26 Jun 2012 e-procurement solutions are only as good as the savings they deliver
The business community, including the analysts and commentators, have for a long time been obsessed with two things about e-procurement solution vendors, both of which are irrelevant. The first is functionality – the second is share price.
No wonder e-procurement doesn’t work.
Functionality
I’m reminded of the old joke about the man who buys a bottle of Super Strength pills. An amazing remedy for weakness that would give him super strength. “How are those Super Strength pills working?” asks his friend. “I don’t know” he replies, “I couldn’t get the lid off!”
All the functionality in the world is worthless if people can’t or won’t use the software and the reality is that most e-procurement implementations fail because of this. The proof of the pudding is in the eating and the strength of a solution should be measured in its adoption, not it’s functionality.
Share Price
What’s share price got to do with it? Well for a start, if I’m a user of an application, the price that investors buy and sell the company for is just about 100% irrelevant to me but the reason why the obsession with share price has contributed to the failure of e-procurement is because of the behavior that it drives.
The way enterprise applications are sold, generally, is to sell software then leave the customer to implement, either themselves or by paying a third party. The customer takes all of the risk. It is the software license revenues that make the application vendors their profits and investors want to see more and more sales which will drive up share price. There is no incentive to see the software successfully installed.
I can hear howls of disagreement. “If the software didn’t work” I can hear “it wouldn’t sell”. But let be very clear. I have seen many – very many – e-procurement implementations and I can tell you – it doesn’t work – not because it’s broken – not for want of great functionality – it doesn’t work because it’s been implemented wrongly. As Jason Busch puts it, because IT organizations “ would rather throw money at the problem rather than take the time to fully diagnose the challenges they face and the potential benefits of applying different solution types in their situation”. The enormous benefits in terms of compliance to contract, ease of use, lower costs, better spend analysis etc. are lost because those who implement it don’t fully understand what they’re doing.
Meanwhile, the software vendors are focused on their next sale.
But it doesn’t have to be like this. And there’s a company that is taking an entirely different approach and delivering entirely different results – Coupa.
What’s different about Coupa and should we care?
For starters, they get cloud. Cloud is a term that’s used and misused and it means different thing in different circumstances to difference people. It’s easier to say what cloud isn’t than it what it is. Hosting software “in the cloud” doesn’t make that a cloud solution. If the technology stack is the same as the one that was developed for a world just getting used to Windows – but it sits in a cloud infrastructure, that’s not leveraging 21st century technology and calling that a “cloud” solution is simply capitalizing on the marketing power of the cloud concept. Coupa’s e-procurement solution employs a true multi-tenant architecture and SaaS approach which allows customers to implement the solution without significant initial implementation or infrastructure costs. That’s a cloud solution!
“So what?” you might ask. Cloud is attractive because it’s easy and inexpensive to install. It’s attractive because it doesn’t require a huge overhead in terms of IT support and it’s attractive because it make the headache of upgrades go away. But it’s not the be all and end all and it’s not, in my view, what makes Coupa special. What makes Coupa special is not it’s ease of use, it’s not the ease of implementation or the seamless upgrades – it’s their company philosophy.
Unlike traditional software vendors, the Coupa team put their money where their mouths are. Their Saas model only pays off for them if the implementation is successful and they will only make profit if they can persuade their customers to remain with them in perpetuity. That drives a very different set of behavior in implementation, product development and support.
They know that the days of embedded enterprise software are over. Users can and will be fickle and it is imperative that the software is and remains compelling. They know that if you have to push, persuade, coax and cajole users to use the software – there’s nothing wrong with the users – there’s something wrong with the software. They know that their solutions are only as good as the savings they deliver.
The e-procurement vision didn’t get delivered but there’s still life in it and as more imaginative solutions emerge, like Coupa, like Vinimaya, like Wallmedian and others and as the more established vendors learn to adapt, we have reason to believe that the vision may get delivered after all.
