Finance chiefs at last week's Finance Directors' Forum were told a 'handful' of software giants will come to dominate the e-procurement market place and that the sector has been subject to massive hype. Only a few companies have made savings
Most e-procurement exchanges will disappear leaving only a handful of giant software companies to clean up the market, the chairman of the Chartered Institute of Purchasing and Supply told last week’s Finance Directors’Forum.
Specialist e-procurement companies like Commerce One have attracted most of the attention so far, according to Peter Smith, director of management consultants Shreepetort and former head of purchasing at both NatWest and the Department of Social Security. But he said: ‘SAP, Oracle and IBM will be the big winners.’
He also told around 300 FDs that ‘it is taken as read’ that Microsoft would also be among the elite group.
However, 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.
‘It’s not a disaster but it’s costing more, taking longer and benefits are coming slowly.’
And he warned: ‘There won’t be many new #100m installations. E-procurement has suffered from massive hype that 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 cost savings to leverage using online purchasing and because cost savings had simply been overstated. Smith also quoted CIPS figures that showed while 47% of companies are involved in some form of e-procurement, some 77% have 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 have been around 11%.
The drug giant has trialled 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 GSK global director of IT procurement Guy Allen. ‘And the two failed because of poor purchasing planning up front. We got the planning wrong.’
The news comes in a week when an American Express survey found 75% of FDs believe the benefits of e-procurement outweigh the costs.
However only 3% of UK and German companies currently order and pay for goods and services on-line.
Currently, more than three-quarters of UK companies, and over half of German companies are still using traditional paper-based systems, despite the majority of respondents admitting that e-procurement facilitates price comparisons and speeds up invoice time and settlement.
For more on the American Express survey see www.accountancyage.com/Business/1121603
More on e-procurement at www.accountancyage.com/IT/1122239.