So Where Were The Best Run Businesses Then?

In addition to my software pricing and licensing research, I also study use of technology to improve procure-to-pay (P2P) processes; so, I'm always interested in customer presentations at software company events, in case I can spot some new best practices or interesting trends. This week I’m at Ariba LIVE in Orlando, but last week I was at SAPPHIRE NOW in Frankfurt, where I attended a presentation by a project manager from a large German car manufacturer talking about his rollout of SAP’s SRM product. Given that it wasn’t in his first language, the presentation was very good, and quite humbling to an anglophone, even a relatively multi-lingual one. (I can say “two beers, please” in eight other languages, but wouldn’t dream of presenting in any of them).

However, the overall case study was disappointing. I won't name the company, but I’ll just say that the SRM implementation didn’t look to me like as good a “leap forward through technology” as I expect to see in a showcase presentation. In particular, I was disappointed to see that this company is:

  • Transacting with suppliers only via a self-service portal. This is a common flaw in SRM implementations. Manual entry and download tasks create additional cost for suppliers. Surely, in this decade, large companies should use supplier networks to send orders and receive catalogues and invoices directly to/from their supplier’s systems.
  • Letting business units keep sub-optimal processes. One of the keys to getting eProcurement adoption is to ensure that the requisition-to-order process is quick. Ideally the purchase order (PO) should be in the supplier’s system on the same day, or at worst the day after, otherwise people will get fed up waiting for their stuff and will revert to ordering by phone. This company had customized approval workflows to suit each business unit’s legacy process, rather than persuading them to accept a best practice company standard. One division had even demanded, and been given, ten separate approvals before SRM could issue a PO!

It is dangerous to extrapolate from one case study, and maybe this one isn’t representative, but what is worrying is that this was the one that SAP picked, out of all the companies that have bought SRM, to support its claim that "best run businesses run SAP." I speak with hundreds of companies each year, and I haven’t noticed this correlation. Indeed, SAP is so ubiquitous that it may be equally true, statistically, to say “the worst run businesses run SAP.” I know from my research for the next eProcurement Forrester Wave™ evaluation that SAP has significantly improved SRM over the last year or so and it’s the right choice for some organisations; but I’ve also found that many companies buy their incumbent ERP’s add-ons for bad reasons, without proper consideration of best-of-breed (BoB) alternatives.

I’d argue that best run businesses don’t place too much weight on brand and customer logos – they do a proper evaluation and pick the product that is the best fit for their specific situation (which may or may not be SAP). They also choose implementation partners that will act as agents of change, delivering rapid, wide adoption using best practices and push back when the client asks them to configure the system to support sub-optimal legacy practices. These are the case studies that I want to see.

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So Where Were The Best Run Businesses Then?

It’s a shame that you didn’t mention the name of the company here in this post. They do process over €75.4 Billion in annual procurement spend through their supplycom site. This has proven to be an exceptionally effective way for them to manage transactions with their suppliers. Note their single supplier site is equal to the annual spend volume that is processed through the largest commercially available procurement supplier network. The largest commercially available procurement supplier network still has a rather small market penetration, 10 years after it was launched.

One of the strengths of this company holds dear is that they run their company as 9 different brands. Each brand has its own character, operates as an independent entity, and is fully responsible for its results. As a result it is not surprising that each company believes that it’‘s procure to pay processes are unique.

This company rolled out SRM 7.0 as the standard solution to manage the procure to pay solution to manage all of their spend, across all 9 brands of their business, supporting over Billions in annual procurement spend. This is a pretty compelling story.

This company rolled-out SRM 7.0 as their standard solution across their entire company to manage their procure to pay process and to support 3 business needs –decreased complexity, fully utilize the powerful and up-to-date technology within SRM 7.0, and reduce the effort and implementation support of supporting non-standard processes e.g. effectively fulfilling legal requirements and taxes in India and Brazil. All sound like compelling reasons to chose SAP SRM 7.0.

Most customers use a combination of reasons for selecting a product to be their standard procure to pay solution. But, one of those factors includes customer references. And when a company like this is an advocate for SRM 7.0 other companies are interested in knowing why. As a side note this company as part of their roll-out of SRM SRM 7.0 replaced a leading best of breed product because they wanted better cost control of their supplier connectivity and a single solution for all of their procurement spend.

Best versus Unique

Thanks for your comment, Paige. Your 3 business needs are certainly great reasons to implement a top, global P2P solution, but SRM 7.0 isn't the only solution that can meet those needs. It may or may not be the best solution, but I'd agree that it is a) a good solution, and b) better than a do nothing approach.

As to your comment "each company believes that it's (sic) procure to pay processes are unique", of course it does, but its the job of the program manager and implementation partner to convince the business units that they aren't unique, and that the goals of reducing complexity and non-standard processes are best met by eliminating arbitrary differences. IMHO, any firm that asks a tenth person to sign off a requisition that nine other people have already approved is not a well run business, let alone a best run one.