Many larger organisations – especially in the commercial sector – have made the move to one of the mega Enterprise Resource Planning (ERP) or Financial Management systems over the past few years.
Many larger organisations – especially in the commercial sector – have made the move to one of the mega Enterprise Resource Planning (ERP) or Financial Management systems over the past few years. What usually happens in the IT-led selection process is that the organisation ends up with something called an ‘enterprise license’ which gives them the right to use just about any of the solution provider’s applications.
That usually includes whatever the ERP vendor has in the way of procurement applications. So the assumption is that, when the IT department gets around to Procurement, that is the software that will become Procurement’s next generation system. But several things are involved in this:
- The procurement applications are never looked at closely in the selection process – they just ‘come along with the package’ and are taken for granted
- IT never seem to actually ‘get around to’ Procurement with anything but the basics because the ERP implementation always takes longer than expected
So Procurement is left to fend for itself for an indeterminate length of time. They use little bits of the big system and small point solutions while they wait for their turn. When they finally start looking closely at what they have to work with, they often realise that it is not all that great. It’s usually more oriented to direct materials than indirect goods and services. It’s no more user-friendly than the rest of ERP – i.e. not even close to something employees would readily embrace as their way of getting what they need. It barely scratches the surface in key areas like sourcing, supplier management, contract management and catalogue management
. And it’s extremely complicated to configure and implement.
So Procurement either struggles through trying to make the ERP solutions do something for them or they lose interest and just keep making do with what they have. Either way, the ERP solutions become ‘shelfware’ – software that’s just sitting on the shelf unused to any meaningful extent.
This situation quietly holds back Procurement progress for years. This happens in a couple ways:
- Most importantly, the Procurement department is unable to get even close to its potential to create savings because they are caught in this purgatory where the organisation feels it has already paid for everything, yet Procurement does not actually have the tools they need
- Secondarily, that software that was ‘thrown-in’ by the ERP vendor actually carries an annual maintenance fee of 20% or more of the LIST price as if it had been purchased on its own. That can add up to a lot of money per year – basically for nothing.
But some procurement executives are breaking out of this mould. They are recognising that, if they are going to be successful, they must INSIST upon getting the right tools. And if they have to branch out from the ERP mother ship to do so, they will. They are saying “Why should we pay maintenance fees for software that isn’t what we need? We can use that money instead on subscription-based solutions developed by specialists who really do understand the needs of Procurement. With the right tools, we can position Procurement to save the organisation much more in annual purchase cost reductions and mitigated risk. It’s really a no-brainer.” Some companies are listening and taking action.
The 'True Cost of Shelfware' is just one of the key trends that finance and procurement professionals are dealing with today as they move forward in their quest for world class Spend Control.
To find out more, download 'Procurement Automation: Key Trends & Hot Topics