Wait...you mean there are procurement solution providers that help companies outside the Fortune 500?

on Friday, March 28, 2008

Debbie Wilson and Nigel Rayner recently named WhyAbe.com, Technology Insight and Decideware to their analyst’s list of “Cool Vendors in Procurement and Finance, 2008”. There were other vendors on the list, but I wanted to bring particular focus to the fact that these three companies are all privately held small businesses.

To be honest, I will admit I have special interest in one of these companies, WhyAbe.com, which is part of Source One. I spend a good portion of my time developing the toolset and interviewing users and I am excited anytime it receives recognition. But, back to the topic at hand….

To quote Gary, a commenter over at Spend Matters, “It's vital that Gartner and other influencers recognize small companies that innovate...because that's where the majority of all innovation comes from.” Well, fortunately it seems that Gartner is doing just that, as this is now a pattern of Gartner in recognizing the small players in the big market, as it is not the first year that they have done it. It is not just in the “cool vendor” reports either, Debbie and her colleagues seem to be particularly savvy about identifying non-mainstream providers even when the revenue selection criteria that most research firms tend to rely on so heavily is not appropriate.

However, as a whole I would say the industry publications, bloggers, and analyst firms (except for Gartner) still do a poor job of recognizing any of the small provider’s innovative, or more importantly, effective work in the marketplace.

As many blogs have noted, small businesses and free or inexpensive solutions do several things for the marketplace. Most mainstream providers will explain in their own marketing that they are happy to see the small businesses providing these solutions, as it forces them to “step up their game”, or improve their product. While this is undoubtedly true, most small businesses do not get the recognition they deserve for the results they are producing in the marketplace. They are often considered as a novelty solution instead of a inclusive solution and are almost always overlooked in research analysis.

It is a great marketing position to preach that 200 of the fortune 500 use a particular sourcing solution, but really does that mean the solution is right for a Fortune 1000 business, or how about a Fortune 2000, 5000? Are profit margins any less important to a $500 million manufacturing company? Can a company that size even support a pure technology solution properly? The answer, of course, is probably no.

The fact of the matter is, in most small businesses, the tools, solutions and processes were likely developed by real practitioners that have superior experience in their given areas. They are often entrepreneurs that realized they could do it better faster and cheaper than wherever they came from. When the businesses mature and grow at a rapid rate, the internal resources that are dedicated to producing results often lose focus of the original goals of their business, and the clients suffer with inflated prices and a weaker ROI.

The larger the consulting firm or technology provider is, the more standardized and commoditized their solution generally becomes. Building customized solutions that fit their client’s needs become something they say in their sales presentations, not something that they act upon in the implementation of their solutions.

Most of the users of WhyAbe that I have surveyed expressed the following reasons for using our solutions:
  • We cannot afford to purchase a large provider’s solution
  • We do not have the time to go through training and implementation of a major system
    And the most common response:
  • We did not want to change our processes to support a new solution; we were looking for something that compliments our existing processes.

I think the research firms miss that last point most often. Although there are killer applications out there that can help you become best in class with procure-to-pay and supply chain management, the fact of the matter is most businesses do not need it, or simply cannot support it. After all, most businesses are buying services or solutions because they are short on resources to begin with. When WhyAbe.com was developed, we set out to develop a toolset that gave businesses a plug-in solution to help supplement their constrained resources. We have many users that use the tools as a stepping stone to move on to bigger more robust systems down the road, and many that are happy to use them as they are. I think Deborah from Gartner hit the nail on the head saying that it is a great way for businesses to try things out with low investment.

I am not saying that the big providers do not produce effective solutions for their clients. What I am saying is, that as a percentage of client revenue and bottom-line profits, smaller firms are developing solutions that often surpass even the most recognized consulting firm’s results. However, the coverage in the marketplace is poor. The only stories we see are about a rollout of a new major product suite, big company product enhancements or the announcement of a customer or case study of a fortune 500 company.

Where are the stories and case studies for the mid-market companies?
I suspect I already know the answer; there is no money it in for the firms, bloggers and publications.

