The 6 Days of X-asperation: Day 6 – Questions to ask your e-Procurement Vendor

For our last post in the X-asperation series, we’re going to conclude with e-Procurement as we tackle the generic questions that you should be asking every vendor, and the types of answers you should be expecting. And just like the X-emplification post, we’re going to keep it short and sweet.

1. What do I have to do to get a good handle on how to make effective use of this technology, and for an organization of my size, how long is it going to take?

You need to answer the following questions:

  • Do I need to alter my processes to implement and use the system?
    If you need to do some process re-engineering, it’s probably going to take a couple of weeks, if not a couple of months, of work before you are ready for the system.
  • What do I need to do to switch over from my current system?
    Chances are you’ll need to undertake either a data integration, or historical data propagation, project and this needs to be adequately planned for. It will probably require at least a couple of weeks.
  • How long is it going to take to train people on the new system?
    You want your people to have some basic training on the new system before you switch over.

An average mid-size organization that needs to switch systems is probably going to need to do (at least) a few weeks of process analysis and preparation before it can switch to a new system, or bring a system in for the first time.

2a. How much functionality is my organization realistically going to be using in 12 months?

e-Procurement is for buying – and that’s as straight-forward as you get. If the tool is easy to use, then, provided that buyers can buy what they need, when they need it, they’ll use the e-Procurement tool to create requisitions, which in turn become purchase orders when authorized and result in invoices when accepted by the suppliers, which in turn get sent to the accounts payable system(s), and they’ll be doing this from day one. An e-Payment tool will be used to pay approved invoices to suppliers that accept e-Payments using accepted payment methods such as ACH or wire.

Unfortunately, lots of things can’t be bought effectively using many of today’s e-Procurement systems, despite vendor claims to the contrary. These include “soft” categories like commercial print, PC’s and computing, and contingent labor. Furthermore, allowing everyone in the organization to punch out to an office supplies catalogue typically doesn’t save a dime, although it may reduce the number of complaints to management about “how slow” Procurement is. So be cautious — very cautious — about the claims of e-Procurement vendors with regard to overall savings. After all, one only has to look at the history of e-Procurement, and the savings claims made in the past that were never realized, to understand that achieving savings goals is a much harder problem than simply enabling a catalogue buying system.

2b. How much functionality do I really need?

The ability to locate the goods and services you need in the system quickly and easily, the ability to create purchase orders, the ability to authorize purchase orders, the ability to accept and approve, or reject, invoices, m-way matching, and simple upload utilities that allow correctly formatted invoices to be uploaded directly into the accounts payable system(s),

2c. And how does this functionality solve my #1 pain today, which is X?

If you’re looking at e-Procurement, then you have two problems. Your tactical procurement team is taking too long to place and approve orders and your maverick spend rate is too high. You’re looking for a tool that makes it easy to add contracted goods and services to the system, to specify contract terms, conditions, and rates, and to allow approvers to verify that if there is a contract that covers a purchase, the contract is being used. If it doesn’t help your buyers buy and your CPO keep maverick spend under control, it’s not the tool for you.

3. How much training is my team going to require to effectively use the software? How long is it going to take them to absorb this training?

It shouldn’t take more than a day to get even the most junior of purchasing agents up and running on the full capabilities of the tool. Remember, it’s supposed to make their life easier – not harder!

4. How much is this software REALLY going to cost me in the first year and each subsequent year?

It depends on whether you’re buying a point solution, or a true end-to-end e-procurement system, and whether or not the system is enabled with catalogues, punch-outs, networks, or marketplaces. Point solutions are literally a dime a dozen and should be in the low five figures per year. True end-to-end solutions are rarer, and those integrated with useful catalogue or network solutions rarer still. True end-to-end solutions will be in the mid to high five-figure range per year and those integrated with networks or e-Payment solutions will be in the low-end of the six figure range per year.

5. You say you care about your customers and that you are going to provide great service. Prove it!

Ask for references. Talk to them. If the vendor has an upcoming user meeting or conference, ask to go to it. Ask for examples of results their customers have achieved on the platforms recently, and how they can help you achieve the same.

6. Can I take it for a test drive or a short term lease?

e-Procurement, by definition, is web-based, and good systems are at least hosted ASP, and most of the new systems are true multi-tenant on-demand SaaS, so the vendor should have no problem setting a couple of buyers for your organization up on the system for a test drive and should be able to give you access to any standard vendors it has integrated through punch-out, XML, or other means, into its offering. And they should be willing and able to give you short term access (for a week or two) to review it for free.

7. Can I buy it or implement it in pieces?

Just like you should buy the entire e-RFx or e-Auction tool functionality up-front, you should buy the entire functionality of the e-Procurement and e-Payment tool up front, as it shouldn’t be that expensive and you should get a slightly better price that way.