CRITICAL SUCCESS FACTORS IN ePROCUREMENT SOFTWARE ADOPTION

BY ANTHONY FLYNN

C ONV E RTI N G TO eP RO C U RE M E N T
17 ASPECTS OF SUCCESSFUL ADOPTION

TABLE OF CONTENTS
PAGE

Critical success factors

2. Project Championing 3. Consultation and Buy-in 4. Prioritising User-Friendliness 5. On-going Monitoring

1
2 2 3 4

1. Financial Justification 1

Making the financial case for eProcurement

6. Lower Transaction Costs 6 7. Reductions in Purchase Price 8. Spend Analytics 6 7

Soft factors in eProcurement implementation

9. eProcurement Champions 10. Consultation 11. Stakeholder Responsiveness 12. On-going Monitoring

8
8 8 9 9

SaaS Revolutionising eProcurement

13. Cost Effective 14. Cutting-edge 15. Connectivity 16. Security 17. Collaboration

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10 11 11 11 12

Final Thoughts

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CRITICAL SUCCESS FACTORS

Successfully implementing new software solutions often proves a lot trickier than businesses anticipate. Initial optimism over new IT systems can give way to frustration and disappointment as buy-in from end-users proves illusive and the hoped-for cost and efficiency benefits fail to materialise. While there is typically no single reason why software adoption fails, there are commonly recognised factors that determine if and to what extent the implementation process is a success. Here are five of them.

1. Financial Justification
Clarity on the bottom-line rationale for adopting and deploying new software solutions is of paramount importance. Among the questions firms ought to be asking of themselves are: what are the advantages of the new system over that which we have at present?; how exactly will the new system add value to our operations?; how will we measure this value?; what is the opportunity cost of investing in new software?; and what return on investment do we aim to achieve? Having a sound business case for the adoption of a new software solution ensures a greater sense of focus and purpose throughout the implementation process. Moreover, it means that

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firms are more likely to stay the course and not be deterred when the inevitable glitches and teething problems surface.

2. Project Championing
Applying a software solution to a business challenge represents change on some level for every organisation. As with any change initiative there must be one person or team that assumes ultimate ownership and responsibility for implementation success. It is their role to inject impetus into the roll-out of the new system and act as a contact point if and when problems arise. In the absence of a project champion the implementation process may become confused and haphazard. Senior management has a critical role to play in this regard, either as project champions themselves or as supporters of middle-management or technical staff. The active, public support of senior management signals to the rest of the organisation that the new system is backed at the highest levels. Resistance to change is less likely when senior management have thrown their weight behind the project.

3. Consultation and Buy-in

If only they had sought our input is a lament about management often heard from software end-users. Not consulting with end- users and obtaining their input prior to implementing new IT systems is a recipe for failure. On one level it is a wasted opportunity to tap

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Converting to eProcurement: 17 Aspects of Successful Adoption

into their insights and knowledge. On another level it represents a missed chance to secure the support and goodwill of those on whom the success of the new system is dependent. Without the support of frontline staff the likelihood of the new system failing is far greater.

4. Prioritising User-Friendliness
New IT systems are often unveiled with much organisational fanfare only for it to transpire that they are not fit for purpose. Adoption failure is often attributable to systems that are cumbersome from a user perspective and that complicate existing processes. In fact, user adoption is by far the most significant predictor of enterprise software success1 . To avoid a scenario in which employees shy away from using new systems the emphasis must be on user-friendliness. This is why consultation with end users is strongly advised. A common mistake firms make is attempting to match people to software. To become embedded in everyday organisational routines software has to match how employees operate and be intuitive for them. In addition, there should be a match between the technological capabilities of staff and the new system. Where employee IT capabilities are not up to scratch the result is either under-utilisation of the new system or outright rejection.

Sandhilll Group and NeoChange (2008). Achieving Enterprise Software Success. www.sandhill.com/assets/pdf/AchievingEnterpriseSoftwareSuccessFinalReport.pdf

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5. On-going Monitoring
There is a temptation to deem a new IT system successfully implemented upon it going live. Such an assessment would be premature. Successful implementation requires on-going monitoring and periodic evaluation. This is a vital part of the implementation process but it is often bypassed as firms move onto their next project or change initiative. Monitoring is required to identify unforeseen consequences and to take corrective action where necessary. It helps to integrate the new system into the existing set of organisational processes and with benchmarking original goals against actual outcomes. A lack of monitoring means firms will be less able to determine the success or otherwise of their change initiative. Valuable lessons for future IT change projects will also go unlearnt.

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MAKING THE FINANCIAL CASE FOR ePROCUREMENT

The factors that influence the likelihood of successful

software adoption are no different in the case of eProcurement. A clear financial rationale should be in place before the decision is taken to automate the procurement function. Establishing a financial rationale helps to allay doubts that employees may be having over changing the status quo. Decision makers need to know the projected cost savings of an eProcurement solution when set against its cost. Reported industry experiences over the last number of years indicate that firms can expect to achieve annual savings from initial eProcurement projects of roughly twice the project investment cost2. These savings come about in two ways: lower transaction costs and reductions in the average purchase price. Financial savings are underpinned by the data or spend analytics generated through eProcurement systems.
Reduction in purchase price

Lower transaction costs

Improvement in nancial management

Competitive advantage

Spend analytics

Buy IT (2002). Building the Business Case for e-Procurement /ROI. Retrieved from
cipsintelligence.cips.org/opencontent/building-the-business-case-for-e-procurement-2007

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6. Lower Transaction Costs

Automation reduces procurement transaction costs. It eliminates a large chunk of the paperwork associated with sorting and evaluating tenders, which in turn helps to reduce man-hours. It also helps to reduce errors in the ordering process, cutting down on wasteful expenditure. eProcurement also enables e-payments. In the interests of more efficient financial processes, electronic payment is preferable to a traditional payment method. Taken together the efficiencies of eProcurement add up to considerable financial savings for any firm.

