Archive for October 7th, 2009

Part III of a III Part Series e-Procurement: Do-It-Yourself VS 3rd Party Solutions

Wednesday, October 7th, 2009

In yesterdays post, we discussed the pros and cons of a do-it-yourself approach to e-Procurement. Today’s post will take a look an alternative methodology which is to involve 3rd party solution providers to assist in the process.

Before getting into the specific positives and negatives of this approach, it is important to note that this does not have to be an all or nothing approach. As with any process, there are entire solutions or just pieces of solutions that can be provided by a 3rd party that have an impact on your Return On Investment (ROI). The way in which companies adopt outside solutions ranges from using a single service or tool, to a complete implementing an entire package where the 3rd party handles all aspects of the process. Most good solutions providers will accommodate a companies needs with either approach.

Let’s begin by taking a look at the downside of involving a 3rd party in this process. Many companies are hesitant to involve an outside company in their processes for two reasons. The first reason is that they are nervous about the lack of control with a process such as procurement occurring outside of their four walls. They have legitimate concerns as to a provider’s long term viability or not being able to change a process or software functionality without incurring additional costs.

The second reason people shy away from outside solutions is the upfront costs associated with many 3rd party solutions. While, in the end, the total amount of money spent on a 3rd party solution compared to using internal resources can be relatively close it is the initial monies or outlay of capital that keeps some companies from choosing a 3rd party to help them with tasks such as e-Procurement.

While both objections have validity, in today’s market many 3rd party e-Procurement solutions providers offer on demand solutions with no start up costs…

On the positive side of things, when purchasing or contracting an 3rd party solution, there is generally no down-time; no sick days, no vacation, and several companies will offer you 24/7 support for their product family as part of the cost of using their tools on demand. To go with virtual non-stop support, there is also the added benefit of employing a company whose sole focus is making their products and services better and more robust. Unlike an employee whose time may be split from a task such as procurement with other tasks, 3rd parties have teams of people focused on the task at hand and on how they can do it better in the future.

Involving outside resources can also help in that they frequently offer additional services that, dependent upon the size of your organization, could never be undertaken with in-house resources due to a lack of time, expertise or knowledgeable headcount. With a 3rd party solution companies can get all of the benefits that are normally only found in Fortune 500 type companies, and at a fraction of the cost.

Finally, taking the approach of involving an outside vendor with this process allows you to pick and choose the pieces that work best for your company and environment, while a do-it-yourself approach means that you and your team get to handle it all of the time regardless of what else comes up. Whether you select a reverse auction tool, contract management tool, professional services necessary to handle RFIs and RFQs, there are many combinations of solutions that can meet the varying needs of most businesses.

To close, there are two approaches that could be executed when it comes to tasks such as e-Procurement. With the advances in low cost agile technology, and the current economic condition, it would behoove every company to at least investigate the advantages of involving a 3rd party solution provider for adhoc functions or entire solutions. The benefits available today far outweigh the costs associated with attempting to do it yourself.

We look forward to and appreciate your comments.