www.globaleprocure.

com

Simplifying
Procurement
Technology
Issues, Challenges & Trends

Compliance Maximized | Savings Realized info@globaleprocure.com

 Simplifying Procurement Technology www.globaleprocure.com

<< Looking Back at Procurement Technology

B2B Procurement has come a long way in the past 10 years. Professionals have lived through technology
hype cycles, and have spent millions of dollars automating and improving sourcing and purchasing
processes. Cost Savings remained the primary driver for transformation, all throughout the journey.

First there was darkness. Enterprises realized that the biggest savings opportunities lay trapped in the
silos of diverse procurement systems. Then there was light. The insight gleaned from
aggregating and cleansing spend data for the entire enterprise led to consolidation of the supplier base
and creation of a preferred supplier pool with national and global contracts. The bottom-line savings that
could potentially be realized through better sourcing far outweighed benefits accrued via process
improvements or outsourcing. Investments in strategic sourcing platforms soared as a result, and
electronic procurement platforms took a backseat.

Circa 2006 - the savings opportunities identified remains 'potential

savings' in many cases as organizations grapple with the challenge of
'compliance'. There is no dearth of information. Actionable information
is not 'acted' on in many instances, because of the dire shortage of
people resources. There is a compelling need for 'change agents'.
Without people who can manage the transformation agenda in-house,
adoption of technology remains severely impaired.

Finally the finger points to technology itself. Corporate executives now

question the merit of making multi-million dollar investments in
technology platforms, when their organizational
maturity demands something different. Users complain that
procurement technology has become unnecessarily complicated,
resulting in poor adoption. Many believe that the problem is about
setting the wrong priorities.

Huge investments have been made in sourcing processes without

paying attention to data - the core underlying framework that powers
visibility. Certainly it should have been 'visibility first', followed by better
sourcing processes. The value of Contract Management that comes via
collaboration and better document management is insignificant, if the
contract is not linked to the procurement process in an intelligent and
meaningful way.

Compliance Maximized | Savings Realized info@globaleprocure.com

 Simplifying Procurement Technology
Technology is an enabler for
procurement transformation,
but it is certainly not the only
means to reach the end goal.
Along with technology, we
need the right combination of
people and processes, to
ensure that we derive full
value, at every step that we
take in the procurement
transformation journey. It is a
fine balance.
2
Compliance Maximized | Savings Realized
www.globaleprocure.com
Is Technology to Blame?
Technology is an enabler for procurement transformation, but it is
certainly not the only means to reach the end goal. Along with
technology, we need the right combination of people and processes, to
ensure that we derive full value, at every step that we take in the
procurement transformation journey. It is a fine balance.
The challenges of successfully deploying procurement technology
have been well articulated in many thought leadership sessions till
date; and stories of multi-million dollar failures have also spread
through the grapevine. But has there been a fair representation of the
core issues?
Consider the poor rate of adoption of electronic procurement systems.
Who is to blame? Users complain that they cannot find the exact 'item'
they want to buy, especially when they need to get their job done in a
hurry. The procurement team, on the other hand, has no 'easy' way to
find out what the users plan to buy ahead of time, to be able to
effectively aggregate demand, negotiate with suppliers and on-board
preferred suppliers with their catalogs. It has been a classic
conundrum. Consider the poor standards of purchasing compliance
(that no one wants to talk about). Who is to blame? Users complain that
they are not aware of changing procurement policies and preferred
suppliers, and emphasize that every purchasing decision is unique,
given the constraints and scenario at any given point of time.
Procurement teams complain about the violation of preferred vendor
and pricing policies, that appear routinely, and the seeming
intransigence of users to understand and appreciate the merits of
standardization.
Consider the poor standards of visibility? Who is to blame? Users
complain about imposition of abstract definitions and standards to
describe products, parts and service items, when they already have
existing systems that “works.” Procurement teams grapple with
islands of data (each locked to their own standards) and fail multiple
times when attempting to build the utopian data management
infrastructure powering global visibility on a dashboard.
info@globaleprocure.com
 Simplifying Procurement Technology www.globaleprocure.com

So who is to blame?

Is it the User Community, the Procurement organization, or the

Vendors? Or is it just BAD technology?

