Cloud computing and software-as-a-service (SaaS) is shaping the way some organizations use procurement software. Editor Michael Power looks at how purchasing professionals can benefit from the trend.
FROM THE PURCHASINGB2B JANUARY/FEBRUARY 2012 PRINT EDITION:
To Telus’s Lynn Clarfield, the procurement software the company uses for purchase-to-pay functions is about as simple to use as doing a little online shopping at home. Clarfield, director of enablement for procurement at the communications giant, oversees the team responsible for installing new software and processes. The system, from Sunnyvale, California-based Ariba, is similar to what one sees shopping online for consumer products. Users click items in the system’s catalogue that populate a shopping cart. Like any online shopping, the purchase is complete once the user checks out.
The system is intuitive and demands little training, Clarfield says. That saves headaches and ensures the procurement department can align itself with the organization’s policies and guidelines.
“Ariba has a very user-friendly interface that allows people to make purchases and feed into the financial system in a way that’s fast and easy,” she notes. And the way the software is delivered—through cloud computing, or software-as-a-service (SaaS)—represents a recent trend in procurement and business software. “I think purchase-to-pay systems are more and more often being bought on-demand, using cloud-based technology and the ERPs tend to be put behind the firewall. They don’t have an on demand offering—they’re not using the cloud well,” Clarfield says.
Clarfield says her team also uses a product called Spend Cube, which lumps together cheques issued through accounts ayable into categories to show how much gets paid out for IT, HR, real estate and other areas. Traditionally, that information has been tracked manually. Not only does Spend Cube save time, but an organization can look at how many vendors it’s spending with for, say, IT, then try to get a better price by consolidating with fewer sellers. “It’s like when you get a credit card bill and they’ve lumped it into food, retail or clothing—that’s what Spend Cube does.” Like other software used in procurement functions, Clarfield says, Spend Cube is available on-demand.
The view from the clouds
Cloud computing (also known as software-as-a-service or on demand software) means the delivery of computing as a service rather than a product. Shared resources, software and information are provided over a network—usually the internet—rather than installed onsite. The advantages, says Clarfield, include not having to carry software data on internal servers—that’s stored offsite courtesy, in this case, of Ariba. Such systems tend to be less expensive and don’t require maintenance fees.
For its part, Ariba decided to offer cloud-based solutions about five years ago, says Glenn Wolff, the company’s general manager for Canada. Before that, Ariba had delivered its software on premises and behind clients’ firewalls. “Which is great,” notes Wolff. “But if you talk to people in the industry you’ll know the time-to-value and the ability to be agile is the key differentiator for on-demand, cloud-computing, software-as-a-service—whatever buzzword you want to use.”
Wolff sees the speed with which cloud-based programs begin running as one of the trend’s major drivers. Getting procure-to-pay systems operational once took several years, he says. The same system delivered using the cloud is rolled out in months. Time needed for upgrades can be shaved down dramatically. Dion Graham, SAP Canada’s VP, line of business-procurement for North America, agrees cloud-based software can become operational quickly, partly due to the different commercial terms.
Usually, organizations pay software license fees upfront and maintenance fees annually, says Graham. With the cloud, the structure often resembles a subscription with software, maintenance, hosting and deployment bundled into that fee. Companies can pay monthly, quarterly or annually. “You start getting payback within the first few months while only investing a portion of the overall costs,” he says.