Old Habits Die HardBy Kim S. Nash | Posted 2002-05-15 Print
Companies selling online purchasing software have been to hell and back. Well, not quite back.
Old Habits Die Hard
Getting users to change their ways is tough, say procurement veterans. Before deploying online procurement software, persuade your company's top managers to issue memos, to demand, to order that purchasing people stop calling their favorite office supply store when they need more notepads. Tell them to order only from sanctioned suppliers and only via the new software. Rogue purchasing must be stopped to see any savings.
At Honeywell Aerospace Electronic Systems, e-procurement is part of a bigger supply chain management project to unfold during the next four years. Doing away with faxes and paper purchase orders will speed up the buying process, says Ken Vlach, vice president of integrated supply chain operations at the Honeywell division.
Vlach plans to use a variety of technology suppliers, rather than a full suite from any one vendor. That's because the technology is changing quickly, as are the firms offering it. "If someone comes along that's better, you can change [software]," he explains.
Big market shifts are possible. Like the smaller players, the major e-sourcing and e-procurement companies all are losing money. SAP, Oracle and i2 Technologies, meanwhile, have moved into the market, providing tough competition. E-sourcing and e-procurement vendors will have to stay ahead technologically, support open standards and get profitable to survive.
Plus, it will be hard to persuade customers who question why they should buy separate e-procurement software when they already use other supply chain products from a more established and stable vendor. Royal Dutch/Shell Group, for example, is a large SAP user. While it is working with Commerce One on an electronic marketplace for the oil industry, it chose SAP's e-procurement package for its own use.
AMR Research expects a shakeout in the supply chain management market in the next two years. Within e-sourcing and e-procurement specifically, OrderFusion went out of business a year ago. SpaceWorks also disintegrated last year, prompting Manugistics to buy what was left of it.
Whether Commerce One and Ariba will survive does weigh on their customers. They say they don't worry overtly, but many have devised a Plan B (see Dossiers).
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