As they look to return to growth, businesses are turning to cloud-based applications to improve performance and profits; and Procurement is leading the charge.
Kevin Costello Ariba
Over the last decade, Procurement has proven its ability to do more with less and drive savings and efficiencies that have helped their companies weather some tough economic times. As the global recovery takes hold, businesses are beginning to prepare for a return to growth. And they are again looking to Procurement for help.
Out with the Old
In the past, companies could manage their internal operations and trust that their businesses would run themselves. But those days are long gone. In today’s global economy, it’s all about collaboration.
Where companies used to focus on executing a process internally, they must now look across the entire value chain. Where they used to mine their own intelligence, they must now look to knowledge networks that are developed through communities. And while they used to think about doing things faster, they now need to think about doing them better.
In short, companies that want to effectively compete in the future of business commerce must become more connected, efficient and informed;
Connected to networks that facilitate collaboration around key commerce processes.
Efficient by automating tactical, transactional work to drive greater productivity.
Informed through participation in communities that deliver market insights and best practices to fuel optimal performance and decisions.
It is a tall order. And to deliver on it, Procurement is taking a new and innovative approach.
Shaking Things Up -- Again
When it was first suggested that technology could be used to automate and enhance the procurement process, the skeptics rallied. Today, you'd be hard pressed to find a company that hasn't implemented some sort of software to gain greater visibility into and more control over their spend, to more effectively manage their contracts, suppliers and risk, and to streamline and enhance invoicing and payment processes. Yet many still struggle to connect and do business with key trading partners.
Inter-enterprise commerce is still very difficult because it is largely driven by closed systems and processes. The key to extending and improving collaborative trading relationships lies in open systems that can be easily accessed regardless of their architecture or delivery model decisions.
More companies are beginning to rely on these open systems.
Reaching for the Cloud
The first wave of technology-enabled productivity focused on making employees more effective by simplifying key tasks such as creating documents, presentations and spreadsheets and communicating with other team members. This change was largely driven by the desktop operating system.
The second wave leveraged Web-based technologies to drive greater productivity within particular functions, including Procurement and Human Resources. This advance was driven by the enterprise operating system.
The next wave of productivity is all about enabling more effective commerce by attacking the inefficiencies that remain between companies. This progression will be fueled by Cloud-based platforms.
The solutions delivered on these platforms effectively blur the lines between enterprise technology and communities and allow companies to improve productivity and ultimately profits by:
Automating processes to eliminate paper and manual work;
Leveraging information to drive process standardization and continuous improvement; and
Creating new process models that leverage people and core strengths.
These solutions are delivering results.
For example, there is AGCO Corporation, a pure-play, full-line agricultural equipment manufacturer that uses cloud-based solutions from Ariba to manage its sourcing activities. “We have developed a more precise and fast-paced way of doing business with our incumbent supply base that is highly accepted and respected,” said Michael S. Clem, AGCO’s director of global purchasing for North America. “And there is definitely a sense of best-in-class processes – e-auctions for example.”
IBM has done the same. “We were able to build a software catalog for a client who uses the Ariba Commerce Cloud in less than two weeks,” Patricia Spugani, program director for global web sales strategy with ibm.com, agrees. “The process was quick and efficient for both the customer and IBM. We were able to transact business very quickly, resulting in increased client satisfaction and a new sales opportunity.”
A New Way of Operating
But, as with the spend management solutions that have transformed Procurement, successfully implementing cloud-based applications requires careful planning and lots of change management. It also takes a realistic view of what they can and cannot do.
Before leaping into the Cloud, Procurement leaders need to have a clear vision of where they want to go. And they need to see Cloud computing for what it is; an enabler, not the ultimate solution, to that vision. To be successful, they must develop a roadmap through which they can:
1) Get connected – It’s no longer enough to assemble a supply chain and execute transactions. The future of business commerce will be driven through networks that facilitate true collaboration around key commerce processes both internally and externally, with employees, customers and suppliers. Create one as a vehicle to share best practices with stake-holders, and use the connections to react more quickly to market opportunities.
2) Be efficient – Cost savings programs are critical. But true value comes from automating tactical, transactional work to drive greater efficiency and productivity. Leveraging software solutions delivered in the cloud can get these automated processes up and running quickly.
3) Stay informed – In today’s volatile and competitive environment, information is vital to survival. But it’s not just about research and data. To gain and maintain competitive advantage, companies need to participate in communities that deliver market insights and best practices they can leverage to fuel optimal performance and decisions.
Business commerce is hard. But if history is any indication, companies that embrace creative new solutions and look outward for insights, can manage the challenges and position themselves for the next wave of growth and successfully ride it—Procurement can show them the way.
Kevin Costello is president of Ariba Inc., a leading provider of cloud-based collaborative business commerce solutions.