Procurement technology has evolved as a series of responses to

challenges articulated by the user community, but we have possibly
lost sight of the big picture trying to translate the minutiae. Time-
tested, manual, paper-based processes have been internet-enabled,
with a mandate for automation, promising enhanced productivity.
Enterprises have jumped on each new bandwagon that have come
their way, and built silos of procurement process automation, failing to
connect them as one meaningful whole entity. Projects have been kick-
started after early failures. Consulting firms have been shown the door.
If there was a survey, one would certainly like to benchmark the
median number of vendors and tools that have failed in the path of the
procurement transformation juggernaut. 3, 5, 10 Hazard a guess!

The responsibility for failure certainly lies with all of us. As users we
have refused to 'buy-in' to the big picture; savings mandate have never
been a personal responsibility, and no one held us accountable. As
Procurement heads, we often failed to understand the needs of our
internal customers, and were insensitive to the needs of the user
community. As vendors, we have focused on solving the problem in
parts and pieces, and overemphasized the use of technology, at the
expense of people and processes.

Compliance Maximized | Savings Realized info@globaleprocure.com

 Simplifying Procurement Technology
Technology can be simplified,
and that in turn can make our
life simple.
Wouldn't you agree?
Compliance Maximized | Savings Realized
www.globaleprocure.com
Let’s simplify Technology!
Technology can make or break our lives. Consider the spectrum of
usability experiences in our personal life. On one hand we spend
hours on the couch with a remote control and get to know only 20%
of the (50+) control keys over its lifetime; on the other we have the
Apple iPODTM with its minimalist design that we adopt in a split
second, and have no need to learn beyond the click-wheel. We
struggle to locate a missing folder on our desktops that we are
positive lies hidden somewhere, while on the big white page of
www.google.com it takes less than a second to locate anything
anywhere on the web. Technology can be simplified, and that in turn
can make our lives simple. Wouldn't you agree?
Is it easy to make things simple? Positively not. The massively
distributed computing architecture along with complex web
spidering and indexing algorithms at the Google back-end, power
the simplicity in the front. Billions are expended by Apple R&D, in
their search for simplicity in UI design. Simple does not equate to
trivial. This is the reality we need to wake up to within an enterprise.
Simplified procurement technology can spur adoption. That in turn
can accelerate the entire transformation process.
info@globaleprocure.com
 Simplifying Procurement Technology www.globaleprocure.com

We will submit FOUR (4) key issues that need to be addressed in the new
generation simplified procurement systems.

DATA MANAGEMENT COMPLIANCE MANAGEMENT

FEATURE MANAGEMENT VISIBILITY MANAGEMENT

1 DATA
MANAGEMENT
Enterprises cannot afford to build multi-million master data management
infrastructures using spaghetti code that fetches data from multiple disparate
systems, maintains one clean datapool, syndicating it back to source systems
when needed. It is easier done on paper than realized in the real world. We can
all learn to live with bad data, as long as we have efficient tools like Google to
help us find what we want, when we want. We could turn the Procurement Data
problem on its head, and adopt a simpler approach to managing the same.
What if we could

Let people live with multiple products and services taxonomies

?
Free users from the burden of categorizing data at source
?
Free vendors from the burden of submitting product catalogs
?
supporting multiple taxonomies

All users care about, is discovering the product or service that they want to buy,
within an electronic procurement environment, when they need it.

All procurement teams care about, is ensuring that the user stays informed
about preferred products and services that are contracted within the
organization and prompting user about
purchasing guidelines on the same.

The inventory folks want to notify the user, if a similar item is in stock and the
sourcing experts want to get alerted, when a lot of similar items are being
bought, because that represents a significant sourcing opportunity.

Compliance Maximized | Savings Realized info@globaleprocure.com

 Simplifying Procurement Technology www.globaleprocure.com

2 FEATURE
MANAGEMENT
Enterprise cannot afford to keep writing custom code to solve all their business
problems. We have seen the rapid rise of packaged applications and death of
bespoke solutions that mired the enterprise in the nineties, but even
packaged solutions came with their own little bag of secrets, a.k.a the 'feature
list'.

Every enterprise procurement process is wired differently and business

analysts insist on mimicking these processes on new platforms, to minimize
change management issues. However most packaged applications have very
little flexibility to re-wire a process (packaged as a feature), and customization
translates to expending millions of dollars in professional services.

So enterprises learn to either live with problems and limitations (read lack of
features), or face huge slippages in project timelines as code warriors battle it
out translating business requirements into additional software features for
the next release. Over time, this further fuels the classic 'feature-warfare'
between vendors as unsuspecting buyers 'buy' features which others paid-for
to 'build'.