7. Reductions in Purchase Price

Lower transaction cost is the initial saving achieved through eProcurement; direct reduction in price paid for goods and services is the second. While eProcurement does not of itself reduce the purchase price of goods and services, it creates the conditions for achieving price reductions. For a start it can be used to direct buyers to source from suppliers with whom there is a pre-negotiated agreement designed to reap economies of scale. This counters a problem experienced in many firms of buyers sourcing similar type goods from a range of suppliers at various price and quality conditions. Also, eSourcing applications such as SourceDogg facilitate increased competition with easy onboarding of new and existing suppliers in the competitive Request (for Quotation, Tender, Information or Proposal) process and greater competition equals greater savings.

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8. Spend Analytics
The generation of detailed, instant data on who is spending what in the firm is among the most valuable features of any eProcurement system. It allows a thorough analysis of spend patterns, which can then be used for decision making and forecasting. It is only when furnished with an analysis of their spend data that many firms become aware of the financial gains to be had from consolidating their purchasing needs and enforcing compliance with pre-negotiated agreements.

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SOFT FACTORS IN ePROCUREMENT IMPLEMENTATION

Just as important as making the business case

for eProcurement is attending to the softer side of its implementation. If the former brings clarity as to why automated procurement is preferable, the latter is essential in seeing the benefits of eProcurement come to fruition.

9. eProcurement Champions
Designating one or more employees as eProcurement champions to drive the implementation process and to act as a sounding board for other employees is strongly recommended. Ideally senior managers should assume a prominent role in advocating that a migration to eProcurement is in the interests of everyone in the organisation.

10. Consultation
Employees with operational responsibility for buying should be consulted on the most appropriate eProcurement system given the procurement needs of the firm. Soliciting end-user input generates commitment to the new system and nurtures a sense of ownership among those tasked with buying for the firm. It also ensures that the optimal software solution is selected. Preferably, this is one based on user-friendliness and that requires minimal training of staff.

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11. Stakeholder Responsiveness

For strategic sourcing to become a reality firms need an eProcurement solution that allows them to build long-term relationships with suppliers. This is why stakeholder responsiveness is another critical success factor in eProcurement adoption. Whichever eProcurement solution a firm decides on, it must be one that suppliers find easy to use and does not frustrate them in their efforts to bid for contracts. Otherwise, the whole point of eProcurement is undermined.

12. On-going Monitoring

The successful implementation of an eProcurement system requires that its effects are monitored in the months following its initial rollout. There may be aspects of its functionality which employees are unsure of or difficulties in how the new system integrates with existing IT architectures. Only through on-going monitoring can these issues be spotted and acted on.

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SaaS REVOLUTIONISING ePROCUREMENT

Having made the decision to migrate to an automated

procurement system, firms are advised to consider several key points. These include cost, functionality, security, maintenance and support, and data rights and responsibilities. Fortunately for firms there is now considerable choice in eProcurement solutions and price is falling as functionality and user-friendliness is rising. The advent of software as a service (SaaS) in particular, is helping to revolutionise how firms go about sourcing goods and services. Under the SaaS model firms make use of a vendors eProcurement service simply by paying a subscription fee. No purchase of software or IT infrastructural systems is required. With SaaS the cloud takes care of everything. All a firm requires is a good internet connection. It is easy to see why more and more firms are choosing the SaaS model for their eProcurement needs.

13. Cost Effective

Cloud-based eProcurement software solutions are proving to be less expensive than non-cloud based systems. They entail no significant upfront costs and subscription fees tend to be linked to the number of system users, making it economical for both large and small firms.

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14. Cutting-edge
SaaS allows firms of all sizes and from all industries the opportunity to tap into the IT expertise of software providers. Firms need not worry about having to keep track of technological developments in eProcurement.

15. Connectivity
With SaaS buyers can access their procurement system from any device that is connected to the web. This opens up the possibility of greater flexibility in work arrangements, whether working from home or working while on the move.

16. Security
Cloud-based software services are recognised as being secure and hold sufficient capacity to ensure that all data is backed-up and retrievable. In the case of eProcurement specifically, SaaS represents a security improvement on paper-based systems which are more vulnerable to loss and to unauthorised access.

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17. Collaboration
Cloud-based eProcurement solutions allow buyers and other staff the chance to collaborate when sourcing goods and services. This is particularly useful for procurement projects that are cross-functional or even cross-jurisdictional. They also open up the possibility of greater collaboration between a firm and its key suppliers.

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FINAL THOUGHTS

Success in software adoption requires a good deal of

forethought, judgement and persistence. In their eagerness to remain ahead of the curve many businesses fail to develop a clear financial rationale for implementing the software solution in the first place. The same mistake is made when it comes to attending to the softer resources needed to support the integration of software systems with existing organisational processes. These issues are certainly relevant to eProcurement. Technology alone is not a guarantee of success. Having an appreciation of the capabilities of eProcurement in cost reduction and putting a plan into action to make these cost savings a reality is the kernel of the issue. The technology is out there and more accessible and affordable than ever before. It is a matter of firms being astute enough to harness it for their own competitive gain.

About the Author

Anthony Flynn works as a researcher in Dublin City University Business School (DCUBS) and specialises in the area of procurement.

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