Words Never Uttered: I regret investing in Sourcing and Procurement technology
As the dog days of summer are starting to fade and kids are starting to get ready for school, I am reminded that it is budgeting time for many companies. Essentially, if you want to invest in the tools and technology for your team in 2020, it’s time to start developing your business case now.
For some companies, the business case needs to be built to make an initial investment into a point solution such as e-sourcing or contract management. For other companies, the business case needs to be made to move from point solutions to an end to end provider.
Regardless of where you are in your need for investment, I want to provide some high-level advice when thinking about your plan to secure funding in 2020 based on my 20+ years in this industry:
1) While results will vary from the vendor you select, I have yet to hear anyone say they did not get a substantial ROI on their investment in Sourcing and Procurement tools.
2) For e-Sourcing, I have found that the first few projects executed typically pay for the entire year’s investment. Line up some “low hanging fruit” projects to deliver initial success.
3) For Contract Management, find out if your company has allowed an evergreen contract to auto renew that they did not want renewed. Any halfway decent contract management solution should be able to prevent this from happening.
4) For Supplier Management, I would encourage you to impress upon your leadership the importance of strategically managing your suppliers and investing in tools to protect your brand. The estimates I’ve heard to manage a supplier manually is between $2,000 to $5,000 per year when it should be in the hundreds when using technology.
5) Unless you have a single instance ERP system with a good BI tool you probably don’t have access to good data to make insightful decisions. Running a procurement team without good data analytics is like driving a car with a blindfold on. A quality spend assessment will make your team anywhere from 2 to 5 times more efficient.
6) An investment into a P2P system is a no brainer if your team has done a decent job of strategically sourcing your indirect categories. Where is your ability to enforce all your hard strategic sourcing work on the indirect side if you don’t have a P2P tool to enforce compliance? All of those savings dollars you are reporting can’t technically count until you see all the PO’s generated at the lower price. How else can you do this without a P2P system?
7) Moving from point solutions to end to end: This one is a no brainer. Often times you should get better pricing when you aggregate all your legacy point solution spend and put it towards a single solution. The benefits of having a unified platform are endless, ranging from the elimination of re-keying to the benefits of a unified dashboard (to name a few).
In addition to my little pointers, I would encourage you to see the research Spend Matters, Gartner, The Hackett Group, Forrester and others have done in this area to help you validate your business case and your budgetary requests. Going to your leadership without industry validated numbers is potential suicide. If you are struggling to get the analyst data, please feel free to reach out to me.
I can tell you this, doing nothing is not a great strategy. The Sourcing and Procurement software space would not be almost 25 years old now if we were not delivering real value. As I mentioned in my headline, nobody has ever regretted making an investment into these platforms. While they may not have loved the vendor they have chosen, they still see the ROI and the value in the investment. Please start the ROI process now to be ready for your budget battle in October.
Roger is Vice President of Strategy for Synertrade
Roger is Vice President of Strategy for Synertrade where he is responsible for analyst relations, partnership and input into our product strategy. Roger is an industry veteran with leadership roles at companies like Ariba, Coupa, POOL4TOOL, A.T. Kearney, FreeMarkets and Deem. In addition, Roger has 15 years of procurement and sourcing leadership roles in the retail, chemical, IT and distribution space. Roger has been awarded the Supply & Demand Chain executive Pros’ to Know award.