Business Users could care less about the published feature-set of COTS
(commercially off-the-shelf) procurement technology to cater to their
procurement and sourcing processes, if given a choice.

Work-flow need to be flexible, giving ability to re-wire processes on the fly,

without changing any underlying code. The control of the process has to pass
back to the business user from the vendor. Data and analytics need to be
available every where. Business users need to be empowered to self-publish
'actionable information' as per their choice, through a corporate dashboard,
enabling collaboration and influencing the right strategic decisions.
Dashboards cannot afford to be hard-wired with pre-defined formats and
templates.

Compliance Maximized | Savings Realized info@globaleprocure.com

 Simplifying Procurement Technology www.globaleprocure.com

3 COMPLIANCE
MANAGEMENT
Achieving 100% compliance with corporate procurement guidelines remains a
distant dream, as stake holders remain locked in conflict when it comes to
implementing 'controls' based on policies and guiding procedures, within a
sourcing and procurement technology platform. Over time enterprises have
matured and employed visionary leaders as change agents, who rally support
for a common cause. Compliance today is thus driven exceptionally well by
people and extremely poorly by technology. Left to technology, very little would
have been achieved in terms of compliance management.

Master Data compliance policies that are governed by tight controls (ex.
explicit authorization on who is eligible to enter and edit a master data record)
translate to delays of several days, before a record can be entered on a system,
triggering a purchase process. Contract compliance policies that block every
requisition, means countless re-routes between users, buyers and supervisors
for approval. “More Control for Better Compliance” is the best that current
technology has to offer to enterprises today.

The reality of business is dynamic and rule books need to be rewritten every so
often, to stay in sync with the global supply and demand chain. Tax rules
change, Supplier performance metrics change, markets change almost
everything changes in the real world. Procurement processes can no longer
afford to be driven from static policies and procedures hardwired as 'rules'
within a particular process environment.

A compliance framework needs to be flexible giving business users the ability

to edit policies and procedures in simple business language. An interim
translation layer is needed to convert policies and procedures into business
rules that guide and drive compliance. If rigid controls are put in place, the
system would become unusable and with time witness declining adoption
leading to a failed transformation initiative.

Compliance Maximized | Savings Realized info@globaleprocure.com

 Simplifying Procurement Technology www.globaleprocure.com

4 VISIBILITY
MANAGEMENT
The concept of visibility within a procurement organization has been
traditionally limited to an archaic definition of aggregated historical spend. It is
a fact that enterprises have struggled to get spend visibility, shifting from ad-
hoc query based reporting to OLAP tools, and then flirting with dashboards.
The wake-up call about poor data quality came in quite late, but millions had
already been expended trying to scrub data using excel based tools with
expensive consulting eye-balls. Possibly lot more was spent in cleansing
supplier content, matching records against proprietary databases.

The problem of visibility is not just historical. Probably too much emphasis has
been put on spend analysis (for the right reasons though), that enables
discovery of savings opportunities. Discovery of opportunity is one thing but
harnessing these opportunities to formulate the right sourcing strategies,
revamp and renew contracts, and drive compliance to realize the savings
identified, is a totally different ball game.

The issue of visibility is not just about historical spend data, but 360? across
the entire procurement transformation value chain.

Users want visibility into prefer redsuppliers and contracts at the time of
making a requisition, Sourcing Experts want deep visibility inside commodity
categories and supplier performance metrics, Vendors want visibility inside
their electronic invoices and forecasted demand, and corporate chieftains
want visibility against their stated compliance drives.

Compliance Maximized | Savings Realized info@globaleprocure.com

 Simplifying Procurement Technology www.globaleprocure.com

So who is to blame?

Procurement Technology needs to morph and become more 'business

friendly' than its current state of being. Granted most products have
become mature in terms of feature sets and strategies, but the key
issues of underlying data, 360 degree visibility, compliance
everywhere and feature management, remain poorly addressed
resulting in slippage of projects, and retarding adoption.

One trend towards simplification is the shift to on-demand

procurement transformation platforms. This is a movement in the right
direction, though on-demand today, comes at a price.

Vendors are not able to leverage the multiple instances of software

that they setup for their customers, and in almost ALL cases, on-
demand is only about outsourcing the headache of infrastructure
management. On-demand could mean a lot more if the core
technology was simplified, and cast in the right framework.

For e.g: simplified services oriented architecture can help create

massively multi-tenanted procurement platforms, where participants
can leverage a common knowledge base.

