Acquiring e-Sourcing and e-Procurement Technology

What Questions Should You Really Ask?

by Michael Lamoureux, Ph.D.

Editor-in-Chief, Sourcing Innovation

http://blog.sourcinginnovation.com/

Webinar Overview

• The e-Frenzy, in Review

• The e-Platforms of Major Concern

• Your e-Journey

• The e-Platforms Addressed

• A Note of Caution

• Vendor Selection

• Key Questions for S&P Technologies

• One Final Point of Advice

It’s an “e-” frenzy out there!

e-Sourcing e-RFX

e-Invoicing

e-Procurement

e-Auction

e-Contract

e-N

ego

tiatio

n

e-Contract

Management

Decision

Optimization e-Auction e-RFX

Spend

Analysis

Invoice

Goods

Receipt Reconciliation

Purchase

Order Payment

Approval Tax

Reclamation

Requisition Analysis

e - Sourcing

e - Procurement

© Sourcing Innovation, 2007, 2013

e-Negotiation

So

urc

e-to

-Pa

y

But not all e-’s are the same!

The e-Platforms of Major

Concern

• e-Sourcing

• e-Procurement

• e-Trade

• e-Logistics

• P2P

• S2P

Your e-Journey

• Start at 30,000 feet and identify challenges

• Dive to 10,000 feet and identify cause(s)

• Glide to 1,000 feet and find the process and technology gaps

• Identify the e-Solutions that may be capable of filling the

process and technology gaps

Your e-Journey explained

For example, if your biggest challenge is:

identifying savings opportunities & categories for sourcing events

then you need to determine if this is because you have a problem

• gathering data,

• analyzing data,

• building should cost models, or

• identifying category targets.

Your e-Journey explained

If your problem is:

gathering data?

you might need a data store or integration effort

analyzing data?

you likely need a good spend analysis solution

identifying category targets?

you might need category expertise and a BI solution

building should-cost models?

you might need a decision optimization solution

… will often lead to a Major “e-”

• e-Sourcing

• e-Procurement

• P2P (Procure-to-Pay)

• S2P (Source-to-Pay

… and these are the solutions we will focus on in this

presentation.

A Note of Caution

• Vendors use the same e-Terms differently

• There are commonalities between use, but they are not

always consistent

• It’s important to understand what is common and what is not

Vendor Selection – The “Real” Overview

• Key Points of Consideration

• List the Potential Vendors

• Send them the Business Needs RFI

• Disqualify those that can’t serve the business

• Define the Functional Needs

• Send those that remain the Full RFP

• Disqualify those without core functional abilities

• Build the Cost Models

• Judge the Responses

• Meet with the Top X that make the cut

Key Points of Consideration

• C-Suite Support is Vital

or you won’t get past the requirements gathering

• Don’t Forget IT

or don’t be surprised when you get backstabbed

• Preferred Vendors are best organizationally,

not who is best for Engineering, Marketing, etc.

• Trade Rags & Analysts Give you Bad Vendor Lists

they have to promote who pays them

• There’s always multiple options (BoB, BoB-on-ERP)

and multiple delivery methods (On-Site, ASP, SaaS)

Key Points of Consideration

• It doesn’t matter how strategic the vendor is

only how strategic its solution is to your business

• It’s not best practices

it’s best-fit practices

• Never disqualify for minutia

only for megutia

• Stakeholders don’t know what they need

only what they need done

List the Potential Vendors

• The Vendors should advertise

even in a down market

• … and be on the tips of peers’ tongues

and be given some positive promotion

• … and be mentioned by the analysts

with some not-negative comments

The Business Needs RFI

• What countries do you do business in?

• What currencies, laws, and regulations need to be

supported?

• What languages do your, and your supply base, need to be

supported?

• What support services do you require?

• What geographies do you need help in?

The Business Needs RFI …

Continued

Supplier Qualification. What is the supplier’s

• background? (formation, product history, etc.)

• ownership and financial situation?

• office situation?

• operating culture?

and who are the supplier’s

• competitors?

• customers (that you can talk to)

The Functional Needs

• From a back-office perspective

(Finance, Procurement, & IT),

• From a stakeholder perspective

(Engineering, Marketing, etc.), and

• From your supplier perspective

(What is the Tech. Level of Competence)

And Chuck the Checklist.

RFP Templates are Poison Pills.

The Full RFP

• Outline the full RFP selection process

• Outline the Functional Needs focus on the processes that must be supported

• Define any necessary integrations and any standards that must be adhered to

• Ask what is required to get the full benefit 3rd party system integrations, specialized training, supplier onboarding, etc.

• Where will you likely be in 6, 12, 24, 36 months?

• Who needs to be trained and how long will it take?

• What is the full cost breakdown over 1, 3, 5 years?

The Cost Models

• On-Premise, Hosted ASP, and SaaS/Cloud require different

cost models

• The cost should be computed for 1 year, the number of years

you expect to keep the platform, and +/- 2 years to

understand the total cost of ownership

On-Premise Cost Model

• License Cost (Up Front)

• Maintenance & Support (Annual)

• Dedicated Server Costs

• Supporting Software Costs

• Implementation & Customization Costs

• Integration Costs

• Training Costs (Up-Front)

• Internal Support Costs

• Major Software Upgrade Costs

• Hardware Upgrade Costs

• (Re)Training Costs (on Upgrade)

Hosted ASP Cost Model

• Annualized License and Maintenance Cost

• Annualize Hosting Cost

• Major Software Upgrade Costs

• Implementation & Customization Costs

• Integration Costs

• Training Costs (Up-Front)

• (Re)Training Costs (on Upgrade)

