procurement options first came out a decade ago they were touted as the next generation of the dot com revolution. And like the dot com revolution they took a lot of our money and never gave it back.
Over that decade many eProcurement companies went bust, new technologies arrived and the market saw significant consolidation. Major players with strong products, a lot of money and a distinct competitive advantage have now turned this dot com bust into a Web 2.0 explosion. Companies are entering this market with open eyes and are seeing a direct link from eProcurement solutions to bottom line savings.
Why eProcurement - Why Now
In the past year the focus on cost savings - across almost all industries - has never been greater. As companies struggle to compete and suppliers disappear there comes greater pressure to find ways to improve profits.
To improve the bottom line a company must either increase sales or cut costs. But if sales are decreasing or stagnant the focus moves to cost cutting.
Adopting eProcurement solutions are currently one of the most effective methods of reducing cost. With a successful eProcurement initiative a company can expect significant reductions in requisition to order cycle cost and cycle times, increased spend under management and a reduction in maverick spend. The following table displays the averages developed by Aberdeen:
Today's eProcurement Market
The leaders in today's eProcurement marketplace are Oracle, SAP and Ariba. Oracle and SAP offer their own front-end software modules with ties to their backend ERP financial engines. Ariba seems to be building from the ground up with a full suite of procurement and payment products combined with the largest supplier marketplace in North America.
Within the SAAS space there is slightly more confusion. The past decade has seen much consolidation and elimination but there are still a handful of vendors who are competing for market share. Both Ariba and Oracle now report that they offer a SAAS option but neither appears to be a very mature product offering.
Other notable SAAS vendors include; Vinimaya, Basware, Birchstreet Systems, Coupa, PurchasingNet and SciQuest.
The Oracle eProcurement Landscape
Oracle has standard eProcurement modules that complement its ERP suites of PeopleSoft Enterprise, JDE and Oracle eBusiness. The PeopleSoft Enterprise suite utilizes the eProcurement module with a supported interface to Perfect Commerce. The Oracle eBusiness suite uses iProcurement with delivered integration to Exchange.Oracle (for access to supplier catalogs) and the Oracle Supplier Network for document routings (PO's, ASN's).
Oracle also reached a partnership agreement with SciQuest, a SAAS eProcurment provider with an industry focus on Higher Education, Life Sciences and the HealthCare marketplace.
The long term direction of Oracle seems to be pointing to a further integration between PeopleSoft eProcurement and the Oracle Supplier Network. Oracle reports that the newest release of PS (Version 9.1) will include this integration as standard functionality.
In the interim PeopleSoft customers would be advised to evaluate linking the eProcurement module directly to Oracle Exchange and the OSN rather than directly linking to outside suppliers. For customers in Higher Ed, Life Sciences and Healthcare SciQuest should be evaluated as a potential solution.
eProcurement Technology vs eProcurement Process
Implementing the best software the industry has to offer does not solve business problems or guarantee a successful ROI. Technology must work hand in hand with business process evaluation and optimization.
Whatever eProcurement technology solution your company decides to implement has to be tied into an overall project to create a procurement organization that is structured for success. A successful procurement organization is one that uses technology to support a center-led core with access to real-time information and spend visibility. In doing so, you will ensure that your procurement organization will align with the larger corporate directives of the CFO and CEO. You'll also be well positioned to weather the next economic downturn.