Purchasing electronic procurement, or e-procurement, software is a strategic and beneficial choice for almost any organization, one that is sure to increase efficiency in procurement processes and improve control over spending. The first step for an organization automating procurement is to evaluate its current processes and identify areas for improvement. Once an organization has decided that it is ready to invest in automation, it then has to learn how to purchase the software.
What should be on your e-procurement software checklist?
Learning how to buy e-procurement software entails understanding the different types of products available and the different ways they can be integrated with existing systems, business structures, and employee culture. A useful plan of attack is to understand and build a buyer's checklist for the product selection and then a roadmap for bringing in the new system.
Integration with existing systems
The first item on the checklist should relate to the technical viability of an e-procurement system, including how it will fit with existing systems. This can depend on the type of e-procurement software; these solutions will be built on hosted, cloud-based or hybrid systems (a mixture of hosted and cloud-based technology), and can be purchased as bolt-on or as a piece of an ERP platform. Many leading ERP offerings, such as those from SAP and Oracle, offer built-in purchasing and procurement software that they make available to their customers for additional licensing fees. While this option can be appealing for companies that are highly dependent on their ERP platform's other financial software, companies have found that these products do not always offer the same broad functionality as bolt-on, cloud-based e-procurement products.
Leading cloud-based e-procurement systems tend to be more versatile and bring greater ROI than ERP-based software and are built to integrate with any ERP or accounts payable system. Cloud-based e-procurement systems will also be able to integrate with any other existing systems and will be able to incorporate existing business structures and data, such as workflow, employee hierarchies, supplier contracts and catalog information. In addition, many solution providers offer implementation services in-house or through a partner to help with these integrations.
Purchase to pay (P2P) software with mobile capabilities is becoming increasingly important to North American businesses. Organizations are pushing their workforces to perform more P2P activities via mobile applications, as it can increase processing speeds, reduce hardware costs and improve internal and supplier collaboration. Even if a company does not currently have a very active mobile workforce, it is valuable to look at the mobile features of an e-procurement system to prepare for the future. Some factors to evaluate include the type of mobile application the provider offers -- responsive Web design versus native -- and the security controls the system supports to ensure company data is safe on employees' personal devices.
Organizations should also consider the e-procurement software's supplier network when deciding which one is right for them. Many e-procurement providers will feature a network of registered suppliers from which users can create new vendor relationships and integrate their existing suppliers. Organizations should evaluate the size of the network to see how many new suppliers it provides access to, as well as how many of their current suppliers are already on the network. Depending on the size of the network and the software provider's market presence, many of an organization's existing suppliers may already be registered.
Organizations should also evaluate the suppliers in the provider's network against its own supplier base to ensure there is an alignment. For example, companies in the oil and gas industry must undergo extensive supplier integration requirements when they contract new services, and they tend to work with a niche set of suppliers that cater to their industry to make the initial integration process simpler. An oil and gas company would not benefit from an e-procurement network in which the majority of registrants primarily service the retail industry.
Beyond the network's size and scope, an organization should assess how it and its existing suppliers would connect to the network. Some networks charge suppliers fees to register, which can lower supplier adoption, while others never charge suppliers for any service. It is also important that organizations evaluate the technological maturity of their suppliers and themselves when choosing a network. Some networks require users to install a desktop client that integrates with their back-end systems, while cloud-based networks enable network access entirely from a Web browser. Other systems offer a combination of Web-based access point and back-end integration for clients and suppliers with older ERP-based procurement systems.
Feature set packaging
Another important aspect for an organization to evaluate is the packaging of an e-procurement system's feature set. Most products are offered in either a modular or all-inclusive P2P suite. Some organizations will need the entire suite, from requisition creation and approval all the way to reconciliation and invoice management. Others may only need a robust requisition and purchase order management system to integrate with their existing invoice management tools, in which case they should choose an e-procurement system that offers product packages according to their needs.
If choosing to take a modular approach to automating procurement, organizations shouldn't discount the other e-procurement features and options available to them, such as spend analytics or inventory modules. Organizations should also check on the software provider's contract compliance support. Many e-procurement providers offer this though a native contract management solution, as well as through integration capabilities with existing contract management systems.
These checklist items are good starting points for any organization, but the assessment process should not stop with these points alone. Organizations should build out their requirements list by evaluating their own procurement system and business needs. When an organization takes a proactive, educated and careful approach to selecting e-procurement software, it ensures quicker implementation times and ROI, as well as long-term procurement efficiency.
PayStream Advisors specializes in helping organizations evaluate both their current and future procurement states based on pre- and post-automation initiatives. For more information contact the author.