07 Jun 2012 The day we lost the e-procurement map
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.
It was in the mid-1990s and smart money was on web-based technology. It was clear that by utilizing the common standards that the web presented, businesses could trade using a common platform, speeding up communication, trading in real time and automating business processes. The predicted business benefits were enormous. On-line catalogs with real time pricing and stock availability would negate the need for quotations and multiple phone calls to suppliers. Routine purchasing processes could be delegated to the end users by giving them buying tools on their desktops. An intuitive interface and workflow would free up the purchasing experts to deal with higher value-add activities. What’s more, by giving users access to supplier product catalogs, not only would it be easier and cheaper to buy things, you could control tightly what the business bought, driving more sales to preferred suppliers and earning greater rebates or finer prices. And it didn’t end there. The approval process could move from paper to computer based, reporting could be more sophisticated and more detailed spend analysis would allow businesses to source better.
Sounds great? It was. But the e-procurement vision never materialized. You see, without a long-term commitment to data maintenance or a strategy to employ technologies and techniques like PunchOut universally, catalogs fall into disrepair very quickly and product selection becomes a nightmare for users – without an intuitive user interface, the process of purchasing requires a level of expertise that e-procurement was supposed to dispense with – a purchasing module of an ERP system designed and implemented by a finance team is, I’m afraid to say, never going to deliver.
Sure, most purchase orders today are transmitted electronically but that is not e-procurement and the sad reality is that today, in 2012, in most organizations, the purchasing process is as clumsy and painful as it was 20 years ago.
What happened to the e-procurement vision?
The original vision was built upon the realization that internet technologies offered a universal, open, inexpensive and secure communication standard. By using the new technology imaginatively, the vision of automation, ease of use and contract compliance could be delivered. But it was the same for everything. Every industry, every business process could be transformed so it seemed and it all got swept up in this huge wave that got labeled “e” – e-procurement, e-sourcing, e-auctions, e-commerce, e-business, e-government, e-everything. Everything “e” was virtuous and that’s when the road map got lost. The early innovators like Ariba, who still survive, and Commerce One – who doesn’t – had the right idea but those that followed including the ERP vendors just didn’t get it. A web front end became a tick in the box for e-enablement. As the dust settled following the dot-com crash only the remnants of the original e-procurement vision were left standing and the vision was lost.
The new vision – bigger and better than the old one
But it’s not all bad news. The landscape is very different today. The foundations and building blocks of the original vision are in place but the world has changed and the original vision is no longer relevant. There’s a new horizon and there’s a new, different vision. A new vision that takes a more holistic view of purchasing and supply – a vision that embraces the entirety of the purchase to pay process – a vision that describes a fundamentally different way of doing business that makes the saving promises of the nineties look insignificant.
We’ll be looking at some of the components of this new vision in the coming months. We think that the rules of the game are about to change and that some of the traditional roles in parts of our economy are going to change no less dramatically than when Dell and Amazon showed how the rules had changed in the 90s.