The perceived importance of the purchasing function is rising in line with the rapid development of the market for e-procurement systems and services. 92% of respondents to a survey of 24 procurement directors, commissioned by e-procurement vendor Tranmit (www.tranmit.co.uk) said they thought purchasing was seen as a strategic function - an increase of 20% over the results of a similar survey by Tranmit and Byline Research in April.
Accordingly, senior management is leaving nothing to chance. In half of companies either the chief executive, the board or both are directly involved in formulating e-procurement strategy. But while enthusiasm for e-procurement is growing, real adoption rates remain low. Only 27% of respondents claim to have an e-procurement system, though 61% have automated some aspects of purchasing as part of existing finance and ERP systems.
The gap between intention and reality is still wide. Most companies claim to be using the internet for purchasing, but the survey suggests that traded volumes are modest. A substantial majority, 73%, use the internet to satisfy between one and five per cent of their purchasing requirements. Only two companies in the survey are doing a fifth or more of their buying online. The obstacles to progress are the same as ever. Lack of appropriate products and services was mentioned by 39% of respondents, and there are persistent doubts about the ability of IT vendors to address the business and technical problems of e-procurement. The biggest single impediment is technology. 74% put "technical integration issues" at the top of their list of problems, compared with only 36% of respondents to the April survey.
If technology is the problem there appears to be little faith in IT to provide a solution. In April, 80% of respondents said the IT department was closely involved in developing e-procurement strategy, but the latest survey suggests that IT is involved in only 57% of cases. Although IT will continue to play a role in supporting e- procurement initiatives, it looks increasingly unlikely to be a significant decision-maker or influencer of policy. Only a quarter of respondents expect eprocurement systems to be developed and implemented by IT. The rest are looking for off-the-shelf solutions from third parties. These cultural issues include resistance to change on the part of senior management, operational management and users. Equally significant, though harder for buying organisations to address, is the belief that the supplier base is impeding progress. Clearly, until supplier organisations have the appropriate sell-side systems in place, buyers can only complete part of the e-procurement picture.
The factors driving e-procurement are changing. Cost savings, far and away the biggest driver identified in the April survey has slipped into second place behind the desire to improve management control of the process. This shift can be explained in several ways. It may be that customers are growing weary of vendors' claims to be able to reduce costs, or that the potential savings are lower than were previously thought. A more positive interpretation is that businesses are coming to realise that
reduced process costs, while desirable, will have most impact in the short term, while the benefits of improved management control of the process are ongoing and sustainable.
The survey suggests that no single IT vendor has a monopoly of mindshare. Asked to identify vendors/platforms they would consider respondents produced a fairly predictable list in which no vendor appears significantly ahead of the others. Ranked according to number of responses the leading vendors are SAP (39%), Ariba (35%), Infobank (30%), Oracle (30%), Commerce One (26%), Tranmit (22%), Biomni (13%) and Elcom (4%).
Overall, the findings broadly confirm those of the more extensive survey carried out in April. They show that the desire to embrace e-procurement is stronger than ever, but that many of the factors inhibiting the market remain to be addressed. Apathy and cultural barriers are still in evidence and may slow adoption of e-procurement, though they certainly won't prevent it. Technical integration of e-procurement systems both with other internal systems, typically ERP/finance, and external systems (trading exchanges, supplier e-catalogues) stands out as the biggest bar to progress.
For further information on the research, and other reports on e-procurement, please contact Mary Kingman, Commerical Director, Tranmit Plc on 01264 365060 or email email@example.com
Tranmit is the leading provider of integrated browser-based workflow and electronic document management solutions to manage finance and corporate procurement. Sprinter Invoice Approval is part of a family of products that will allow businesses to extend the benefits of Total Process Procurement and automation to include internet based e-commerce. Tranmit’s customers include Sony Music, SmithKline Beecham, Mirror Group Newspapers and Fisher Frozen Foods. Tranmit are based in Andover, Hampshire. For further information visit http://www.tranmit.co.uk
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