FT.com / Technology - E-procurement: From chaos comes the ‘eBay for business’

FT.com / Technology - E-procurement: From chaos comes the ‘eBay for business’

E-procurement: From chaos comes the ‘eBay for business’
By Andrew Baxter

Published: July 11 2007 12:23 | Last updated: July 11 2007 12:23

The rapid pace of development in consumer technology has made some enterprise IT look clunky. This is certainly the case with corporate e-procurement – the purchasing of workplace goods and services online.

At home, online shoppers buy quickly and easily from a range of websites, all of which have invested heavily in making their sites as simple and intuitive as possible. The corporate world has largely missed out. But now there is growing recognition that enhanced user-friendliness could be the key to increasing the usage of e-procurement systems and extracting more benefits from them.

“If you ask any of the e-procurement vendors today for a demonstration you can guarantee it’s going to look like an eBay shopping experience,” says Sharon Crawford, principal analyst at Quocirca. “There are going to be shopping baskets and clicks and so on – everybody has built that into their software to make it easier for any end-user to participate in purchasing.”

Because the process increasingly resembles an online consumer purchase, organisations can devolve the buying process much more effectively to end users who are not purchasing professionals. It could also mean companies can keep a closer eye on who is buying what.

One of the companies in the vanguard of this new approach to e-procurement is UK-based ProcServe, which has developed a commercial e-procurement system of the same name and also led a consortium that is delivering a programme called Zanzibar for the UK public sector.

The interface for Zanzibar, launched last year, was modelled on consumer sites such as lastminute.com and eBay, says Veera Johnson, ProcServe’s chief executive. “We tried to relate it back to what experience I would want if I was a public sector employee, so the debate was about usability and not about procurement language,” she says.

This challenges long-held assumptions about e-procurement – for example, that it requires huge amounts of training because of its complexity. “The user interface is absolutely crucial for getting people to use the system based on their own experiences,” says Ms Johnson. “Training and driving the adoption of the system become easier.”

If properly implemented, corporate e-procurement should be like “eBay for business”, says Lyn Duncan, business development director at @UK PLC, a company that works with businesses to enable them to trade online quickly with their customers. Once purchasing professionals have sorted out issues such as contracts with suppliers, and who is allowed to buy what from whom, the clicking and buying for the rest of the organisation should be simple, she says.

“There are lots of people with enterprise solutions who want to make this stuff complex, because it is expensive,” says Ms Duncan. In contrast, the @UK system uses the same interface for public sector e-procurement as it does for consumer purchases. “You can set up favourites – it works just like a Tesco [online] shopping list.”

One target market for ProcServe, a PA Consulting Group company, is schools, which need a simple e-procurement system that can be used by bursars, teachers and secretaries rather than e-marketplace professionals. By last month, 600 UK schools were using the system, and a national roll-out is planned this summer.

Another cherished assumption with e-procurement is that, to increase efficiency and control, it makes sense for organisations to restrict the number of users. But once a system becomes as simple as a home shopping website, more employees will try to use it if they can.

The UK Department of Work and Pensions, one of the earliest Zanzibar customers, will probably have 30,000 users on the system once it has reached the next stage of its implementation, says Ms Johnson. That sounds a recipe for chaos, but all the purchases are made via a central collaborative contract and the entire process is electronic, from sending the purchase order to receiving the invoice, so the number and size of orders becomes largely irrelevant, even to suppliers.

As systems such as this devolve buying throughout an organisation, however, there is a need to prevent the free-for-all that the modern, intuitive home shopping website represents. This explains why corporate attitudes to user-friendliness have often been ambivalent.

Brett Mauser, director of global procurement at NCR, recalls a comment from the company’s chief purchasing officer several years ago when the US retail systems, ATM and IT services company was considering a web-based e-procurement system: “Why would we want to make it easier for people to spend money faster? What we want is for the right people to buy the right things at the right price.”

Without wishing to make web-based procurement deliberately cumbersome, says Mr Mauser, companies need a balance between user-friendliness and control. “We’re not an L.L.Bean or a Lands’ End, which have been given awards for their usability. It’s very easy to shop and buy stuff from them – they want it that way so people spend more.”

The big fear for organisations has been that employees would use the web for “maverick spending” on items that do not conform to their standards or – as often occurs with online travel – deals that look like a bargain but result in the company losing out on a discount for multiple or bulk purchases.

“One of the challenges is that there are always nice things that people will try to find a way to buy, or suppliers will find a way to users,” says Mr Mauser.

NCR, along with many other large companies, directs its buyers of indirect materials, such as office supplies, to various approved suppliers’ websites. The supplier will host an NCR page with special prices, and everyone from the company pays the same price. The supplier will then send a summary bill electronically.

Many organisations, however, want employees to go to one online source – what Ms Crawford calls a “central backbone” – which handles all the relationships with suppliers and from which purchasers can draw down what they need. This is the approach taken by ProcServe.

As employees from across the buying organisation gain access to the catalogues that have been loaded on to the system, and make purchases, their managers achieve visibility, at a very detailed level, of what is being bought by whom.

The St Mary’s National Health Service Trust in London is one of a group of hospitals introducing the Zanzibar system and Andrew Holden, the trust’s finance director, is impressed by the greater level of control over maverick purchases that the system will give.

“In the past, a catalogue might arrive on your desk and you are a doctor in orthopaedics, and you say: ‘I like that, I’ll buy one of them,’ but now you won’t see it,” says Mr Holden. “The ability to make sure people stick to buying what you want them to is much greater.”

The hope is that a user-friendly interface will encourage more employees to go through the right channels when they buy items online at work, reducing organisations’ worries about indiscriminate web-based purchasing and ensuring that companies make the most of the deals they have made with suppliers.

“Because e-procurement systems have improved, people are less likely to do their own thing, they can browse catalogues and see pictures, and that has reduced maverick spending,” says Ms Crawford at Quocirca. “This is one place where, because of the importance of purchasing and the control of it, it is recognised that the user experience at work needs to be as good as it is at home.”

Copyright The Financial Times Limited 2007