System Selection Phase

There are many good books on system selection techniques that can explain in detail how to develop your software requirements and “scripts” for vendor demonstrations, but it is worth noting that because of the volatile nature of the e-procurement software industry and marketplace just now, the scoring criteria for an e-procurement project should include several key areas of emphasis: cost, functionality, and integration and interoperability.

Cost

Although Gartner Group, confident of the potential returns of an e-procurement project, contends that an organization should expect an ROI to be justified in two years,^[1] it is important to remember that such an ROI needs to be realistic and to include all of the elements that account for a total cost of ownership. We have up to this point focused on the benefits of the business case, but when devising a realistic ROI for e-procurement initiatives, even for simple ORM projects, it is important to consider implementation costs that include

• Integration to your ERP and other back-end systems

• Both technical and process-focused user training

• Costs associated with helping suppliers to tie into the system

Outsourcing through ASPs may always be an option, but this type of approach has its drawbacks. Limited back-office systems integration and a dependency on an organization outside of your direct control are both serious issues. There have been innumerable cases of ASPs failing to deliver at agreed service levels, and, particularly if your project is focused on mission-critical MRO or direct materials, you will want to be certain of the cost/benefit ratio of an in-house versus ASP approach. Be certain when developing your strategy to consider all “total cost of ownership” variables.

Functionality

Any good e-procurement system will provide the basic catalog, ordering, and payment functionality, but it is important to remember that the success of ORM- and MRO-based requisitioning is dependent upon employees being able to easily complete transactions from their desktops. Therefore, ease of use is very important, especially in projects involving nonpurchasing employees. For the purchasing staff, it is also important that a system provides comprehensive, easy-to-use decision support and reporting tools.

It is always worthwhile, when preparing for a software vendor shortlist, to create a database of current procurement transactions, complete with paper forms used in the process, and to have the software vendor incorporate these directly into its solution presentation for your company. This “day-in-the-life” approach not only helps to contrast the differences between systems, but also forces the vendor to provide case-specific examples (as opposed to preorchestrated and often sweeping claims made in standard presentations) of how the software will deal with your organization’s purchasing needs. Remember, too, of course, to make certain that the system can provide the level of data and access security that you need.

Integration and Interoperability

One of the most important criteria for selection, particularly if your organization is focusing on reducing the transaction costs (time, labor, errors, etc.) that come from manually rekeying data, is the system’s ability to fully integrate both inward to your own ERP systems for automated approval and payment and outward to those of your suppliers. Links to in-house decision support systems will be key for either direct or indirect projects, and if the project involves direct goods, the system will need to interface directly with supply chain systems, as well as CRM systems and any e-commerce order fulfillment front end.