Hard work for procurement technology providers in Europe

While economies generally and many consumers around Europe still suffer, it ‘s been noted that a lot of companies are not doing too badly. In fact many are sitting on large cash reserves. Now investing in procurement improvement would seem to be a very sensible way of spending that cash. Whether it is investment in technology, people or tools, it tends to have a strong and pretty short term return if done properly.

And yet... we don’t seem to be seeing the growth that we might have expected . Most of the technology firms we talk to are doing OK, some better than OK. But the general feeling in the market is that customers are cautious in the UK and across Europe.

“Even if they like you here, it’s taking a long time to go through the process of selection, testing, and approvals,” said a senior technology executive to me last week, as he contrasted the speed at which his firm are winning new clients in the US with the pace in Europe.

Recent financials from Hubwoo showed some improvement in profitability, but (my highlighting);

“We remain cautious on Q1 2012 revenue expectations, as a consequence of the combination of seasonality in supplier revenues and delays in new projects signatures and their implementations.

Or take another case from a European firm:

“..the Group is applying inventive solutions to close increasingly protracted sale processes…” (Proactis 2011 Annual Report)

So does this reflect a more intrinsically cautious approach to business in the old world compared to the new? Are our US friends less risk averse, and more accepting of the benefits that technology can bring?

Or perhaps is it that the USA has emerged firmly from recession, even if not all the economic indicators are pointing in the right direction.  Economic growth in the last quarter of 2011 was 3% in the USA, while  Europe saw a decline of 0.3% -  that does of course conceal huge differences between Germany at one extreme and Greece at the other.

Or here’s a third option – that US firms “get” procurement better than European, are more easily sold on the benefits quickly and readily than we are this side of the Atlantic?

Another point to consider is the business case for procurement investment. Most procurement leaders I know will tell you that their teams deliver benefits of at least 10 times their cost. But if this were true, and accepted by their organisations, wouldn’t it be a no-brainier to invest further?  Perhaps part of the problem is that many procurement functions still offer pretty cursory and often unconvincing evidence as to the value they bring. That may compromise the business case for further investment if fundamentally the business doesn’t believe in the value proposition.

That doesn’t explain in full the difference between the US and Europe however, so perhaps we come back to the economic situation – in which case we should see some improvement once (if) Europe does pull round.

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  1. Julian Moore:

    The poor take up and protracted nature of sales cycles in the UK and Europe is a feature of all of these things in my opinion. Certainly caution on new investment and rigour to ensure current investments are properly utilised remain strong in these worrying times, but I believe there’s also another reason. In the US there is a huge and homogeneous domestic market which enables consistency of product design and market positioning, this combined with unified laws and taxes. So the product understanding, acceptance and application across such a wide audience is easier. This can lead to ‘stellar’ success for innovative new entrants in the US. Here in the UK and Europe however, we still have variations and embedded bias towards how things should operate and run (plus language preferences). This isn’t to say sales are insurmountable (I know), but vendors should understand and not under-estimate the nauances of the sales agenda in the UK and Europe. Local expertise and knowldge counts for a lot, and after 25 years in enterprise software sales, including establishing new US software vendors in this market, it’s still something that American vendors in particular continue to fail to understand or invest in sufficiently (design, marketing and sales). Support and utilisation of local partners is the key for success in both good times, and, as now, the bad times.

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