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Fleet Management: Open End Leases

on Thursday, March 27, 2008

Now we’re getting into the nuts and bolts. I feel compelled to provide a small disclaimer here. This is not going to be Chris Farley’s greatest hits. Also, this isn’t going to be a 400-level college class on fleet management. This is the basics to get you on your way. If you’re reading this, I’m assuming your [expletive] boss dropped this on your lap and now you have no choice. I will treat this as such, you unfortunate soul. I’ll try not to delve into much strategy here since there’s a lot to digest when it comes to these types of leases. In my next post, I will get into strategy a bit more and discuss when open-ended leases are appropriate.

If you have a corporate fleet, odds are, you have open-ended leases. They are by far the most common lease types in the corporate world. The most basic thing to know is open-ended leases generally result in you owning the vehicle. In a closed-ended lease, like most personal use leases, you relinquish the vehicle at the end of term, usually 36 months. You can buy it at that point, but are not under obligation to do so. In most open-ended situations, you’ve been paying for the vehicle for so long it becomes a de facto purchase on your part and you own the equity in the vehicle.

The second most basic thing to know about open-ended leases is you are not bound to mileage restrictions. This is what makes open-enders attractive to corporate fleet administrators; they know they won’t be whacked with mileage overage charges. The unfortunate thing is if you put some time into analyzing usage patterns, with most vehicles, you can decipher how many miles per year are required and can possibly get a better price on a closed-end lease, but few people have the time and/or insight to do this.

I can’t harp enough on the importance of considering resale price when going with an open-ended lease. As mentioned earlier (and will be mentioned many times hence) you likely own the vehicle when you sell it. Sell it for a good price! Consider this when going with an open-ender. Many people are short-sighted and only look at the monthly cost. Once you own the vehicle, paying small management fees to the fleet manager seems like a bargain, but in reality, you’re getting nickel-and-dimed on gas-mileage, maintenance, repairs, etc.

These are the basics. Next time we meet, I’ll discuss basic strategy to be smart about open-ended leases.
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Fleet Management: The Three Year Itch

on Tuesday, March 25, 2008

In this day and age, divorce is incredibly prevalent. Why not be like all the other cool kids and take the D-train and get a divorce…from your fleet, that is. Sure, your fleet isn’t cheating on you, but it more than likely is stealing your money. That’s as good a reason as I can think of. Get those papers filed, and here’s why:

There are a number of reasons to get rid of your fleet within a 36-48 month time frame; some of which I mentioned in my first post “Today’s Menu: Fleet, Well-done”. I will expand on some of these points in later posts.

Maintenance/Repairs: The older a vehicle gets, the more you’ll dump money into repairs and maintenance. Sales fleet vehicles, as compared to trucks, will typically last longer and not incur as high a price on maintenance and repair, but you can’t hold onto them forever either. Get rid of them sooner rather than later to avoid this cost.

Down-time: This goes hand-in-hand with maintenance/repairs. The older a vehicle is, the more maintenance and repairs it will need, the longer it is in the shop, the less productive your fleet will be.

Miles-per-gallon: The older a vehicle gets, the less fuel efficient it becomes. This wouldn’t move many people in the 90’s, but it’s a different story now when gas is over $100 a barrel. The larger the fleet, the more this becomes relevant.

Driver Morale: Give an employee a beater and they will beat it. Remember how meticulously you kept clean your first new car? How you wouldn’t dare let anyone eat in it? That’s how most fleet drivers will respect new vehicles. Remember how you could care less about the stains on the upholstery when that car was on its last leg? That’s how fleet drivers feel about having a Flintstone’s vehicle. This type of psychology can further depreciate an already depreciated vehicle. Give your fleet drivers a respectable vehicle and most will respect it.

Corporate Appearance: If you had a sales meeting with the CEO of a large potential client, would you show up wearing a pair of sweatpants with the crotch worn out? That ’97 Crown Vic you got for a steal at a sheriff’s auction is that pair of crotch-less sweatpants. If appearance is a priority to gain business, everything from the shine on your shoes to the car you drive up in is subject to scrutiny.

Unified Fleet: Replenishing the fleet at a regular interval enhances corporate appearance and helps maintain a fleet of the same vehicle. This makes employee transfers more manageable since everyone knows the capabilities of the vehicle they will be driving. It also makes for a unified corporate appearance. A great example is the Best Buy “Geek Squad”. When you see a black and white VW Beatle, without reading the logo on the side of the door, you know who it is. Dorky, but smart. Wouldn’t you want that kind of instant recognition?

