Daily Archives: October 3, 2008

Public Sector vs. Private Sector Procurement : Does One Size Fit All? II

Yesterday we noted that if you were looking for a way to quickly and easily segregate the vast array of companies offering procurement solutions in the marketplace, you’d quickly find that they could quickly be divided into those that almost exclusively serve the public sector and those that almost exclusively serve the private sector. We also noted that public sector organizations operate quite differently than their private sector enterprise counterparts. We then discussed the differences in day-to-day procurement public sector organizations vs. private sector enterprises.

Based on the operational differences we identified, we reviewed the fundamental differences in workflow, awards, and approvals and discussed the underlying technology required to support both the public sector and private sector needs. And we found something quite surprising – pretty much the same solution was needed in both cases. Which left us scratching us head and asking, so what’s the difference?

Well, when you get right down to it, there are no differences in the fundamental e-procurement technology requirements for public sector and private sector organizations. They both need to create RFXs to solicit information, accept bids, generate awards, create and approve contracts, cut purchase orders and goods receipts, accept invoices, issue (e-)payments, and track and report on spending. And they need to be able to do it in a smooth and integrated manner that minimizes data entry (and eliminates rekeying of data already in the system, as that just leads to human error).

The fundamental differences are in the processes they use. Public sector organizations have one set of rules for whether it’s a public RFX, renegotiation with an incumbent vendor, or a direct award and private sector enterprises have another. Public sector organizations tend to use the RFX, Bid Management, and Contract Management solutions more heavily than their private sector counterparts who are free to chase the award with the greatest long-term value and use non-discriminating e-auctions and cutting edge decision optimization to get the best value for their shareholders. But the fundamentals of procurement don’t change.

So why are most e-Procurement companies either or?

I think the answer is two-fold.
(1) Most technology-focussed solution companies don’t understand the differences between public sector and private sector procurement, and thus focus on one or the other.
(2) Most technology solution providers are still selling B2B 2.0 solutions, which have been customized for one environment or the other. In order to support both environments on one platform, you have to have very flexible workflows that are extremely customizable by the customer (to meet their needs) and a user interface that is trivially easy to use. This is easy with flexible B2B 3.0 solutions, but almost impossible with rigid B2B 2.0 solutions.

And if you have the right platform, you can easily support both types of customers.