Free Procurement Isn’t Free — So Why Are We Going Through This Again?

Apparently SpendMap, a relatively unknown provider of Procurement software (compared to the big guys), has decided on the marketing strategy of “Free Procurement” to make a name for themselves and, hopefully, get their software known.

the doctor really wishes they would have consulted with him, or another knowledgeable analyst who has been around for a decade, before making this decision. “Free Procurement” doesn’t exist, and it’s just gonna bite them in the rear if they don’t do the smart thing, like Coupa did, and drop it.

This isn’t the first time, or even the second time, a company has tried this, and it didn’t work then for the same reasons it’s not gonna work now. Most people don’t remember, but way back when Coupa launched on Procurement Independence day, they offered a free downloadable, streamlined, do-it-yourself version of their software. Anyone could download this RoR (Ruby-on-Rails) code bundle, install it, test it, and use it for free as long as they wanted — if they could install it, configure it, get it working to their liking, and deal with any bugs that managed to slip though. (And installation wasn’t a breeze, mainly because you had to get the RoR stack working, which wasn’t a breeze to do in the early days of RoR.)

Then, a few years later, a company called Bupros (remember them, probably not, but they are still around) decided to make the same play. They also released an open source PHP community edition of their procurement software about 3 years after Coupa and still no one knows their name. (And installation of this, despite being three years after Coupa, was even more painful. PHP is a nightmare — unless you are using the same version on the same stack in the same environment it was developed and tested on, something is not gonna work right. Plus, their documentation didn’t quite sync up with their download and the doctor remembers spending the better part of a day for what should have been a 30-minute install just to get basic functionality going. [Remember, the doctor has a PhD in CS and has been a Chief Scientist, Chief Architect, and CTO and has been coding for over 25 years, so when he says something should take X time, and it takes 10 time, you can trust that assessment is reasonably accurate.])

So why isn’t there any such thing as “Free”? And why doesn’t “Free” work?

First of all, when it comes to Procurement software, especially do-it-yourself procurement software, as per our classic post on Uncovering the True Cost of On-Premise Sourcing & Procurement Software, it’s not just the license cost. It’s the cost of the hardware and middleware infrastructure (which could include databases, web servers, third party middleware, etc.) it runs on. It’s the cost of the installation, which, as per above, can take a lot longer than the provider will say it will (because only their developers know all the gotchas to watch out for and avoid), integration with any third party systems that need to push data in or pull data out, and maintenance. It’s the internal training and support costs. And these costs can often be substantially more than the license fee.

And don’t get fooled by a pure SaaS offering either. Just because the license is free and you don’t have to buy servers, there’s still the integration costs (as someone has to figure out how to use the APIs to push data in and pull data out and actually do it), the training costs, the maintenance (as the provider upgrades the platform and introduces new connectivity requirements) and re-training costs (as new features or modified workflows require retraining). And then there’s the back-up costs (it’s free, which means no service guarantees, including no guarantee the platform and/or your data will still be there tomorrow) and contingency plan creation, testing, and maintenance costs (what to do if the platform, or your data, disappears). These add up. And they might be considerably more than just licensing the lowest cost product on the market where you have service guarantees, initial integration, maintenance, and regular (web-based) training or free access to a complete self-training audio, video, and manual library.

So, regardless of the intention of the provider, who might be trying to move you up the ladder or increase the visibility of Procurement software (which is an important component of success), don’t get taken in by free. When it comes to Procurement (or Sourcing) software, there is no such thing as free. Low-cost, yes, because basic procurement and e-negotiation-based sourcing functionality is now a commodity, but not free. Either you’re paying a provider, who can take advantages of economies of scale, or your paying IT and support staff (and possibly paying for more infrastructure). And if you’re small, you’re paying more when you go the free route.

If a company really wants to help small and small mid-size businesses get on a platform and modernize, they’ll go the low-cost consumer-based SaaS route and offer low-cost monthly licenses per user that a user can put on their p-card or credit card and expense monthly and, as part of that service, offer all of the support and reliability of other online service offerings (like SalesForce, Zendesk, etc.). But they will never, ever, offer, or push, free.

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