Buy Ariba eProcurement … Save More?

Whenever I see a third-party research piece claiming that companies will save more by choosing a specific vendor, my built-in software marketing warning bells go off. After all, my job in the past used to be to engineer studies of the sort. But having come to trust Aberdeen's research in recent years, I'm less skeptical of their recent study that found Ariba eProcurement customers save more than users of other solutions than I probably should be. I'll provide some further insight later on to let you decide for yourself whether to believe the numbers. But first, here are some basic facts from the study. In looking at eProcurement implementations measured by "spend under management, suppliers enabled, user adoption and reduction in unapproved or 'maverick' spending, Aberdeen found that Ariba customers:

- Reduced off-contract spending by an average of 34 per cent, compared to 21 per cent for all other respondents

- Increased spend under management by 30 per cent, compared to 8 per cent for all other respondents

- Manage 46 per cent of their total indirect materials spend through their e-procurement system as compared to 35 per cent for all other respondents"

These are some impressive numbers, but I believe that they require further explanation and analysis. My working hypothesis is that Ariba customers tend to be early adopters and will invest more to get their investments working -- and to ensure roll-out across the broader organization. While I am not sure if core Ariba Buyer functionality will result in greater spend under management than other solutions -- or improved metrics in other categories -- I can say that the network-based approach to supplier connectivity through the ASN makes it easier to connect suppliers than traditional eProcurement implementations. But you don't need to buy Ariba eProcurement to take advantage of the network anymore (which at the time of the study, you basically did).

In any event, these numbers are certainly a boon for Ariba's marketing. Maybe they'll breathe some life into Ariba's eProcurement sales. But what about the validity of the data, you ask? Knowing the analyst firm and the analyst involved, I am hesitant to say that the Aberdeen numbers were in any way influenced in a "pay to play" way to publish this study. At the same time, I should also point out that one can criticize Aberdeen’s research methodologies based on their "bottoms-up" approach to data gathering which by nature does not control for the quality of data in the same way of a Hackett-like study. Anyone can fill in a research survey form (versus going through a rigorous one-on-one interview or receiving a pre-screened invitation to participate in the research).

For some, this approach is grounds for partially (or completely) discounting the validity of Aberdeen's research findings -- not just in this survey, but for all of their research. But for most, this approach is perfectly fine, and provides a cheap way of seeing how one stacks-up through a fast and easy approach to benchmarking and survey data gathering participation. I'm in the latter camp, though I can appreciate the position of those in the former.

So at worst, Aberdeen's study is somewhat directionally accurate, though not valid statistically. However, I can buy the basic premise of why Ariba customers would do better -- after all, first movers tend to take things more seriously and spend more on ensuring success. At best, the study is convincing evidence that Ariba eProcurement customers get better results -- either by design or approach -- than those who choose other eProcurement solution providers. Decide for yourself which camp you're in, and toss out your opinion here at Spend Matters.

Jason Busch

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