In my last post, I shared an observation about how cost savings is no longer the sole metric of success for procurement teams. I also revealed that savings is no longer among the top 3 reasons that procurement teams choose to purchase new upstream procurement software solutions. Cost savings has been drifting down in the list, holding the #3 spot in 2012 and 2013. Now, in 2014, cost savings has fallen to 4th place.
Why the change? Well, to start, the most frequently cited reasons that clients and prospective clients sought a new solution were:
- Dissatisfaction with their current software solution
- Process improvement
- Merger & acquisitions
In today’s follow-up post, I want to discuss each of these reasons in more depth.
Reason #1: Dissatisfaction with Current Software Solution
According to data from Iasta clients and prospects, the number one reason they were seeking a new solution was that they were dissatisfied with their current tools.
Naturally, there were many causes for dissatisfaction, but the main reasons we heard over and over again:
- Companies wanted a common tool for supplier information management, strategic sourcing, and spend analysis. Consolidating to a single tool was a goal for many of the organizations we encountered. Clients wanted to streamline costs and simplify customer support and maintenance issues by choosing one software provider for multiple solutions.
- Low adoption rates with existing tool: Software solutions only work if people use them. Many organizations were unhappy because they had experienced sluggish internal adoption rates with their tools. Companies believed that their tools were too complex, required too much training, and involved too many clicks. Ultimately, software that is difficult to use or difficult to learn is bound to fail in the field. Procurement people are busy, they have complex jobs, and they want their software to help them solve other problems, not become a new problem to be solved.
- Over-customization: Surprisingly, one of the reasons companies wanted to abandon existing tools was that they had allowed them to become over-customized to the point that they were less flexible. Sometimes modifying tools to support a unique process makes them difficult to adapt to the process changes demanded by evolving best practices.
Reason #2: Process Improvement
I love seeing process improvement rise in the ranks of important issues for procurement teams. We, at Iasta, are deep believers in software that guides organizations toward better internal processes and are excited that more and more companies agree with us. My favorite part about focusing on best practices is that it helps steer organizations away from the worst practices!
The improvements that we heard the most about were:
- Automating and standardizing internal processes
- Using templates and other software methods to standardize content
- Centralizing data so that team members are working off of the same version of supplier, sourcing, and spend data
Another cool thing about the process improvement trend is that, in many cases, the initiative to improve processes comes from procurement professionals who have effectively used software in previous positions and are paying the benefits of their experience and knowledge forward to improve results for their new companies. Procurement people are awesome that way.
Reason # 3: Mergers & Acquisitions
Mergers and acquisition activities commonly leave procurement teams with dramatically increased spend, an immediate influx of new/potential suppliers, disjointed information about current contracts, and a sketchy knowledge of the past strategic sourcing activities.
We’re not surprised to find that mergers and acquisitions trigger organizations to evaluate both procurement processes and tools, which sometimes results in an initiative to develop a new overall process and purchase new software solutions. Procurement teams know that the key to controlling the new, expanded organization’s spend is to invest in a spend analysis solution that is stable, accurate, repeatable, and easily refreshed (kept up to date).
Without knowing how much you’re spending with which suppliers, it’s difficult to find opportunities for savings based on combined spend, or to find where you have overlapping suppliers and contracts. With accurate and flexible spend analysis tools, organizations are ready to take on additional strategic elements, such as managing their new supply base and finding savings opportunities to target with strategic sourcing tools.
Procurement is Evolving
As procurement evolves, I’m sure we’ll continue to discover new ways that software can help procurement teams achieve greater influence in their organizations and establish new criteria for measuring success. How is your team evolving? Comment below or tweet us @iasta.