Resale Price: In most corporate situations, you’re on an open-ended lease. Depending on the depreciation scale and vehicle usage, you more than likely own the vehicle when you liquidate it. Why not sell the vehicle when it can command a respectable resale price? Holding on to that vehicle for an extra year or two or three is typically not worth it. Think of it this way; you could have sold that vehicle for $3k three years ago, but in the meantime you spent $3k in maintenance, repairs, and despicable gas mileage keeping that vehicle in your fleet. That’s a swing of $6k. You didn’t think about that when you signed the lease papers, but it’s burning a whole in your pocket now.
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United States, the Next Low Cost Country?

on Friday, March 21, 2008

Several articles and blogs have recently mentioned that the United States is quickly becoming the Low Cost Country of choice for many overseas companies. Industry week published an article on this topic a couple of months back... As stated in their article: “Even low-cost countries are now trying to capitalize on the weaker U.S. dollar by snatching up machinery and software from U.S. manufacturers in order to foster their next wave of growth.”

When I first read the article a few months back, I quickly dismissed it as a short-term solution. I do not believe that the US Manufacturers could sustain a stable low-cost manufacturing and export program that could remain competitive with the rest of the low cost country world. However the US dollar remains weak and the long-term economic outlook still shows it will take some time to recover.

In the meanwhile, this week alone, I have been contacted from two mid-market European corporations and one neighboring company in Canada. In all three cases, the procurement managers have been specifically tasked with reducing procurement spend in heavy manufacturing equipment and were told to look to the US for the savings.

Interestingly, the majority of their purchases are already coming from China, but the belief is that the weak dollar (though they used a less politically correct term than “weak”), will far outweigh the advantages of low cost labor and overhead in our overseas competitors.

It will be interesting to begin these projects and grind through the analysis comparing prices, export costs, value added services, and the moving value of each currency. More importantly, with unemployment up and manufacturing down, I wonder how many US manufacturers will even be able to meet the demand and lead-times that are required in these initiatives and be able to ramp up production rapidly.

Either way, I still suspect that the long-term cost benefit will not be sustainable when the economy recovers.

To read Industry Week's Article in full click here:

http://www.industryweek.com/ReadArticle.aspx?ArticleID=15663

To start sourcing your products in the United States, Contact Source One


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Fleet Management: Fleet Managers; Friend or Foe?

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It is common practice in the business world to be highly suspicious of anyone selling a bill of goods; and rightfully so. On my way out of the brewpub this past weekend, I gave a cigarette to the last business flop who didn’t watch his money. But how suspicious is too suspicious? Sometimes paranoia and a rabid zeal to protect company resources means a true partner with a viable service is discarded like a bag of moldy tangerines.

When it comes to fleet management, most vendors fall into the friend, not foe category. Their interests are aligned with your interests. If for no other reason, it’s because setting you up with a cost-savings plan makes their lives easier. The best cost savings plan to the consumer is to replenish a fleet on a regular basis. At the same time, doing so automates the process for the fleet manager, which makes their lives much much easier. Otherwise, replenishment is based on spur-of-the-moment stock purchases when a vehicle kicks the bucket. This is not an enviable situation for the fleet manager. In that situation, the fleet manager is killing time online, checking last night’s lottery numbers to see if they can cash out of this god-forsaken industry, and they are interrupted by a call from you saying a truck cashed in its chips and they need a replacement RIGHT NOW! This throws the fleet manager’s life into disarray. So now, lack of preparation/apathy/stubbornness on your part necessitates an emergency on the fleet manager’s part. Now they have to go foraging the Joe’s Car Lot market for a vehicle you want. If you had been on a regular schedule of replenishment, a factory order would have been placed well before the vehicle flat-lined which would have saved you money and would have not interrupted the fleet manager from checking the lotto numbers.

