3 Reasons Why E-Sourcing Providers Have Failed Procurement

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Many procurement practitioners know the basic components and capabilities of an e-sourcing solution. They may even know the alluring benefits of adopting such a solution, including an average of 12% savings across the board.

Yet getting users to fully adopt e-sourcing still remains a perennial challenge in procurement organizations large and small. Many organizations are using their e-sourcing platform on only 25% of applicable events, according to one CIPS study.

How can this be, when the technology and purported benefits are anything but new and certainly compelling enough to get the attention of the CFO? For several reasons, the provider community at large has failed procurement when it comes to designing sourcing solutions. Here are three reasons why they’ve gone astray — and how to fix it.

1. Too Much Functionality

As solution providers fight to create the most advanced, market-leading technology available, they’ve forgotten the reason they created the solutions in the first place: to create a better way to do sourcing. When sourcing the old way is easier, faster and more effective than with a sourcing solution, why would anyone abandon the old method?

Take spreadsheets as an example. They may be static, siloed documents that lack the organizational efficiencies of a digital tool, but spreadsheets are also a lingua franca, of sorts, in the business world. Both buyers and suppliers know how to fill out a sheet for a bid collection without any explanation or direction.

Compare that with the RFX bid forms in solutions. All bids have to submitted through sometimes complicated, ill-structured bid sheets; attachments have to be added one at a time; and all suppliers have to answer fixed questionnaires, which are often populated with far more questions than the buying organization needs answered.

Many of these features may sound great on paper, but when using the solution actually takes longer — and feels more onerous — than emailing a spreadsheet around, why would anyone use it? No wonder, then, that of the six most significant inhibitors to e-sourcing adoption, half of the reasons CIPS lists have to do with buyers or suppliers not having the attitude or skills for using a tool with which they have no experience.

2. Too Much Analyst Focus

In an effort get a seal of approval from analysts (and find the “magic” components that will help their solutions stand out from the rest), providers have invested in pushing advanced functionality most users don’t need.

When analysts create market landscape reports, they publish lists of features a particular solution “should have.” Often these lists run the gamut of functionality, from simple tendering to combinatorial bid optimization. But when analysts are documenting solution components, they’re likely not thinking at all about procurement’s day-to-day needs — and certainly not the needs of your specific business.

The people selling e-sourcing solutions, however, seem to have misunderstood the analyst’s perspective. Instead of designing solutions around the user’s core requirements, providers have taken analyst lists as dogma. They assume that because an analyst listed every auction type ever conducted since the dawn of commerce, procurement groups will turn their noses up at a solution that does not offer every type right out of the gate.

For most organizations, adopting e-sourcing successfully requires the opposite approach: starting out with simple, quick wins that can be scaled to more complicated projects. A 12-week, 300-hour strategic sourcing initiative to revolutionize your $40 million IT hardware category is likely the wrong place to start your e-sourcing program. Diving headfirst into the most advanced features in the solution is bound to send buyers back to the warm embrace of email and spreadsheets.

3. Too Much Emphasis on Satisfying RFPs

An RFP for a sourcing solution can seem harmless on the surface. Procurement sends out hundreds or thousands of RFXs a year, so when fishing for a provider that satisfies its own requirements, creating the RFP should be a no-brainer, right?

Not quite. In fact, procurement often does more harm than good when sourcing for itself. By over-researching and planning only for an ideal adoption scenario, organizations end up creating wish lists for things they don’t need (see point No. 2).

But procurement isn’t the only one guilty of overcomplicating the vendor selection process. Consultants, ever the technology analyst’s partner in crime, have contributed to feature list overreach, as well. Because the integrators and subject-matter experts at consultancies know technologies like e-sourcing so well, they frequently overwhelm practitioners with extraneous information about solution features.

Consultants would do better to follow a “crawl, walk, run” approach, starting clients off with the basics of creating and sourcing an event with a small number of items and suppliers before moving onto, say, advanced optimization exercises for a major category.

In an effort to beat the competition, vendors have picked minute functional points to “one-up” each other over and waxed poetic about these features in their marketing materials. Analysts and practitioners alike repeat these points until they take on a life of their own, and no one can remember a time before such features became “must haves.”

So how can procurement organizations and solution providers come back down to Earth? Approaching solution adoption like a game, where users must reach a certain level of expertise before they unlock a new (feature) level, provides a promising way forward. To learn more, be sure to check out Part 2 of this series.

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First Voice

  1. Alun Rafique:

    Yes, eSourcing can be made easier. The question is can eSourcing ever become easier then just emailing a spreadsheet to a few suppliers? A buyer receives a spec and then just forwards the email on to their three favourite suppliers. The benefits of eSourcing around data centralisation, efficiency & scalablity come downstream.

    Encouraging adoption through design is certainly very important. Although this does need to be combined with training of buyers and company policy. A salesperson would expect to use a CRM system, is it mandated?

    I would say that it is certainly mandated, except through training, the requirements of the business and an understanding, it is expected by salespeople. Why is eSourcing not seen the same way.

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