Procure With Caution

Complex dependencies may stall e-procurement adoption in sluggish economy

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

The Human Factor

Intellectual capital guru Nick Bontis discusses KM's missing link

Nick Bontis, Ph.D. is the Director of the Institute for Intellectual Capital Research Inc., assistant professor of strategic management at the Michael G. DeGroote School of Business at McMaster University in Hamilton, Ontario, and chief knowledge officer (CKO) of Knexa.com Enterprises Inc. Bontis is a frequent lecturer on knowledge-related topics at conferences around the world. We spoke with him at the InfoToday 2001 conference in May. An excerpt from that interview follows.

IE: What is the state of knowledge management (KM) in the enterprise today?

Bontis: The KM technologies are suffering from poor return on investment, simply because the KM decision has been made by a CKO, who's a brand-new individual, or an IT individual, and neither of them have ever consulted with human resources (HR), which knows how to motivate and compensate employees.

One of the missing links right now in KM is integration with HR policy. We can motivate, compensate, reward, and recognize employees by giving them incentives to use the KM tools that we're investing in. The problem that I see in large KM implementations is one of participation.

IE: Do you think that enterprises are making full use of their own intellectual capital?

Bontis: Absolutely not! The latest research that I've seen shows that 2 percent of what we know is being leveraged by the enterprise. If you were to look at it from an operations perspective, most factories operate at between 70 and 95 percent capacity utilization. If a factory drops its capacity utilization [to] less then 50 percent, we shut it down. We're operating at 2 percent knowledge capacity utilization.

IE: What do you think are the main challenges in KM for the enterprise today? Extracting tacit knowledge from employees or retrieving knowledge?

Bontis: I think anything technological is easy. It's the human stuff, that's the biggest challenge with KM right now. Sometimes you go to a KM conference and you see 95 percent of the exhibitors are technological tools. Why isn't it 50 percent technological tools and 50 percent HR consultants? The HR community is missing a huge opportunity in KM.

The problem, though, is the culture and the human problem. Having the CEO answer the questions: Do we know what we know? Who in my organization of 50,000 employees do I go to - to solve this problem? It's having CEOs develop among their senior management team the behaviors that they want to see in the rest of the organization.

To read more of this interview, visit www.intelligentKM.com.

— Chuleenan Svetvilas

Pass the P3P

Microsoft tosses new sliding-scale technology into the privacy ring

Microsoft plans to incorporate the World Wide Web Consortium (W3C)-developed Platform for Privacy Preferences (P3P) specification into its Internet Explorer 6 and Windows XP operating system, both available in fall 2001. P3P lets Internet surfers select levels of privacy protection in dealing with Web sites, and in particular with the sites' use of cookie files. But many analysts question whether P3P is sufficient to protect users' privacy and worry about possible Microsoft domination of Web privacy.

The privacy tools in Internet Explorer 6 will let people choose from five privacy level settings, according to their privacy preferences. With the sliding scale of protection levels, the tool provides consumers with information about the types of cookies used, where they originate, whether sites collect personally identifiable information, and whether collected information will have secondary uses; based on Web sites' XML-based P3P privacy policies.

However, some privacy advocates argue P3P leaves too many problems, such as the need for widespread Web site compliance with the standard and the potential frustration of users who are expected to understand the complexities of third-party cookies and opting out of ad network tracking. While some major Web sites are embracing Microsoft's plan, others are taking a wait-and-see stance.

Junkbusters President Jason Catlett, a longtime P3P critic, commented, "Microsoft's 'thermostat setting,' where surfers are required to tell their PCs how much they will tolerate being [under surveillance] gives a misleading and dangerous view of privacy. People shouldn't be forced to trade privacy for participation. People need legally guaranteed privacy rights to control the data collected about them."

Microsoft prefers to leave privacy decisions to individual users. "Rather than telling consumers what privacy level is right for them, we have provided a tool that will allow them to determine the appropriate level for themselves," said Tonya Klause, a Microsoft spokesperson. "We feel it shouldn't be up to the privacy advocates or Microsoft to make a blanket decision for consumers in every country." Klause added, "Microsoft remains cautious when it comes to additional regulation around privacy."

In addition, many find Microsoft's default setting too lenient - an important concern of critics who believe that the complexity of the system may leave many users with a de facto choice that doesn't meet their privacy needs. Microsoft officials said in a Wall Street Journal article (March 21, 2001) that default settings blocking most advertising and data collection activities are unrealistic. Furthermore, the higher levels of protection may disrupt rapid Web surfing, which would result in many users simply turning the tools off.

Other vendors are also readying or have available P3P-compliant products, such as IBM's P3P Policy Editor and YOUPowered Inc.'s Orby Privacy Plus. Data collection and advertising is big business, but perhaps privacy tools will be just as lucrative.

— Michelle Nichols