This kind of situation makes fleet managers smack their foreheads and has them showing up for happy hour at 10:30am. It baffles the industry why you not only pay more money for a vehicle when a simple alternative is available, but also why you pay more in intangibles for a replacement situation which is no more enviable to you than it is the fleet manager. I’m not saying fleet managers are cute cherubs floating on a lofty cloud. Sure, there are bad apples out there. And sure, there are ways they can squeeze extra bucks out of you, like high management fees, but this is a rare business model where the objectives of the client are in synch with the objectives of the provider. This isn’t like telecom, where on its best day is still sleazier than Bourbon Street on Mardi Gras; this is different. And this is coming from a procurement service provider, whose job is to identify every possible savings opportunity in the supply chain. In my experience, most fleet management providers are more than happy to discuss your present situation and shift you to a better model of managing your fleet. I’ve had people deny participation in a bid because they thought I would be spinning their wheels. How much more honest can you get?

The moral of the story, children, is when a fleet manager speaks, listen. Give them the time of day. You just might learn something. Not only that, you may realize cost savings. This is a rare circumstance where your interests are aligned with theirs. Take advantage of it, or you might be spinning your wheels out of money.
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Today’s Menu: Fleet, Well-done

on Wednesday, March 19, 2008

Got fleet? Cars, trucks? Do you simply maintain your fleet, or do you have a fleet management program? Now we’re cooking. If you have a corporate fleet, odds are, you are part of the approximately 75% of companies who have no fleet management program. So don’t feel bad; you’re in good company. These companies usually wait until the tires and bumper are falling off and the primary color of the vehicle is Bondo grey before they replace the vehicle. Not a good idea, unless in a faltering economy you enjoy wasting money on excessive maintenance, repairs, down-time, miles-per-gallon, driver morale, corporate appearance, and crap resale price.

Over the next few posts, I’ll address various aspects of the fleet management process and various strategies to implement Best Practices for Fleet Management.
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Upcoming Strategic Sourceror Procurement Topics

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When Source One created the vision of the Strategic Sourceror blog, we wanted to create a forum that did more than just write about conferences and service providers. We also wanted to stay away from the obvious (indirectly) paid posts raving about particular software and service providers that you often see on similar blogs. Our goal is to provide a unique portal for procurement professionals to read tips, industry news, perspectives, and best practices in procurement.

Our ultimate goal is build a community of sourcing professionals that all contribute and help each other in developing best practices in procurement. As with our WhyAbe.com toolset (which is STILL free although most people in the industry said it was impossible), we encourage professionals to share their insights, tips, and suggestions to improve the procurement industry.

With that being said, we would like to announce some upcoming topics that you will see over the next several weeks:

  • “Fleet Management” - Discussing Best Practices for managing fleet services.
  • “Building your Strategic Sourcing Team” – Tips and best practices in creating a successful strategic sourcing initiative.
  • “Get Over It” – A continuous series that will help you overcome particularly difficult people and objections that you may encounter in a strategic sourcing initiative.

We encourage your feedback, ideas, tips, comments and suggestions for each of the posts. If you would like to contribute to our discussions or have some suggestions for content, please contact us!

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Dems, White House, Spar Over E-Procurement Effectiveness

on Friday, March 14, 2008

You know the drill. For years, if not decades, technology buffs touted the "paperless" office, or the "streamlined" business, free to pursue profits without all the nasty paperwork gumming up the works.

Some recent evidence, at least at the procurement level, suggests that e-procurement may actually be getting in the way of small business progress.

The National Association of Government Contractors, in a March 7 dispatch on its web site, reports that some Democrats are unhappy with the Bush administration's (I know - big surprise) efforts to ramp up government's use of e-procurement technologies.
The NAGC says that, at a House Small Business Committee hearing, Chairwoman Rep. Nydia Velázquez of New York warned that automated procurement systems, contract bundling and online auctions have created an uneven playing field in which large contractors are able to dominate the marketplace.

"Taken together, these new processes are creating roadblocks for small firms as they try to navigate the federal procurement system" Velázquez said. "If left unchanged, this could lead to a marketplace without the contributions of small businesses -- ingenuity and innovation. This will result in a less diverse supplier base -- leaving taxpayers paying more for less."

Some small business owners, testifying at the hearing, say that workers are ill-equipped to handle the reforms and changes needed to set up and maintain e-procurement operations. Bush administration officials dispute that sentiment, saying that more small businesses than ever are using e-procurement practices, and are saving tons of money in the process.

