The Amazon Effect Is Aptly Named

CPO Agenda recently ran an interesting article in their Winter edition called The Amazon Effect which, although it asked a good question, did not, in my opinion, give a full answer. The article made a great point when it noted that many users find traditional e-Procurement systems frustrating when compared with consumer websites. This is one of the main reasons why CAPS Research in 2006 found that only 36% of total spend goes through an e-Procurement system in most organizations, as quoted by the article. The reality is that systems like SAP are so complicated, that even experts have problems.

But let’s get one thing straight – even though, as Aberdeen pointed out when it noted that efficient e-Procurement initiatives increase the spend under management by 35% in an average organization while reducing maverick spending by 41%, implementing a user-friendly e-Procurement system will go a LONG way towards increasing organizational use (and maybe even lead to a 433% improvement in spend under management in extreme cases), it won’t solve all your problems. Let’s face it – not everything you buy is office supplies or other products that neatly fit with the “shopping cart” system that so many vendors these days are trying to reduce their e-Procurement systems to. Can you put a “temp labour worker” in a cart? (In the US? Legally?) Can you put “customized machining services” in a cart? Can you put a non-catalogue one-time buy in a cart? Depending on the flexibility of the cart application, the answer could be a resounding no.

The strength of an e-Procurement system lies not in its look and feel, but in how much organizational spend it can capture – since that’s where the true value of an e-Procurement system is. Usability is important – but if the system can’t capture non-traditional spend, and can’t do so in a straight-forward and efficient manner, users will continue to bypass the system regardless of how slick it’s cart interface is. It’s time to wake up and smell the coffee – enterprises aren’t consumers. They don’t go down to the local office supplies store and buy a ream of paper, a pack of pens, and a can of coffee for the home office. They buy office supplies by the palette, custom products by the thousands, or millions, and temp labor services on the fly. If you can’t handle that – then nothing else matters.

So, the Amazon Effect is merely that – an effect. It’s not a solution.