In this Issue: Procure With Caution
|
|
Recent conflicting reports about e-procurement adoption rates highlight the intricate issues surrounding this technology. According to InternetWeek (May 1, 2001), Deloitte Consulting concluded from its survey of 100 corporations that "e-procurement is a key strategic initiative." InternetWeek also reported on a concurrent Forrester Research report for the National Association of Manufacturers that provided both optimistic and pessimistic statistics on e-procurement adoption.
Dow Jones Newswires reported in the same period that the Gartner Group released a dismal statement from analyst David Hope-Ross that said the e-procurement market was flagging, which would lead to acquisitions of specialized e-procurement vendors, such as Ariba Inc., by large enterprise application vendors.
Why the contradictions? It's probably because the e-procurement market is so heterogeneous. Rajeev Kasturi, an SAP, supply chain, and e-procurement consultant, says a number of factors determine whether a company will go forward with an e-procurement initiative. They boil down to how much a company stands to gain and how quickly.
In this economy, the impetus to adopt an e-procurement system is cost savings. But unless an investment will result in a payback that can be realized almost immediately, it is less likely to win executive support in a culture driven by quarterly results.
In the manufacturing sector, maintenance, repair, and operation (MRO) procurement generates costs that are (albeit significant in absolute terms) small proportional to the costs of materials requirements planning (MRP) or "true" supply chain procurement. Therefore, in manufacturing, there likely isn't enough of an argument to allocate budget to an MRO e-procurement initiative right now. And MRP procurement is very complex; more difficult to improve with current technology.
However, in sectors such as insurance, retail banking, financial services, and healthcare, where a much larger proportion of costs are operational, specifically clerical, companies stand to gain a great deal through better integration and automation of their procurement processes.
Any company in an industry of a size that benefits from better asset management is more likely to consider e-procurement as well - although e-procurement is just one aspect of full life cycle management. Peregrine Systems Inc. of San Diego, Kasturi said, is doing well as a vendor in this space. At press time, Peregrine's market capitalization was $4.12 billion. Additionally, very large companies with the capital resources to plan ahead are also good e-procurement customers right now.
But despite the existence of customers, e-procurement vendors must contend with the overall dampening of sales. No matter how beneficial an e-procurement implementation is expected to be, said Kasturi, "the sales cycle is a lot longer right now." General caution about the economy has slowed down decisions about large investments, period.
— Jeanette Burriesci
In this Issue:
  
|
|
|
|
|
|