Compliance Maximized | Savings Realized info@globaleprocure.com

 Simplifying Procurement Technology www.globaleprocure.com

Procurement Transformation will never be a stand-alone exercise for any

customer; it shall succeed only through participation of partners and vendors,
and running a mix of processes both inhouse and outsourced. Both vendors,
partners and customers will stand to benefit if collaboration is enabled in a multi-
tenanted setting.

A simplified Data Management framework where an entire organization relies on

ONE standard (such as UNSPSC) to connect different processes, is a better bet
than building complex master data management networks. A light-weight
standards based crosswalk along with a coding engine embedded at-source will
help keep data clean, from the point of entry to the warehouse, and keep the data
business-friendly, enabling people to view the data in a format of their choice and
defining standard.

'Compliance everywhere' will not remain an utopian dream and can be realized
only when it becomes easy to wire-up a business process with a generic
compliance 'service'. Since compliance requirements are dynamic by its very
nature, a process manager or supervisor should be able to use business rules to
drive compliance, on-demand.

Feature Management will make the procurement transformation exercise very

investment friendly. Users should be able to pay for features on the tap. Users can
pick and choose modules to start the journey with the lowest investment
possible, but quickly spread their wings as they realize the benefits to their
bottom line. A very aggressive roll-out and deployment capability will mean that
customers are not penalized by the limitations of a stack lock-in.

The realization of this vision of simplified technology is not far away. Many
vendors are aggressively engineering services based procurement platforms,
and are driven internally by such a vision. Customers on the lookout for potential
solution partners must balance their search for credibility and proven solutions
with 10 demonstrable evidence to stay on the leading edge.

Technology is changing fast, and one has to safeguard against obsolescence. Yet
at the same time, one needs to safeguard the investments being made, by
putting the right combination of people and process expertise to harness the
benefits. Ultimately it always is a people, process and technology game.

10

Compliance Maximized | Savings Realized info@globaleprocure.com

 Simplifying Procurement Technology www.globaleprocure.com

Tech Trends worth watching

Procurement Technology will get increasingly simplified while

?
undergoing radical design changes to adopt a services oriented
architecture. It will be independent of underlying transactional ERP
systems. The technology will be thin and lightweight, and deployed
across a global virtual organization, on-demand.
Business Stakeholders will drive the selection, design and
?
implementation of procurement software, and IT groups will be
increasingly kept out of the loop.
Procurement Teams will prefer flexible software, delivered on-
?
demand. Feature Sets will give way for the 'ability' to drive using
business rules.
?Procurement Technology will be built 'virtual organization' ready.
Procurement processes will move off-shore, co-locate, or be in-
sourced as the market demands, and software has to be made
ready to deploy anytime, anywhere.
?Data Management, 360 Visibility and 'Compliance everywhere' will
be the 3 key issues that will make or break a procurement
transformation initiative. Most other features will be a commodity
and may need to be custom wired to match the particular demands
of an enterprise.

11

Compliance Maximized | Savings Realized info@globaleprocure.com

 www.globaleprocure.com

Do you subscribe to the vision of

About Global eProcure:
simplifying procurement technology? Global eProcure is a leading procurement services company offering
I look forward to your a unique blend of consulting, technology, and procurement
comments and thoughts. outsourcing. Our goal is to help our clients achieve their compliance
and savings targets through tailored solutions that combine the right
Email me at: combination of innovative technology, industry expertise, and proven
subhash.makhija@globaleprocure.com best practices. Focusing on realized savings that directly impact the
bottom line is how we measure the value we bring to our customers.
About the author
Global eProcure is a privately held enterprise with global
headquarters in Clark, NJ and offices throughout Europe and Asia.
For more information, please visit www.globaleprocure.com

Dr. Subhash Makhija

CONTACT INFO
CEO, Global eProcure
EMAIL US AT
As the Chief Executive Officer of info@globaleprocure.com
Global eProcure, Subhash has been
instrumental in guiding Global CALL US AT
eProcure into one of the fastest
growing technology and consulting
(732) 382- 6565
companies in the U.S. Subhash
provides the vision and leadership VISIT US AT
critical in building relationships with
investors, customers and strategic
www.globaleprocure.com
partners.
Global eProcure, 100 Walnut Avenue,Suite 304, Clark, NJ 07066

Compliance Maximized | Savings Realized info@globaleprocure.com