03 Feb 2012 E-procurement’s second wind – one of the most boring things in the world is about to get interesting (1)
We were promised hover cars and vacations on the Moon. What did we get? Luggage on wheels!
The new millennium wasn’t what it was billed as and it’s a sad fact of life that reality rarely lives up to the promise. E-procurement solution promises are the same. One click, walk-up interface. Employee self-service. No training required. Turns your sandwich into a banquet! The promises are impressive but “one click” actually means “one click as long as you’re only buying a pencil” – any color you like as long as it’s black – and employee self-service is a euphemism for “do it yourself”.
There is an exception. Ariba got it right first time and for over a decade now have, almost, met the promise and the times they don’t quite live up to the promise, it is generally for pragmatic business process reasons. Whatever anyone tells you, B2B procurement isn’t ever going to be as simple as amazon.com. So well done Ariba. But the fact remains, most e-procurement is painful to use and delivers virtually nothing in terms of business efficiency.
A little bit of e-procurement history
Let’s turn the clock back a little and remind ourselves how we got here.
It’s the mid 1990s, the internet is new and exciting. It was like graphene is today. An amazing, simple invention with so many possibilities we don’t know where to start. E-procurement was one of the first B2B applications that was successful. Purchasing, in those days, was a paper world. I once saw a paper requisition signed 12 times – twice by the same approver. It could take weeks to get a purchase approved and then there was the manual rekeying process at the supplier end, followed by the paper chase from hell called accounts payable.
E-procurement could fix all that – and more. By automating the requisition and approval process, approval time and effort could be reduced. But there was more. You could pre-approve suppliers using a catalogue – there would be no need for a purchasing team to do the day to day, humdrum transaction stuff. I instead they could concentrate on more strategic activities. Suppliers would receive orders directly into their sales order processing system. Rekeying errors would be eliminated. The cost of doing business would come down. Finer pricing could be offered. Profits would increase. E-business would transform our world forever. It was a win-win-win-win-win and it’s no wonder that Ariba’s share price went galactic.
For a time, it was just the standalone third party players like Ariba that owned the growing market for e-procurement. The nimble new kids on the enterprise application block were eating the ERP players breakfast – at least in the indirect and MRO spend areas. The ERP vendors were slow to react but they did react – eventually – and they presented a fairly compelling case to their customer base that a native purchasing application could address a larger proportion of spend – not just indirect and MRO – without potentially complex and costly integration projects.
The world moved on. The dotcom bubble burst. Andersen Consulting got caught. Sarbanes Oxley was born. The focus of procurement people moved back toward strategic sourcing. The focus was spend management, e-sourcing and BPO and e-procurement got renamed P2P and was put in the back office with accounts payable.
Today, e-procurement is a SOX compliance tool – the purchasing module within an ERP suite. Sure, users access it through a browser, but that’s not the e-business we were promised. The purchasing process is just the same as it used to be – with wheels.
I could fill pages with examples of how, in “world class” organizations, using “world class” purchasing systems, it’s impossible to buy what you need without resorting so phoning up the supplier. World class? My ass!
e-procurement has largely been a failure and there hasn’t been anything new or interesting to say about it for a while. But the world of P2P is about the change. E-procurement is about to get interesting again and in a second post, we’ll tell you why.