I recently challenged public sector procurement professionals to consider whether a best-of-breed or ERP solution was best for their organization based on current buying policies and their agency’s desire for future process improvement. As anticipated, a debate ensued. Is either one of these procurement technology designs – on its own – completely satisfying public sector agencies’ expansive and ever-evolving business needs? The team here at Periscope Holdings wanted to find out.
We commissioned a survey through the Center for Digital Government to see if there was a clear winner finally emerging in the nearly 15-year performance competition between eProcurement (ePro) Software-as-a-Service (Saas) platforms and ERP procurement modules. What we learned may surprise you: Nearly 31 percent of the government, IT and procurement decision-makers said that – still to this day – they don’t even have some form of online portal or eProcurement system where they can post bids and RFPs online. So they couldn’t even say from experience whether ePro or ERP was better.
But all respondents, regardless of current procurement methods, did come to a definitive consensus: Procurement technology modernization is a must. They made it very clear that manual and legacy procurement processes add costs, cause delays, and reduce agility – not just for procurement functions, but for all government and supplier stakeholders.
However, the survey – combined with recent Gartner reports – also led to a few game-changing realizations about what government organizations, as a whole, are expecting from today’s procurement functions and technology investments. We have to rethink how we operate in today’s “postmodern ERP era”:
Rather, we must ensure every technology decision –procurement or otherwise – aligns with the organization’s larger IT and business process strategy. That means closer integration between procurement and supplemental technology platforms, such as finance and other ERP modules employed by project managers, HR, and the like. Establishing two-way connectivity between critical information systems –is now essential to executing more efficient business processes across the board. Procurement needs broader visibility into how their actions impact other departments’ functions – and vice versa. So every technology decision must be strategic, balancing the need for greater organization-wide standardization with the need for departmental (or functional) flexibility.
While procurement’s function has always been to secure the necessary goods and services for the lowest price and greatest value, we now have to work harder to establish new cost savings within agency’s internal processes. Resources have been reduced, purchase demands increased and, thus, we have to find better ways to streamline the procurement process to eradicate waste and recover lost productivity. That means agencies must be smart about which procurement technology platform they choose to utilize moving forward. The sticker price isn’t always indicative of the integration costs (or results). Nor is the sticker price indicative of the Total Cost of Ownership: the level of manpower and future financial commitments needed to maintain the technology’s compatibility and performance long term. To save money, you need a procure-to-pay solution that can get up and running quickly within your custom process definitions – and give you the flexibility to adjust procedures and policies easily as demands evolve over time.
We stand to gain more from loosely-coupled, yet purpose-driven, hybrid solutions. Our survey found that it’s easy to make the case for eProcurement solutions in the postmodern ERP era. ERP packages just aren’t meeting the public sector’s procurement needs. But, as Gartner made clear in a recent report, taking a best-of-breed-only approach to procurement – or any organizational function – and abandoning the ERP all together is not the most appropriate strategy either. Yes, you’ll gain more ROI by using best-of-breed, procure-to-pay software that makes it easy to implement business process changes, customize vendor management systems, and provide built-in requisition/bid/purchase order support. However, the only way to overcome your current and future business challenges – and implement the best solution for each functional need – is to design a hybrid eProcurement-ERP solution. Ideally, the eProcurement solution will continue to live outside of the core enterprise resource planning (ERP) system — but become more tightly integrated. This will allow all integral systems to adapt and evolve in parallel with each other, without issue.
I think it’s clear in numbers 1-4 above why standalone procurement systems are a thing of the past. We must collectively, as procurement solution providers and agency-side procurement specialists, find ways to more completely integrate eProcurement systems with the entire ERP system in a balanced manner. And we must ensure that finance leaders, CIOs, and other technology decision makers mutually accept – and equally embrace – a more cohesive approach to technology design and integration. After all,
Remember: Modern procurement is expected to simplify the purchasing process, protects taxpayer dollars and ensures fair competition. At the same time, allowing for complete IT governance and complete government transparency is now mandatory. If you’re unable to meet any of these critical goals with your technology solution, it’s either time to re-invest in more modern technology solutions or re-think how you’ve integrated your modern technology systems.
Calculations are based on documented Periscope Holdings customer savings and research from Aberdeen.