EProcurement sounds like yet another business challenge that you need to get your head around. It’s probably easier to understand if you think about it in terms of automating the purchasing and supply functions (acknowledging that procurement encompasses substantially more than this), which is really what eProcurement is all about.
Essentially, eProcurement involves ordering, invoicing, authorisation and payment processes between buyers and sellers online, using Software as a Service (SaaS) or internet-based solutions. The objective is simple: to develop more cost-effective purchasing processes. It is also about eTendering for contracts online, making it easier for small businesses to compete alongside larger companies – effectively removing the barrier between large and small players and providing a level playing field.
What you need to know
So what do you need to know about eProcurement and, more importantly, how can any business benefit from it?
Much of the pressure for the use of eProcurement has come largely (but not exclusively) from government which is expected to purchase most, if not all, of its services online using a paperless ordering system, as well as receive invoices.
eProcurement solutions using SaaS provide a level playing field for suppliers, where small businesses gain a level of business sophistication that is generally only found in big businesses. This increases the opportunities for SMEs to compete. Buyers benefit through greater control and less fragmentation of their buying power. So, despite some initial concerns, buyers and suppliers increasingly see eProcurement as a positive process.
What’s in it for suppliers?
There is a wide range of benefits provided by eProcurement to businesses on the ‘sell side’, including:
- Opportunities to compete with large and established suppliers that have sophisticated systems;
- A chance to widen your client base and provide a point of difference with competitors;
- Time and efficiency gains;
- The opportunity to sell products and services to other eProcurement customers;
- Shorter payment times (because electronic invoicing is generally a more efficient way of billing clients) and potential to increase working capital through payables financing;
- A higher level of buyer ordering accuracy, thus increasing overall efficiency.
Part of the drive towards eProcurement is to create a one-stop portal where businesses can gain access to multiple contracts, online tendering process, as well as standard catalogues and order processes, making it easier and fairer for all businesses to compete in this environment.
What’s in it for buyers?
- The tender process can be standardised and automated to reduce cycle times and the complexity of analysing supplier responses.
- Paperwork can be slashed helping them analyse, obtain and respond to bids more quickly.
- Transparency is improved as all supplier bids using eProcurement systems should be traceable – so there should be a logical reason for opting for one supplier over another.
- eProcurement tools can help with the implementation of new contracts.
Are you ready?
Buyers are already implementing eProcurement so that means SMEs need to be eProcurement-ready now. Suppliers who are up-and-running early are likely to have an edge long-term as they create a track record and become a known quantity to their clients implementing eProcurement.
The channel opportunity
Many eProcurement resellers have been experiencing an increase in sales deferrals as prospective customers seek to hang onto their cash. The fact is, changing an accounting system is often seen as a discretionary spend, which often gets shelved. However those same resellers are also very well placed to exploit the new demands for commitment accounting and improved financial control, by expanding their existing expertise and financial knowledge into eProcurement.
In fact, eProcurement can be seen as an extension to accounting solutions and it offers itself as a spend control lifeline for accounting customers. The SME market sector represents a significant opportunity to provide spend control to finance directors who can struggle to control their companies’ financial spending without effective procurement solutions in place.
Now more than ever, implementing eProcurement is critical to an organisation’s future profitability. In challenging economic times it is much more difficult to sell hardware, software and services unless they can be shown to deliver fairly short-term cost reductions. To be able to compete, resellers need to be able to offer SaaS-based eProcurement capabilities and embrace annuity revenue stream models in order to compete.