June 27, 2018

A Guide to Phased Procurement Technology Investments

Written by
Anthony Mignogna

When procurement sets out to become more effective and efficient, a new technology often looks like the obvious solution. In 2017, the Hackett Group found that a whopping 84 percent of organizations expect a digital transformation to fundamentally change their business within the next five years. There is nothing obvious, however, about identifying your team’s best-fit solution.

Finding Procurement Solutions is Hard

Determining what you need, where to get it, and how to implement is often a struggle for even well-staffed, highly strategic procurement departments. Short on resources and confronted with endless speculation, they can easily become overwhelmed in their search for solutions. Conducting online research and subscribing to trade research publications are good ways to start reducing that confusion and building an understanding of the landscape.

After some quick digging, a popular next step is to start contacting some of the more appealing suppliers in the market. This approach, however tempting, may prove both inefficient and ineffective. It’s perhaps to blame for procurement’s relative lack of faith in its digital strategy. According to Deloitte’s most recent Global CPO Survey, only a third of procurement leaders feel they’ve currently got the tools in place to meet their objectives.

Which FSM software
is right for your business?

On the surface, just about every solution could look like the right fit at some point. JAGGAER’s Kristian O’Meara recently described the phenomenon, “Too often, the appearance of a new technology is perceived as a magic bullet for the procurement department’s problem du jour.” Software reps are salespeople after all. Understandably, they sell the technology they have, wow you with elaborate demos, and build a business case for selecting their particular product. More often than not, this case is a fairly compelling one. Even the most spirited sales pitch, however, will leave a pair of questions unanswered. Are the outcomes and ROI promised by this solution actually attainable for my organization, and if so, when?

Check the State of Your Procurement

Sifting through the rhetoric and recommendations to reach answers is not easy; and if you’re scoping your project during the sales cycle, this process is all the more challenging. That’s why I recommend procurement take time to look inward before looking out into the market. Assessing your operations and defining your requirements, goals, objectives, and priorities is the best way to ensure your organization sets a manageable pace and ultimately selects the right solution.

Furthermore, it’s essential to evaluate and forecast the impact investing in a new technology will have on the organization. Who will need to participate in implementation? Which business units will feel the impact of the tool’s implementation and employment? Who are the end users and how capable, likely, and amenable are they to adopt the new platform?

By estimating how the technology required to achieve your goals and objectives will impact your business and its stakeholders, you can assess your organization’s ability to undergo these changes and achieve your desired results. If the anticipated change is too much for your organization, end users, and stakeholders to adopt initially, you will likely want to consider taking a phased approach to implementation and investment.

So how does procurement determine what this phased approach looks like?

I recommend looking at three factors.

First, procurement has to determine which component of a technology investment will provide the best ROI. Evaluating tools against the organization’s priorities and objectives, procurement should assess a tool’s hard and soft dollar ROI, as well its capacity to meet these objectives.

Another factor to consider is the timeline for reaping these benefits.

  • Are there components of the software platform that your organization can adopt more easily or more quickly than others?
  • Are there modules that can be made available immediately?
  • Are there any end-users who’ll adopt the tool more quickly than others?

Depending on your business’ objectives, it may prove more effective to accelerate time-to-value rather than focusing on total ROI alone. Finding the point where ROI and time intersect for your organization can help you develop a more strategic schedule for making targeted investments.

It’s About Relationships

Finally, procurement should analyze any close relationships and integrations between functionality. Spend analysis, for example, could be a standalone offering or an integrated component of a source-to-pay suite. Sourcing and contract management is another grouping of software functionality that tends to serve category managers and procurement professionals well. Similarly, the procure-to-pay cycle is generally a similar set of stakeholders, business process flows, and software functionality that are implemented together.

Depending on where your organization is, what your goals are, and the business outcomes you are looking to support, you may determine to group and phase these components of software applications in different ways. This will also factor into you provider list, and whether you need a full source-to-pay software, or simply P2P, S2C, or some other combination of acronyms.

As the conversation surrounding emerging technologies grows louder and louder, organizations are often tempted to jump in head-first. Taking time to reflect on your target business outcomes, ability and willingness to change, and your timeline for attaining the expected ROI will make the landscape look far less overwhelming. Moreover, this deliberate pace could very well make the difference between discovering a best-fit solution and fruitlessly devoting time and resources to the wrong procurement software investment.

Anthony Mignogna is a Director at Source One, a Corcentric Company. As the Practice Lead for Source One’s Procurement Technology Advisory service offering, he provides clients with expert, end-to-end support for their procurement software investments. Leveraging years of experience working with mid-market to the Fortune 1000 companies, he and his team empower procurement organizations to identify opportunities to better leverage technology, assess the software landscape, select best-fit solutions, and implement them to meet their business objectives.