Purchase to Pay Process

The European Commission has declared some ambitious targets for e-procurement. They reckon that €2 trillion can be saved and they intend to get government organisations using purchase to pay best practice to deliver these savings by 2016. These targets are of course way too ambitious. What’s more, the Commission is going about it in completely the wrong way. They may be ambitious and their methods may not be perfect but I’m impressed and delighted at what they're doing.

How can a banjo frailing ballad singer in Appalachia operate a more modern business model than a government department? Imagine that I am a finance director in the UK with personal tastes which run to “roots” music. Even for relatively obscure artists in any genre and any country, I will probably be able to find a website either for them or a distributor and buy their music directly as a cd or as a download. I will pay with my credit or debit card and get my cd a week later or my download almost immediately. The artist will get paid relatively quickly and pay a merchants fee which they will have factored into their original pricing. What I will not do is raise a requisition for the cd, have it approved and then issued to the artist, create and issue a goods received note when the item is delivered and approved, match the ensuing (paper) invoice against the receipt and the order and then promise the artist that I’ll instruct my bank to pay them 30 days thereafter. Yet, when I go into work the next morning, guess which process I will insist that my organisation uses?

The more I look at the proposed acquisition of Ariba by SAP, the less sense it makes. SAP didn't need the functionality. They didn't need the brand. The Ariba shareholders will clearly be pleased to see this deal go through but what, I wonder, would an SAP sales guy be thinking and what would Ariba's competitors be making of it all?

The original vision was right. The cost of purchasing as well as the cost of purchases could be dramatically reduced by applying the new technology. And there was a road map – a detailed vision showing how to secure the savings. The costs weren’t even that high – especially in comparison to the potential savings - but in the excitement, we lost the map and now, the vision is lost.

Finally the penny has dropped. Automating the purchasing process and controlling spend more closely by using modern technology reduces cost compared to following a manual or paper based process. This could save between 5% and 20% of procurement expenditure according to the EU commission. That means that the EU could reduce its public procurement spend of €2 trillion and save a massive €100 million. And all this can be achieved in 4 years – apparently. That’s a huge amount of money. 150 large hospitals could be built with that so it’s worth aiming for before anyone gets excited – and I hate to be the bearer of bad news – it isn’t going to happen.

Ask anyone who’s worked in more than one purchasing organization. When it comes to technology, they’re not normally what you would describe as model implementations. Supplier data all over the place, catalogues out of date, Heinz 57 varieties of purchasing system. Purchase to Pay processes are very rarely joined up and if purchase to pay really is the plumbing of your organization, you’d be drowning. But before you beat yourself up about your role in this chaos, ask yourself the question: Why is it that everything is always a mess?

I was excited to read about Alusta last week – the end-to-end framework or platform that Basware have developed for their procure to pay offerings and I was keen to understand a bit more about it when I hooked up with Juha Häkämies VP Market Development, Rowan Lemley, product Marketing Manager and John Webster, VP Global Product Marketing What is Alusta exactly? Is it the purchase to pay panacea or simply vaporware – a new marketing spin on an old set of products?  Actually a bit of both – but in a good way.