Purchasing Transformation

Jason Busch’s Analyzing comparative claims piece on Coupa‘s Ariba-bashing marketing campaign has caused quite a stir. And not without due reason. Jason has correctly pointed out a number of shady points in the Coupa campaign as well as clearly juxtapositioning the two competitors.

But there are a few areas where the correct analysis unfortunately gets in the way of pragmatically successful purchasing; namely how we define maveric spend and which path one needs to take when tackling this dilemma.

One of Coupa’s big differentiators is the iRequest and iBuy features. In brief it enables end users to browse online-stores to requisition items. The items are then submitted for approval and the actual purchase is carried out by a purchasing professional.

Commenting on this functionality Jason Busch writes:

“…however, in larger organizations, iRequest and iBuy defeat the purpose of rationalizing spend with specific suppliers to hit volume-discount thresholds. Going to non-contracted supplier sites through iRequest and iBuy may not constitute a maverick purchase in the purest sense, but it’s certainly close to one, given the lack of a contract, price sheet, and potential discount/rebate schedule.”

And whilst he is correct in his analysis, I’ve experienced first hand on numerous occasions how exactly this type of functionality and behavior has paved the way for successful e-procurement implementation as well as development.

When I started out with e-procurement back in the dark ages before the dot-com era our free-text requisitioning was the one killer app that successfully won over a reluctant user base.

• First, it made it possible for end-users to still use their preferred suppliers
• Second, the purchasing department could when possible steer the purchase towards contracts
• Third, the purchasing department could analyze buying behavior and end-user preference to optimize the supplier network
• Fourth, skillfully navigating the above criterion, the purchasing function was able to minimize maveric spend while transferring spend towards contract suppliers

To this day – the very company that I started my procurement path within is still applying these fundaments in successfully rolling out e-procurement to a global organization (~100 countries). It eases the change management process as well as enables e-procurement roll-out to locations that are off the map in many cases.

There is a big difference between uncontrolled maveric spend and allowing end-users to show their preferences while still retaining control. And lest not forget that in the latter case, there will be a pre-approved purchase order sent out to whatever supplier, a PO that can be matched against an invoice, minimizing administration.

Call it what you will – iBuy, iRequest, free-text requisitioning – to successfully roll-out procurement you need a procurement solution that goes well beyond traditional catalog e-procurement. Jason also points this out and gives a heads up to Vinimaya which I can only applaud; from what I’ve seen, they have some great stuff up their sleeves.