The facts seem to support that argument. In 2007, small businesses accounted for more than 76 percent of sales on GSA Advantage, an online shopping and ordering system, James Williams, commissioner of the General Services Administration's Federal Acquisition Service, told the NAGC. Small firms also represent about 95 percent of all business on GSA's e-Offer, which businesses use to submit online contract offers and keep track of them..

"E-systems allow for faster and easier processes, and can increase accessibility and transparency and minimize costs to small businesses wanting to sell to the government," Williams said.

Read the entire piece at: http://www.governmentcontractors.org/articles/a.528.asp
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Gartner Predicts Future IT Business Spending

on Thursday, March 13, 2008

The Gartner Group has some interesting things to say about global IT and business spending plans for the rest of the year. The analytical firm's UK-research division recently rolled out a list of top IT business trends for 2008, some of them directly pertaining to cost control and procurement strategies.
Some of the highlights include . . .
  • By 2012, 50 percent of traveling workers will leave their notebooks at home in favor of other devices. Even though notebooks continue to shrink in size and weight, traveling workers lament the weight and inconvenience of carrying them on their trips. Vendors are developing solutions to address these concerns: new classes of Internet-centric pocketable devices at the sub-$400 level; and server and Web-based applications that can be accessed from anywhere. There is also a new class of applications: portable personality that encapsulates a user's preferred work environment, enabling the user to recreate that environment across multiple locations or systems.
  • By 2012, 80 percent of all commercial software will include elements of open-source technology. Many open-source technologies are mature, stable and well supported. They provide significant opportunities for vendors and users to lower their total cost of ownership and increase returns on investment. Ignoring this will put companies at a serious competitive disadvantage. Embedded open source strategies will become the minimal level of investment that most large software vendors will find necessary to maintain competitive advantages during the next five years.
  • By 2012, at least one-third of business application software spending will be as service subscription instead of as product license. With software as service (SaaS), the user organisation pays for software services in proportion to use. This is fundamentally different from the fixed-price perpetual license of the traditional on-premises technology. Endorsed and promoted by all leading business applications vendors (Oracle, SAP, Microsoft) and many Web technology leaders (Google, Amazon), the SaaS model of deployment and distribution of software services will enjoy steady growth in mainstream use during the next five years.
  • By 2011, early technology adopters will forgo capital expenditures and instead purchase 40 percent of their IT infrastructure as a service. Increased high-speed bandwidth makes it practical to locate infrastructure at other sites and still receive the same response times. Enterprises believe that as service oriented architecture (SOA) becomes common "cloud computing" will take off, thus untying applications from specific infrastructure. This trend to accepting commodity infrastructure could end the traditional "lock-in" with a single supplier and lower the costs of switching suppliers. It means that IT buyers should strengthen their purchasing and sourcing departments to evaluate offerings. They will have to develop and use new criteria for evaluation and selection and phase out traditional criteria.
  • By 2009, more than one third of IT organizations will have one or more environmental criteria in their top six buying criteria for IT- related goods. Initially, the motivation will come from the wish to contain costs. Enterprise data centers are struggling to keep pace with the increasing power requirements of their infrastructures. And there is substantial potential to improve the environmental footprint, throughout the life cycle, of all IT products and services without any significant trade-offs in price or performance. In future, IT organisations will shift their focus from the power efficiency of products to asking service providers about their measures to improve energy efficiency.
  • By 2011, suppliers to large global enterprises will need to prove their green credentials via an audited process to retain preferred supplier status. Those organizations with strong brands are helping to forge the first wave of green sourcing policies and initiatives.
    These policies go well beyond minimizing direct carbon emissions or requiring suppliers to comply with local environmental regulations.
    For example, Timberland has launched a "Green Index" environmental rating for its shoes and boots. Home Depot is working on evaluation and audit criteria for assessing supplier submissions for its new EcoOptions product line.

Gartner is careful to say that none of these trends require IT directors, CFO's and other key corporate decision makers to drop what they're doing and address each one immediately.
"But they are the most compelling and critical predictions, the trends and topics . . . and they indicate a strong focus on individuals, the environment, and alternative ways of buying and selling IT services and technologies," said Daryl Plummer, managing vice president and Gartner Fellow. "These areas of focus imply a significant groundswell of change that may in turn change the entire industry."

