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Amazon Business as Disruptor or Innovator in eProcurement?

The basis for most of an enterprise’s contact with their procurement team lies in eProcurement technology. It’s supposed to be a one-stop shopping solution for distributed buyers that allows them to make approved purchases on their timeline, at their convenience, without having to check the contracts in the filing cabinet.

Take a look at our Procurement Management Product Guide.

By centralizing multiple suppliers’ information, contract terms and item level pricing into an online interface, eProcurement systems support independent, distributed buying without sacrificing enterprise-wide reporting, traceability or risk management. Internal stakeholders win and procurement wins. So why isn’t eProcurement received with more enthusiasm by the internal user groups they’re designed to benefit?

The Failures of eProcurement

Despite the best of intentions, few eProcurement implementations have been celebrated as transformational successes – or even as examples of easy adoption with little pushback. In fact, the failure of eProcurement implementations to achieve their stated objectives has been widely discussed by providers, analysts and thought leaders. They point to many possible causes: over-generality holds back the ability of eProcurement to meet the needs of one industry or functional team. The lack of investment in the user experience leads to frustration. And a lingering preference to continue buying the way it was done before eProcurement results in non-compliant (also known as “maverick”) spending.

And yet, in their personal lives, procurement’s internal stakeholders no doubt spend significant portions of their own time and money on Amazon.com. This appears to be a contradiction. What is Amazon, if not the most popular B2C eProcurement implementation in the world?

But does Amazon Business intend to become the next generation disruptor of eProcurement as we know it? Amazon has been asked many times if they see themselves as holding a competitive position to more traditional enterprise eProcurement platforms. “No!” said Prentis Wilson, Head of Amazon Business, at the Global Procurement Tech Summit in 2016. “We have a great relationship with eProcurement providers. We are the marketplace behind the eProcurement solution.”

Amazon Business is Staking its Claim

Information on the Amazon Business landing page for enterprise procurement lists out no less than 54 eProcurement and ERP systems that they’ve already partnered with. If the provider you’re looking for isn’t listed, adding them is as simple as completing a quick online form. The integration process is straightforward enough that they have a detailed instructional video on their site – and it only takes 3 ½ minutes to watch it.

Amazon Business actually presents far more of a challenge to suppliers than to eProcurement providers. It opens the door to easy price comparisons on a “market basket” of items they’ve negotiated themselves against the dynamic demand-driven pricing available via the huge Amazon Business marketplace. If procurement can channel purchasing activity through an approved central channel while maintaining competitive pricing, and without having to negotiate it themselves, it could be a real win for the enterprise.

The fact of the matter is that procurement is paying more attention now than ever to how much it costs them to bring spend under management and reduce the risk of purchases. Such pressure to perform is likely to bring out a higher level of creativity than we have seen in the past with procurement technology.

In order to achieve a reasonable ROI, procurement must leverage automation and focus their efforts on the largest categories of spend and the most strategic supplier relationships. This has left “the long tail,” or highly fragmented low-dollar value spend, unmanaged in most organizations. Amazon Business speaks directly to this on their website, presenting themselves as a cost-effective, convenient solution for spend that is not (and is unlikely to be) covered by traditional corporate contracts.

Will eProcurement Get Creative?

A more imaginative eProcurement implementation might be inspired by the ability to integrate a resource such as Amazon Business – becoming a central hub for different kinds of demand, rather than the only approved channel for distributed indirect purchasing.

For instance, imaginative eProcurement might include:

  • Traditional punch-out catalogs from suppliers where procurement has negotiated item level pricing, usually covering indirect spend categories.
  • Expanded eProcurement ordering scope that covers some (or all) direct spend categories and supplier relationships. This, incidentally, brings with it an opportunity to also integrate inventory and automatic PO management solutions.
  • Amazon Business for infrequent or one-off needs that can be paid for with a purchasing card, becoming part of the enterprise’s centralized reporting.
  • An integration with one of the many service procurement platforms, allowing service categories – which represent a growing percentage of spend – to be managed through the same channel.

A business’ eProcurement software may not be anyone’s favorite solution today, but with a little imagination, there’s no reason why satisfaction, adoption, and – yes – even enthusiasm, can’t be increased. As the categories of spend traditionally covered by eProcurement become an increasingly smaller percentage of procurement’s time and effort, the use of eProcurement can continue to grow. The key to this will be adjusting its role (such as from an indirect spend hub to a broad, self-service demand portal) so that its capabilities and the value it offers to procurement’s internal stakeholders are maximized.

Take a look at our Procurement Management Product Guide.

Kelly BarnerAmazon Business as Disruptor or Innovator in eProcurement?

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