SaaS / Cloud Cost Model

• Annualized License, Hosting, and

Maintenance Cost

• Implementation & Customization Costs

• Integration Costs

• Training Costs (Up-Front)

Judging the Responses

• Core solution litmus test

• Willingness to adapt

• End-to-end total cost of ownership elucidation

• Third party claim verification

• Open-book negotiations

• Open finals

Don’t Forget the “Gotchas”

• e-Sourcing and e-Procurement Technology is mature and most functions commoditized

• The ROI of any solution should be quantifiable, measurable, and known to the vendor

• An Uncombed Contract is Full of Thorns - toothless SLAs - exorbitant gratuities for that “free-lunch” - hidden future costs - meaningless escrow

• The “Big Lie” asking a vendor if they can provide “X” after they are shortlisted will almost always elicit a “yes” even if the vendor cannot; always ask how they solve “X-Prime”

Key Questions for S&P

Technologies

We will cover some key questions for:

• Spend Analysis

• RFX and Auction

• Optimization

• Contract Management

• e-Procurement

• Supplier Networks & Catalogs

• e-Payment

Spend Analysis Questions

• How much flexibility do I have in spend cube creation?

• How should I deploy spend analysis?

• What if I am resource constrained, and I need to outsource spend cube services?

• How much reporting flexibility do I have?

• What should I know about data cleansing?

• Does the tool support derived and ranged dimensions?

• Can the user fix any desired set of filters while pivoting and drilling?

• What if I have multiple accounting systems?

• How easy is it to get data in and out of the system?

• How much knowledge is captured in the application?

• How easy is to to change and add reports on the fly?

RFX & e-Auction Questions

• How much flexibility do I have in form definition?

• Can I build advanced sourcing grids?

• Can the forms be completed by the vendors off-line?

• Are the forms secure and uniquely identified?

• How easy is it to export the response grids for analysis?

• Can I define my own bid type(s)?

• Can the tool support complex formulas, splits, and cross-

lot rankings?

• Does the tool integrate with an optimization solution?

Decision Optimization

Questions

• Are the four pillars of strategic sourcing decision optimization satisfied?

1) Sound & Complete Mathematical Foundations

2) True Cost Modeling

3) Sophisticated Constraint Analysis

Capacity/Limit; Basic Allocation; Risk Mitigation; Qualitative

4) What-if Capability?

• Does the application support the creation and comparison of multiple what-if scenarios?

• Does the application automatically identify the most constraining and costly constraints?

• Does the application support the automatic creation and solution of relaxed and perturbed scenarios?

• Does the application support make-vs.-buy and arbitrary product substitution?

Decision Optimization

Questions … Continued

• How fast is it for different average model sizes?

• If it supports "real-time" is it "true" real-time or "near" real-

time?

• What situations have you encountered where you could not

model the situation exactly?

• Can we do a pilot project before committing to a long term

license?

Contract Management

Questions

• Does it allow you to define your own meta-data dimensions?

• How easy is it to export the meta-data, or any desired subset, in a standard format recognized by other Sourcing/Procurement apps?

• Does it support free text search? And does free text search work?

• Does it support proactive alerts - on contracts NOT composed using the standard templates or built-in functionality?

• Does it support buy-side and sell-side contracts?

• Is it easily accessible and usable by everyone in the organization?

• Does it support the creation and management of initiatives such as risk management and IP-based revenue generation around your contracts?

• How hard is it to get the data AND contracts out of the solution?

e-Procurement Questions

• Does it support requisitions, orders, goods receipts, invoices,

and m-way matching in an integrated fashion?

• Does it integrate with a modern supply/commerce network

offering that lets you and your suppliers manage your

catalogue and pricing?

• Does it integrate with your payment system and allow

payments to be correlated to invoices?

• Does it support true end-to-end invoice automation?

Supplier Network / Catalog

Questions

• Does the solution support integration with your suppliers'

current solutions? What's involved?

• Does it support the integration of multiple catalogues into one

coherent view?

• Is it expensive for suppliers to use the supplier network /

catalogue management solution?

• How did you amass all of the suppliers currently in your

network?

• Does it allow for override pricing based on business rules?

• Can the solution be integrated into our current e-Procurement

platform?

e-Payment Questions

• Does it integrate with our ERP and/or e-Procurement

Platform?

• Does it integrate with our AP system?

• What level of volume can the system support?

• Does it detect duplicates?

• Does it support early payment discounts?

• What is the true cost of the system?

• How are rejected transactions managed?

• What types of payment are supported?

One Final Point of Advice

Make the Decision Committee-Based

Don’t be ruined by Maury the Management Moron

Look at that nice flash interface with fancy dashboards and full

color graphical reports. It’s obviously a superior product. After

all, how else would MoneyPit have all of our "big-name"

competitors as customers?

http://blog.sourcinginnovation.com/2012/10/23/why-your-peers-buy-stupid-

products.aspx

And If You Need RFP Help

Sourcing Innovation

would like to remind you that there’s

RFP HELP HERE!

http://blog.sourcinginnovation.com/2008/09/10/reminder-rfp-help-is-

here.aspx

Thank You!

Any Questions?

“How can I get the slides from today’s webinar?”

Type of account: Premium Membership All-Access Corporate

Subscription

NLPA webinar slides and on-

demand replays

Templates (e.g., RFP, cost

savings, etc.) Transcriptions from interviews

with procurement experts

All online Express Courses

All full-length online courses,

including certification

Access for entire department

Cost Starting at $15.99/mo. Call for quote

+1-412-294-1990

Have a Great Afternoon!

the doctor has left the building!