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How to Get the Most From Your Hourly Workers

on Tuesday, March 11, 2008

It's a thankless task, for employers and especially, for employees who try to coexist under an hourly wage pay structure. But there are ways to get the most out of your hourly staff and a lot of it has to do with bringing good jobs into the hourly pay infrastructure at your company.

Says who? Says a new study by an industry think tank that sheds new light on methods companies use to successfully motivate hourly wage workers.

The study, conducted by researchers at the University of Kentucky and Boston College, and labelled The "CitiSales Study," by lead researcher Jennifer Swanberg, is touted by study providers as one of the first major studies to focus on employee engagement among lower-wage hourly workers. Its main benefit, from this viewpoint, is that it finds six workplace dimensions that may be essential components to employee engagement and customer satisfaction in the retail industry.In particular, the CitiSales report found that supervisor effectiveness as the most powerful driver of employee engagement and customer satisfaction, along with five other workplace dimensions: opportunities for career development; climate of teamwork; job fit and adequate resources to get the job done; schedule satisfaction; and schedule flexibility.

“Particularly interesting is that five of the six workplace dimensions predict the sixth dimension, supervisor effectiveness, which in turn drives employee engagement and customer satisfaction,” noted Swanberg, executive director of the UK Institute for Workplace Innovation. “We hope that companies use these findings to promote excellence for their employees, customers and business.”

The study also defines workplace flexibility for hourly workers in retail jobs. Flexible work practices for hourly workers at “CitiSales” primarily include strategies that give employees control over their schedule and provide accommodation/job security around work-life conflicts. Overall three-quarters of employees reported some control over their work schedule. Seventy-six percent of employees report having some to a lot of input into their weekly schedule, and 76 percent report that their schedule preferences are considered almost always or always. Over 90 percent of senior managers report that offering workplace flexibility to hourly workers makes good business sense. Findings also demonstrate that access to flexibility was predictive of both employee engagement and customer satisfaction.

The “CitiSales” company which was the subject of the study operates more than 6,000 stores throughout the United States. The "CitiSales Study" used a multi-method data collection strategy including employee surveys and interviews with 41 senior “CitiSales” managers. A total of 6,085 employees, both in hourly and salary positions, within 388 stores in the three geographical regions of the United States completed the survey. The findings released today focus on information gathered from 3,903 workers in hourly, front-line jobs.

"This study shows that investment in hourly workers is good for business and good for employees,” said Helen Neuborne, senior program officer of the Ford Foundation. “It provides practical recommendations to help employers build quality job opportunities for their hourly employees while simultaneously increasing the company’s bottom line.”

I'm not sure I'd go that far. But any way to close the gap between hour workers and corporate managers is a good thing. Of course, maybe a raise for your best hourly workers is a better idea.

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Here are a few simple steps that can help a company achieve efficiencies on the bottom line By Terry Wilcox

on Friday, March 7, 2008

Oh boy, today's employment numbers . . . down 63,000 jobs for the month of February, according to the U.S. Labor Department, will likely have even more business owners battening down the hatches. One mistake they could make in doing so is focusing on what financial managers call "direct" costs of sales and doing business, and not "indirect costs." Direct costs usually mean the obvious stuff - like equipment and labor. Indirect costs are below the surface items like utility supplies, insurance and staff expenses.

Writes Terry Wilcox in the online publication Online Supply Chain, "too many organizations have very little visibility into these costs or an understanding of the controls that could be implemented to manage them, despite their impact on the bottom line."

Adds Wilcox; "The irony is that indirect costs can be much easier to control than direct costs. A purchase-to-pay (P2P) system will enable the company to undertake company-wide planning that can address issues such as maverick spend, contract visibility and economies of scale. If a purchase-to-pay system is able to integrate with other systems, including enterprise resource planning (ERP) systems and supply chain management (SCM), the visibility can deliver significant savings."

Okay, let's get specific. What does Wilcox mean when he writes about visibility and significant savings? To clear things up, the author cites several key steps business owners and manages can take to address indirect spending improvements. Let's have a look . . .

