Most e-procurement exchanges will disappear leaving only a handful of giant software companies to clean up the market, Peter Smith, chairman of the Chartered Institute of Purchasing and Supply, told last week's Finance Directors forum.
Smith, a director at management consultants Shreepetort and former head of purchasing at both Natwest and the Department of Social Security, said specialist e-procurement companies like Commerce One have attracted most of the attention so far.
‘SAP, Oracle and IBM, will be big winners,’ he told around 300 FDs. ‘It can be taken as read’ he added, that Microsoft would be also be among that elite group.
Smith was critical of conduct of some advisers and suppliers in the field.
‘E procurement has been over sold by consultants, software companies and by everyone else,’ he said.
‘It’s not a disaster but its costing more, taking longer and benefits are coming more slowly.’
And he warned: ‘There won’t be many new £100m installations. E-procurement has suffered from massive hype it will bring changes to supply chain activity.’
Smith said e-procurement often didn’t work because it was employed in areas where there were no actual cost savings to be had by purchasing online and because cost savings had simply been overstated.
‘And maverick buying doesn’t stop overnight,’ he said, urging: ‘Don’t throw money at this until you’ve sorted out months ends.’
Smith also quoted CIPS figures that showed while 47% of companies are involved in some form of e-procurement, some 77 % had no e-procurement strategy.
Large companies like GlaxoSmithKline have already made massive savings through online purchasing. GSK which spends £8bn with third parties each year, has saved up to 48% of its purchasing costs by using online purchases, though the average savings has been around 11%.
The drug giant has trialed 60 auctions in areas as diverse as professional services, electricity, hotels, car hire, glass bottles and caffeine.
‘Two have been disastrous, three or four OK and the rest fantastic successes,’ said GFK global director of IT procurements Guy Allen.
‘And the two failed because of poor purchasing planning up front. We got the planning wrong.’
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