The eProcurement "Smackdown" Continues ...
Over on Supply and Demand Chain Executive, Andrew Reece penned an informative perspective on the recent hailstorm that Abedeen's Vance Checkett's conjured up when he examined the results that Ariba, SAP, and Oracle users realized after implementing their eProcurement systems. In the article, he writes that "one standout finding that Checketts cited is the number of customers of Oracle, SAP, Ariba and other "best-in-class" solutions that had 1,000 or more suppliers enabled. For Ariba, the figure was 20 percent, 14 percent for other "BIC" enablers, and 0 percent for Oracle and SAP." "BIC" stands for best in class, in case you were wondering.
But perhaps more important, Andy cites a comment from a Spend Matters reader that "it is typically more important to look at the percentage of spend captured within an e-procurement system: if 80 percent of your spend is with fewer than 50 suppliers, enabling more than 1,000 suppliers might be a lot of effort to capture relatively small portions of your total spend."
So in all fairness, perhaps SAP and Oracle SRM customers might be achieving decent returns relative to Ariba after all. But still, the fact that not one of SAP's or Oracle's customers achieved 20% enablement -- especially relative to the 14% of users who were best in class – says a lot. Personally, if I were an SAP or Oracle SRM shop and was not happy with the current level of supplier enablement, I would look to third parties to help enable both a greater percentage of spend as well as a greater percentage of overall suppliers. The good news here is that there's no need to "rip and replace" an older ERP SRM system with an upgrade to a more recent version or a different vendor to drive enablement. Rather, companies should look to enhance the capabilities of what they currently have by turning to true expert providers with focused enablement capabilites.
- Jason Busch
But perhaps more important, Andy cites a comment from a Spend Matters reader that "it is typically more important to look at the percentage of spend captured within an e-procurement system: if 80 percent of your spend is with fewer than 50 suppliers, enabling more than 1,000 suppliers might be a lot of effort to capture relatively small portions of your total spend."
So in all fairness, perhaps SAP and Oracle SRM customers might be achieving decent returns relative to Ariba after all. But still, the fact that not one of SAP's or Oracle's customers achieved 20% enablement -- especially relative to the 14% of users who were best in class – says a lot. Personally, if I were an SAP or Oracle SRM shop and was not happy with the current level of supplier enablement, I would look to third parties to help enable both a greater percentage of spend as well as a greater percentage of overall suppliers. The good news here is that there's no need to "rip and replace" an older ERP SRM system with an upgrade to a more recent version or a different vendor to drive enablement. Rather, companies should look to enhance the capabilities of what they currently have by turning to true expert providers with focused enablement capabilites.
- Jason Busch
If one accepts that point of view, quibbling about how many suppliers are enabled becomes less interesting, as long as the vast majority of the spend is covered.
In the indirect world e-procurement has been a mountain of effort due to its supplier enablement work. I was with a client just the other week who admitted that they only put tens of millions of spend through their e-procurment solution, while the solution itself has cost 3-4 times that. However, lately they have "seen the light” by taking advantage of exactly what you and Andrew point out; by going outside for additional help to make the most out their solution.
Adding to the complexities around supplier enablement, you have the real issue; you can't put more than (typically) one-third of your indirect spend through an e-procurement solution. With most companies, this means most of the significant spend dollars like temp labor, IT contractors, legal, advertising/media services, etc. Although BIC vendors claim to address it, the reality is that there is a big difference between simply allowing users a way to requisition these complex indirect categories and actually put these completely under management (from source-to-settle) without having a landscape of several niche vendors that deal with each category individually. I have read many times where Verticalnet was compared to Emptoris. And where I would agree that they do overlap, there were many companies that had both solutions in to manage different categories of spend/sourcing due to each having better experience with different commodities.
It’s not uncommon today to see a client/prospect that has SAP for ERP, Procuri for easy-to-use sourcing, diCarta (now Emptoris) for contracts), Verticalnet for complex transportation sourcing, Ariba for traditional e-procurement, eLance for certain services, Newline Noosh for print, Manpower for temp/contingent, Perfect for catalog management, and so on. The reality is that there are two solutions to this problem; consolidation by niche players (although we’ve seen the integration issues and long turn around times associated with these strategies) and/or ERP furthering their reach (I think we all agree that it’s only a matter of time before Henning Kagermann and Larry Ellison complete that strategy).
Lastly, and to your point, the clients are spending tens of millions on one of two ERP solutions. They really want to leverage that investment. Now if there was a way to still leverage their investment through a SAP or Oracle offering AND bring the functionality at or beyond parity with BIC vendors, which would be ideal. Luckily for me, that's exactly what we're doing with Oracle in the SRM space.
The world of niche software vendors is already crazy for clients to keep up with and sort through. Each client that I speak with tells me horror stories of hundreds of calls from niche vendors calling each week trying to sell some "unique value". They continue to say that their internal IT organizations are all but mandating that they first try to look within the core IT direction in terms of their ERP offering before going out to market for niche solution.
I think our space will come down to trying to figure out how organizations can get the most out of their existing investments in ERPs. I also believe that this idea of working with and not against the ERP vendors will be the long-term staying power of the SRM vendor landscape over the next several years. You already see some niche vendors like Emptoris doing things to make SAP (for example) better and more robust for the SAP community. In my opinion, the folks that will be able to adapt to the changing market will find long-term success (or an attractive acquisition target).