The Procurement of Procurement Technology

Posted on October 7th, 2015 by

It’s complicated… This could just as easily have been entitled “The Procurement of Sourcing Technology” or “The Sourcing of Procurement Software” or “Buying an S2P (Source to Pay) Platform” – already, we’re spoilt for choice.

We’re not finished yet, by any means. Let’s talk about P2P (Procure to Pay, Purchase to Pay), shall we? or perhaps we could settle on e-Procurement, which certainly covers buying intelligence, price comparisons, analysis and modelling tools and the generation of dashboards to visualise everything.

We might, though, need to use P2P if we’re going to focus on raising electronic requisitions, the generation and despatch of purchase orders and automated invoice payments. S2P, meanwhile, will address Spend Analysis and Category Management, Strategic Assessment, Supplier Management, and Contract Negotiation and Management, amongst others.

Basically, we’re talking about platforms to improve buying. They can be bought as software that is installed on site or as SaaS (Software as a Service) solutions. Either way, we’re considering the use of electronic tools to make buying better, in exactly the same way that the Finance Department “went electronic” ages ago and was closely followed by Sales and Marketing and the rest.

Picture of some coding

Where would we be without our spreadsheets, our document creation, presentation software, CRM, email and the rest? I just hovered over the Start Button bottom left – go on, you know you want to – and counted 30 main programs in All Programs, before even drilling into individual folders (7 in Office alone).

Where would we be, indeed? If you’re in Procurement and reading this, but don’t have any specific Sourcing program to hand – where are you now? Where do you want to be?

Everyone “gets” what the digital world can bring to most business functions. So when it comes to Procurement Technology, perhaps it will help if we look at the major benefits rather than the various features:

  • greater control over E2E (end to end) procurement processes, particularly control over spend
  • efficient and structured method of accessing a wide range of suppliers
  • negotiations that are free from emotion and drive for a realistic win-win every time

From the Business Development perspective, that sounds a lot like the various CRM systems that nowadays manage the search for customers and keep management abreast of the pipeline, minimising sales hype and driving productive activity. In plainer English, those procurement benefits add up to the ability to cast the widest net in the search for suppliers, whilst retaining informed selectivity; the integration of the whole process into wider company strategy; maintaining control over it; and staying pragmatic and objective.

The last point is especially salient, as emotion can lead to “distortion” in many transactions, whether that applies to personal prejudices and/or preferences, risk aversion that may delay or prevent adoption, or impetuosity that could lead you to repent at leisure.

So – why wouldn’t any forward-looking organisation invest in technology to enhance procurement?

Well, first thing to remember is that amount of choice with which we’re spoiled. A quick look-up of available programs yields about 130 and counting, from ADP Procure-to-Pay and Aestiva Purchase Order, via ProcServe and ProcureApp to Winddle, Zeeling and Zycus Procurement Performance.

Then factor in the key consideration that software always benefits from tailoring to specific user and business needs. No-one wants to buy a tool that isn’t completely fit for purpose. By the same token, it’s a particular concern for buyers that they’re not left with a mass of features they’re never going to use: we always want our spend to be “lean” in that sense.

Procurement, too, is a multifaceted function. True, there is a heart of Best Practice to which we at SpringTide particularly subscribe. The sheer number of sectors creates a diversity of buying needs, though. Another quick check on Standard Industry Classification (SIC) Codes (NAICS in the USA) reveals 18 Divisions (Agricultural and Related Service Industries to Other Service Industries) and 99 Major Groups, each with up to 50 or more sub-categories.

One by no means exhaustive online guide to Category Management lists out over 30 major categories: BPO, Catering, Commercial and Professional Services, Construction, Consultancy, Digital Marketing, Energy, Engineering, Events, Facilities, Financial Services, Freight, Insurance, IT & Telecoms, Laundry / Uniform, Legal, Logistics / Freight, Marketing Services, Metals & Mining, MRO, Music, Outsourced Services, PR, Print / Agency, Professional Services, Public Sector Outsourced, Public Sector Services, Purchase / Credit Cards, Recruitment Services – Permanent Labour, Recruitment Services – Temporary / Flexible, Security, Shared Services, Total Facilities Management, Travel and Waste Management.

Let me know if yours aren’t on there – but you get the gist. It’s never going to be a case of buying off the shelf. Even the savviest buyer is going to need some advice on which platform. That’s before we get to implementation, user training and driving stakeholders to make the best of the system (all very much part of the SpringTide offer: please check out our case study on Ariba implementation, for instance).

Picture of a laptopLet me just offer one last complication to consider. It also strikes me as vital to reflect that we’re not just talking about “buying software”: we’re talking about “buying Buying Software…” Acquiring any kind of software usually involves wading through a plethora of options, consultations with the relevant Departments (including end-users if we’re lucky) and, of course, getting IT involved. And that’s where things currently look to be a little challenging for Procurement in particular.

Market researchers Redshift recently carried out a survey for Wax Digital into perceptions of the Procurement function, involving 200 procurement, finance, IT and sales and marketing department decision makers in medium to large organisations. The findings were published in the CPO Viewpoint study and consistently found what is best expressed as “misalignment” between Procurement and other internal departments.

The perception from those other functions tended to be that they didn’t work as closely with Procurement as Procurement thought they did. The majority of IT leaders in particular were dismissive of the procurement function’s value. Indeed, 78% of IT respondents suggested Procurement hindered rather than helped the IT department, with one in three admitting that they bypassed official purchasing processes.

A mere 19% of IT respondents felt that the procurement team took the lead on IT cost saving initiatives – whilst among the Procurement respondents, 43% claimed they did. Priorities for spend were also found to be in conflict, with Procurement focusing on front-end technology devices and hardware, while IT placed greater importance on infrastructure and security.

Interestingly, IT’s particular flavour of risk aversion, cyber-security concerns, brought them closer to procurement’s typical priority, with 46% of IT people identifying the most important contribution from Procurement as supply chain risk management.

The report concluded that IT departments require some level of autonomy, given the technical and involved nature of their function. It did, however, point out that Procurement can offer strong and relevant support – that is, help, not hinder, as currently perceived – with robust tender processes and supplier evaluation and contract management tools.

Which brings us back to the state of the art for such tools – S2P! The benefits of Procurement Technology are clearly not confined to the Procurement department. The cross-departmental gains, indeed, the strategic organisational gains of a well-executed purchase of Purchasing Technology are clear from the above.

Our experience at SpringTide is that support in selection of the right platform needs to be extended into its implementation and, thereafter, the encouragement of its adoption by all stakeholders. It’s an opportunity for enhanced relationship management that involves not just suppliers, but internal customers as well – and could even get the IT and Procurement people onto a better footing.

If you would like to find out more then please get in touch – give us a call now on +44 (0) 1543 466835 or fill in this form.