27 Oct 2021 How does your in-house procurement system compare to world class?
Any mature, modern organisation should have a long hard look at itself if it is still using an in-house built procurement system.
Many businesses have procurement systems that have been built or are maintained by their own IT team. It could be a rudimentary spreadsheet that maintains purchase order records or it could be a something customised from a system designed primarily for another purpose. The justification is usually cost.
And if anyone should know the difference between price and cost it’s a procurement professional
The good thing about in-house built systems is the price. But there’s one down side to an in-house built procurement system. The cost.
And if anyone should know the difference between price and cost it’s a procurement professional.
Sure, you’ll make huge savings on license costs if you build software yourself but when you compare the potential cost savings that a world class system can deliver, the overall cost of an in-house built system is much greater. Procurement professionals would know this – you’d think.
The merits in-house software
There are some advantages to building your own software but it’s a short list. It used to be true that in-house built systems would be a safer investment than off-the-shelf software. Every business has their own unique requirements and constraints and your own system is guaranteed to meet those needs. Your own people are dedicated to your business and can support the system full time. Changes can be accommodated when they’re needed not when a new release becomes available.
If you’re serious about procurement, you should be serious about your procurement system
But these theoretical benefits of an in-house system never really stacked up. The priorities of IT would compete with other functions in the business and unless procurement was seen as the highest strategic priority, procurement systems would not be first in the queue for maintenance and upgrades. Besides, IT people are IT people, not procurement people and procurement people are not IT people. Getting a meeting of minds resulting in anything resembling world class was never going to happen.
The whole build or buy debate became mute some years ago and the business case to build an in-house system now only makes sense for the most specialist and exceptional circumstances. Certainly, for generic business activities like finance and procurement, the idea of building an inhouse system is absurd.
Comparing an inhouse built system with one of the specialist cloud systems is like comparing a soap box go-kart with a formula one car. Building your own can be fun and satisfying. If you want to get from A to B with no upfront investment – and you don’t really care how effective it is (or to be frank, what the rest of the world thinks you look like) – the go-kart ticks all the boxes. If that describes you and your business requirements – go for it!
But it’s not a joke. If you’re serious about procurement, you should be serious about your procurement system.
if you think world class P2P is pricey, take a look at the cost of not implementing it
And If you think world class P2P is pricey, take a look at the cost of not implementing it. Every week you can read a report of purchase to pay fraud perpetrated because a business didn’t implement proper controls. Or look at the businesses that are locked into supply chains because they lack the flexibility to adapt to real time changes in their market conditions. Without the agility that world class P2P delivers they are like kites in the wind with no control over their direction.