Outsourcing: Ed Cross, Executive Director – Procurement & HRO at Xchanging (Part 5)

Sramana Mitra: I have followed those phases. There is Starbucks doing contract life-cycle management. Then, we have had pretty sizable companies being built in the procurement management systems base like E-vines that now sits inside SAP and several other vertical-focused offerings on procurement exchanges. How do you see that trend evolving?

Ed Cross: I wouldn’t want to specifically comment negatively about a competitor in the marketplace. However, you have to look at the technology that Ariba and SAP supply and think in terms of whether it covers all the procurement set of activities. Frankly, it doesn’t. Ariba carved out a very fine niche for themselves in certain areas of the procurement life-cycle, but they are not doing all of it and neither are SAP. That’s why there’s a proliferation of organizations in the marketplace offering single-solutions for single areas of procurement activity.

There are several suppliers doing contract life-cycle management. I don’t think there’s anybody that has come through to the fore and there’s no one organization that offers your one-stop shop for all procurement activities. Ariba has an affiliation model with suppliers that have signed up with them in particular territories, but it’s not broad-based. In terms of contract life-cycle management and supplier relationship management, my understanding is they don’t have a solution to that challenge.

SAP is clearly a great ERP system that many leading organizations use but it doesn’t cover all the bases in the procurement activity set. Yes, Ariba exists but so do several other organizations. Organizations like Cooper suggested to me that they’re taking market share from Ariba because of certain facets of the software that they provide. Again, Cooper doesn’t provide a solution that completely covers all the activities within procurement. What I’m suggesting is that there is a place for an organization to come forward and marry-up all those different solutions out there and create a one-stop shop for the procurement professional and for the buyer of services, who are not always procurement personnel. The big challenge for procurement or non-procurement people in any big blue-chip organization is that they often don’t know where to buy things from because the technology in front of them does not make it easy for them to find what they’re looking for, the way an eBay or Amazon type of consumer business solution does.

There is a space in the market for organizations that can bring forward solutions that are very easy to use. If we look at the ERP marketplace, there are some very sophisticated solutions out there but they are not easy to use. They won’t be configured, necessarily, for your system. They are brought in as an off-the-shelf solution, and you drive your processors and so forth to fit their solution. That involves a lot of integration activities and training for the users.

One of the trends that I am seeing in the marketplace is that our Generation Y comes through their expectation and what they would drive are systems that are easier to use and a lot more comprehensive in the business environment. I still think that’s not the case. Most systems are difficult to use in the business-to-business world.

You have mentioned about vertical procurement solutions. I have worked with a sourcing company called ShamAccent 2000 when the first wave of e-sourcing vendors came through. It was much heralded in vertical and horizontal marketplaces, but none of them took off and very few of them exist today. I’m not convinced that they’re the way forward. I’m sure there’s a space in the market for them but given the history, where nearly all of them failed in 2000-2001, I’m not necessarily convinced that this time around that will be the route forward.

This segment is part 5 in the series : Outsourcing: Ed Cross, Executive Director – Procurement & HRO at Xchanging
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