Procurement SourcingProcurement Strategy

Procurement system specification and selection

By 8th August 2016 No Comments
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There are a lot of procurement systems on the market.  Below we look at some options and to help businesses make the right decision, we outline our approach to procurement system specification and selection.

Procurement systems

Traditionally procurement software systems have been designed for larger organisations (think of products such as Oracle, SAP etc.). Benefits from using a procurement system include reduced costs through leveraging volume buying and replacing manual processes, enhanced reporting on procurement activity, increased productivity through the use of templates and re-usable data, reduced procurement cycle times, and standardised buying by employees and departments. As all businesses need to procure goods or services in order to produce their products, it is not at all surprising that recent years have seen a wide variety of procurement software come on the market, from stand-alone to more traditional enterprise level solutions integrated into the businesses’ finance systems – and everything in between. However a clear trend is the move towards cloud-based solutions: the security, scalability, elasticity and availability that cloud-based solutions provide coupled with the wide ranging functionality desired by customers has resulted in procurement software vendors migrating to the SaaS model, allowing them to offer enterprise-level solutions at a price points attractive to smaller businesses.

Amongst the array of cloud-based procurement systems on the market are the following:

  • Coupa Procurement is an enterprise procure-to-pay solution that aims to increase employee adoption by applying a consumer e-commerce shopping experience to procurement management processes. The system’s functionality spans the entire procurement lifecycle, from employee requisitions, through the approvals workflow, to invoicing and inventory management. Easy to implement and very capable, some organisations might find the level of customisation available to be limiting.
  • BravoSolution’s BravoAdvantage platform includes supplier value management, spend analysis (managing costs and compliance) and savings management in addition to providing the infrastructure to enable negotiating and managing contracts online, and online sourcing (tendering, eAuctions etc.).  Going directly to the marketplace is a novel feature but perhaps not one that every organisation will require to implement for itself.
  • Zycus Procurement Performance also provides a to a full suite of procurement performance solutions including spend analysis, eInvoicing, eSourcing, contract management, supplier management, financial savings management, and procure-to-pay. Zycus’ offering is also tailored to specific industries and its client list includes global multinational corporations like Coca-Cola and Nestlé.

If the above examples have piqued your interest, but the complexity or cost appear daunting – then perhaps our final example may be of interest:

  • The Free Procurement Project by SpendMap offers small businesses a free full-featured purchasing system that allows users to automate purchase orders and related processes. Businesses requiring greater functionality can transition to SpendMap’s own commercial offering – this version is cloud-based, while the free version is not.  While the focus is on the more routine, day-to-day purchasing/procurement activities, the system is designed to be modular and expandable.

A word of caution: there are many systems to choose from, and it is important to invest the time and effort in choosing the system that best meets your organisation’s needs.  Software migrations are non-trivial regardless as to whether the solution is on-premise or cloud-based. Techcentral.ie noted that among Irish organisations using public cloud platforms and services, there is very little migration of workloads between service providers, due to the complexity of the process. That being said, the case for implementing cloud-based procurement systems is becoming compelling especially for  young companies with limited existing infrastructure.

System specification and selection

So how should you go about choosing the right procurement system? IT systems require money and time to deliver, and they can impact how employees do their job. It is best to adopt a methodological approach.  We use the following five-step approach for system specification and selection (note this is for any IT system, not just procurement systems):

  1. Key drivers. Have a clear understanding of the reasons a new system is required. What are the key business drivers, and desired benefits? Is there agreement that they are sufficient to merit the procuring of a new system? It is important to ensure there is buy-in on the need for, and the benefits of a new system. Your management team need to be on board and supportive for the implementation to be successful.
  2. Requirements. Compile a list of key requirements to be shared with a potential software provider. Don’t make the mistake of assuming this is a job for your IT team. Remember that the system will be a tool used by your business.  Think about how the current way of working could be improved.  Its important that the final priorities and requirements are clear – any vagueness can result in cost overruns, delays and unfulfilled expectations. There are three broad areas that should be considered:
    • Business Functionality: A new software system should as much as possible have the scale, scope and ability to meet current and future business requirements. Consider also compatibility with your IT infrastructure and any required integrations with other office systems.
    • Key Controls: Is the business required to comply with any regulations or standards? What are the requirements for security, data protection, and IT governance? Its a really good idea to also consider reporting and metrics: what do you want to be able to gauge from the system?
    • Ongoing Support and Quality of Service: What is the expected life-time of the system, and what is the vendors development path for the software? What support will be required to manage the system? Ensure that vendors will be asked include these in their cost structure.
  3. Selection process. Allocate weightings to the requirements depending on their importance to meeting the the business’ objectives. Define the selection criteria and compare all options against these: it goes without saying that it is best practice to approach more than one vendor with your requirements. Ask for system demonstrations and also ask for references from other customers. When reviewing potential solutions, consider the amount of customisation required to configure and deploy each system. Highly customised systems are more costly to deliver and maintain.
  4. Contract negotiations. Contract negotiations are not just about agreeing a price. Roles and responsibilities must be clear and explicit. Also include requirements for the service level agreement (SLA).
  5. System Implementation. It is important to anticipate the implementation effort and its business impact. Scope shifts or a large number of changes will reduce the chances of success. For bigger IT systems, implementation may be a significant project: this will require a project plan with tasks, responsibilities etc. and a project manager. It is wise not to rely on the vendor-appointed project manager only. Instead appoint your own project manager who can lease with the vendors project manager and take the lead for collecting end user requirements, understanding the new system completely, working with the vendor on data conversion, coordinating training and acting as the point of contact for all users. Ensure the project team is supported by management, that sufficient resources are allocated and the decision making process is clear and effective.

Following the the approach outlined above will  help your system specification and selection be effective result in a solution that maximises your investment and meets the need of your business.