Thursday, July 31, 2008

A State Gets Smart

Those of you who follow the public sector space may know that the State of Georgia recently selected SciQuest's e-procurement tool. State agency employees in Georgia who need to buy anything from pens to asphalt will shop in SciQuest's web-hosted electronic catalogs which will be populated with pre-priced goods and services from the State's existing supplier agreements. This decision by the State of Georgia is notable for two reasons - (i) it is another example of an organization electing to carry out its purchasing transactions in a best-of-breed e-procurement tool as opposed to the purchasing module its existing ERP system (numerous Fortune 500 companies have gone the EP route following sunk ERP investments and the State of Georgia already has PeopleSoft) and (ii) it is also an example of another state government that is moving ahead strongly with a strategic procurement initiative (other states moving to transform their procurement function include Virginia and Indiana to name just two).

The shunning of ERP's historically much-maligned inbuilt purchasing functionality in favor of e-procurement is a trend that I would expect to continue both in the private and public sectors. Not so much due to application functionality (a gap that that I would say doesn't really exist anymore since the ERP vendors have refined the workflow in their own e-procurement modules) but due to the fundamentally different way that the best-in-breed providers and ERP vendors handle catalog content. All of the e-procurement providers utilize web-hosted catalogs pre-populated with many of the vendors and products that most buying organization will need (and with the capability to have the organization's specific contract pricing built in). And if a customer has vendors that are not already in the pre-populated catalog it is a simple task for the e-procurement provider to request product and pricing from those vendors and load them into their web catalog. With an ERP provider's e-procurement solution, however, you are most likely going to have to build your catalogs behind your firewall, involving considerably much more time and expense. And now that the best-in-breed e-procurement providers all integrate so perfectly with ERP (e.g. with accounts payable to enable payment reconciliation), why would you ever go the ERP purchasing route? I wouldn't.

As regards Georgia's general procurement transformation initiative, expect to see a lot more of this from state governments in the next 2-5 years. State governments have long presented a massive challenge for creating value from procurement due to their extreme decentralization. Often hundreds of state agencies within a state making their own procurement decisions and developing their own price agreements with suppliers. To complicate matters even more, agencies usually have their own financial and purchasing systems meaning there is no centralized store of data from which to build a consolidated picture of total state spend by category, supplier and agency - key information for identifying and developing aggressively discounted price agreements with suppliers. Rounding out the challenges for states in the this area are a lack of a strong mission/vision/strategy for a center-led approach to procurement and a shortage of strategic sourcing skills among current state procurement staff.

As regards my state procurement crystal ball I would expect to see (or would HOPE to see) state governments address the following five areas:

- Develop and broadly communicate a center-led strategy for procurement in the state with the centerpiece being a strategically focused, "center of excellence"-based central procurement group

- Conducting a best practice spend analysis to develop a consolidated cross-state picture of spend by agency, supplier and agency

- Based on the spend analysis, develop and implement a sourcing roadmap with the objective of maximizing the amount of state spend under cross-agency ("state-wide") leveraged price agreements

- Upskill the central procurement group with the required training in best practice strategic sourcing methods (or hire where needed)

- Implement a state e-procurement system with web-hosted electronic catalogs to drive maximum spend through the new price agreements

Thursday, July 17, 2008

Guest Starring on E-Sourcing Forum

Just a heads up to my global audience that for a while I will be guest blogging regularly on E-Sourcing Forum, one of the most widely read blogs on procurement and spend management. E-Sourcing Forum is written by my friend David Bush, CEO of Iasta. Iasta is one of the leading providers of e-sourcing software and services, providing solutions for spend analysis, strategic sourcing and contract management. I'm not sure that Dave knows what he's letting himself in for, and I fully expect to be fired when Dave realizes how much my posts are lowering the tone of the place. Nevertheless, ESF will be where you can find me. Some of my upcoming posts will include:

Can Spend Analysis Have an ROI?

".....Numerous companies of all sizes across many industries are making high dollar resource deployment decisions in procurement while having little or no access to a piece of information that is critical to the procurement decision making process....."

A Cautionary Tale of Zero Investment (Released in the UK under the title "I Didn't Do a Spend Analysis but I Sourced Anyway")

A tale of dry holes and those who drilled them.

Surefire Strategy #8 For Producing a Consulting Train Wreck: "Just Focus on what You Can Control, You Can't be Blamed for Someone Else's Actions"

The pitfalls of assuming that you will not be held accountable for the mis-deeds of those over which you hold no sway.

Sunday, July 6, 2008

Can a Spend Analysis Have an ROI?

First of all I hope everyone had a great 4th of July holiday! To those of you who spend much of your work week waiting in airport security lines I also hope you were able to take valuable time out to spend with your loved ones.

This is a just a quick line to give some some early warning that one of the subjects I will be diatribing about next week will be the oft-asked question "how do I quantify the ROI of a spend analysis?". Now come on, admit it, you've asked this question at least as many times as "what happened to the equity in my home?" or "how do I get hold of a Prius?".

See you in the week...