  1. Maverick Spend -- Maverick spend can be addressed by simply removing any ad-hoc purchase capabilities from anyone that needs to place an order within the organization. This will ensure that employees only purchase goods and services from preferred suppliers with which the purchasing department has negotiated a discounted pricing contract. Regardless of corporate procurement guidelines and processes, whenever staff need to buy goods or services they will find the easiest way to do this. An effective spend management solution will provide the easiest route, but one that has the appropriate controls in place to ensure maverick spend is kept in check, without direct involvement from the employee.
    Spend control is often hard to enforce unless some control mechanism, a component of any best-in class e-procurement solution, is put in place. Control mechanisms will prohibit impulsive purchases and will put into place an approval process that allows for authorization at the right level and stage, prior to the order being placed, when the spend is committed. Maverick spend issues will then be addressed before it is too late. The key to this is to ensure the control process is invisible to the user. The process of buying goods and services should be as easy and intuitive as possible.

    Without the right systems in place, companies can encounter what's known as a "reverse purchase order" process, which occurs when orders are placed without being noted in any form, electronic or paper- based, at the time of order. Once the invoice comes in it will be unclear where it came from, whether it is a duplicate, if it is within the budget and who it was approved by, if approved at all. To address this issue, which can cost a company thousands or even millions of dollars, efficient systems need to be put in place to ensure that the purchase order process is undertaken in the correct manner.
  2. Contract Visibility -- Most organizations are tied into multiple contracts that can be worth many thousands of dollars, but many will not have full visibility into those agreements, their values or expiry dates. With different departments in the business controlling contracts for different goods and services, a company needs to have a central view of its spending commitments, if only to appropriately allocate budgets.

    A system that provides a central view over contracts will address such issues as corporate governance, accountability and traceability, which if not identified could be the difference between meeting or missing financial targets. Contracts that are automatically renewed can also cause headaches for individual departments as the supplier, who has its contract renewed automatically, might not carry the same goods or services anymore. Also, costs connected to that contract may not necessarily be allocated in budgets, which can cause significant issues.
  3. Strategic Activity for the Purchasing Team -- It is essential that procurement systems are intuitive, so that anyone who needs to make a purchase can do so easily and in line with policies that are set out by the organization. The purchasing staff will then be able to focus on their core, strategic value-add activity, such as contract management and supplier relationship management (SRM).

    Read the whole thing at: Supply and Demand Chain Executive
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Software Spending Trends: Canary in the Mineshaft for U.S. Economy?

on Monday, March 3, 2008

Businesses are snapping their wallets shut, at least when it comes to software spending - usually a good leading indicator of economic growth.

One key benchmark, the ChangeWave corporate software spending survey, has seen a shift into negative territory for the first time in years.

In its January, 2008 survey results, ChangeWave says that better than one-in-five respondents (22%) now say their company will spend less for software over the next 90 days compared to the previous 90 days -- 8 percentage points worse than our previous survey in October 2007.

Just 16% of respondents say their company will spend more -- 2 points worse than previously.

A total of 1,802 respondents involved with software purchasing in their company participated in the survey.

"These latest software results -- combined with our recent consumer spending survey - should end the 'are we or aren't we' in economic recession debate once and for all," says Tobin Smith, founder of ChangeWave Research and editor of ChangeWave Investing. "Now both businesses and consumers are singing from the same 'cut-thy-spending' hymnal."

Nearly one-in-10 respondents (9%) cite "a general slowdown in business conditions and capital budgets" as the foremost factor driving their companies purchasing decisions -- a number that is up 3 points since October 2007 and triple the percentage of a year ago.

In a follow-up question, respondents were asked if there had been any adjustments made to their first quarter capital budgets over the past 90 days.

Twice as many said their capital budgets were adjusted lower (22%) than said they were increased (11%) -- a powerful indicator of a very tough corporate spending environment.

The survey also looked at specific software categories and found Security Software (16%; down 7-pts) to have experienced the biggest slowdown since October 2007. Business Intelligence (8%; down 2-pts) and Document/Content Management (5%; down 2-pts) software also look softer.

On a somewhat brighter note, Virtualization (9%) and Enterprise Resource Planning (7%) spending appear similar to that of the previous survey.

But overall, the survey results show clear signs of a recession in business spending for the first quarter of 2008, and are a striking confirmation that we're now sailing through a period of heavy economic turbulence.
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