02 May 2013 The broken promises of e-procurement
I’ve been working with e-procurement in a wide variety of guises and in many different organizations for nearly 20 years. Before the widespread use of the internet there were some proprietary on-line purchasing systems that were, by and large, the same as a modern incarnation of a web based e-procurement system. And they all have one thing in common – they don’t work.
To be fair, they’re getting better but still, most implementations are an expensive set of broken promises. It’s not always the technology that’s at fault – sometimes it’s the promises that are wrong – expectations are set unrealistically. Or its the functional design that’s wrong – business requirements ignored or misunderstood. And it’s such a shame because e-procurement was such a good idea.
So what’s gone wrong?
Three of the most common reasons why e-procurement doesn’t work
1. The technology isn’t up to it
This was especially true a few years ago but it’s still true today. The solutions were deigned for the thoeretical purchasing process. A requester has a need which can be fulfilled by a contracted supplier who has a glossy online catalogue that the requestor can choose products from. The requester builds a shopping cart, clicks buy and Hey Presto! the approval workflow process happens silently in the background and the goods magically arrive a few days later. What could possibly go wrong?
Well let me tell you that apart from on planet stationery cupboard, things don’t work like that. In the real world, goods are required by yesterday, suppliers aren’t on the system, people forget their passwords and the approver has left the company. Or perhaps the category of spend simply doesn’t fit the simplistic MRO model that the solution was designed for. The system ends up addressing a tiny fraction of spend, that was probably under control anyway, and without heavy customization, it goes no further.
2. Compliance is poor
So sometimes the technology is up to the job. The e-procurement system is built properly and can address lot’s of areas of spend. Every category and ever circumstance is catered for. It enforces compliance to contract and ensure that purchase to pay processes are followed – but nobody uses it.
Let me explain how the real world works with a real life example.
A commodity trader in a merchant bank wants a new computer. Try telling him he has to have a Dell laptop. He’ll explain to you in no uncertain terms that he makes million of dollars an hour for the bank and he’s not going to be distracted for a moment by some ridiculous mandated procurement process. Then he’ll pick up the phone and order his Mac Book Air from the local Apple shop.
This is the environment that some e-procurement systems have to fit in with where business needs on the ground – whether reasonable or not – are just too difficult to meet.
3. Designed by finance
When is a purchasing system not a purchasing system? When it’s a finance system.
It’s often said that a camel is a horse designed by a committee. It’s not meant as an insult to Camels who are fine beasts – but they’re not very good horses.
A purchasing system designed by finance a great finance system. Using one of these beasts, you’ll never get your management codes wrong and your fixed assets will be tracked a treat. But if you’re responsible for getting stuff ordered and delivered today and you don’t know the difference between OPEX and CAPEX because you’re not an accountant – is it any wonder the system doesn’t fulfill it promise?
It’s not all bad of course. There have been some great new approaches emerging in the last few years. Coupa have been making some impressive waves and recently I came across Apptricity – (more of Apptricity soon) – some of their references where they have successfully implementing tight, compliant process in the most demanding of circumstances, demonstrates to me that actually, e-procurement is alive and well and is increasingly delivering the promise.
Pete Loughlin can be found on twitter @peteloughlin