Part 1 of our series on the Myths & Realities of Services Procurement focused primarily on the perceptions (it’s too hard!) and responsibilities (HR should do it for us!). Now, let’s dig deeper on the approach - adoption, demand management and technology - to dispel some more common misconceptions…

Myth: If you build it, they will use it.

Reality: Users will find a way around any system they don’t like. Any change in the way services are purchased is viewed with skepticism within most organizations - particularly when relationships with long-standing providers are involved. And if you implement a solution to manage services procurement that your user community finds cumbersome or complicated to use, they will do anything in their power to skirt it. This is why any solution you choose must be easy to use - as in no training required. Ideally, it should provide:

• A consumer-like user interface and requisition process.
• Single sign-on for any purchase request, goods or services.
• Visibility into the status of all orders that are in process by the user.

Myth: The best way to cut costs is to cut services.

Reality: Significant cost reduction can be achieved through effective spend management. Too often procurement of services has flown below the radar, bypassing standard requisition controls and approvals. This maverick buying is compounded by creating spend that cannot be monitored, so visibility is lost. The result is cost cutting with a hatchet rather than with surgical precision. By managing services spend, visibility is restored and intelligent decisions can be made around value and improved cost negotiation.

In addition, global economic conditions have created a buyer’s market for services, opening the door on categories previously thought to be off limits to the procurement. Categories such as print services and consulting are increasingly becoming fair game for spend management. But none of the categories will come under procurement’s umbrella if the promise is to deliver less service. Instead the focus should on improving services AND cutting costs.

The key to doing more (improved services) with less (smaller budget) is to develop a process that:

• Supports services collaboration by facilitating an exchange of communication and proposals to drive the best value.
• Enables companies to manage the renewal process and renegotiate at the time of contract renewal without any unwanted auto renewals.
• Integrates tightly with contract management solutions for contract compliance.
• Ties payments to the completion of key milestones and agreed-upon terms.

Myth: Any eprocurement solution can be configured to handle services.

Reality: Most services have unique attributes that cannot be simply configured as catalog items. Some applications attempt to simplify this by creating catalogs for labor and other services and presenting them as if they were indirect goods. For complex categories, this just won’t work.

It is imperative to implement a technology and process that can handle any service you may purchase, including, but not limited to: temp labor, consulting, marketing, project-based services and print services. It should also support external collaboration, flexible rate cards, time and expense reporting, flat rates and milestones. And if you purchase for a an enterprise with more than one ERP system, don’t underestimate the potential challenges around unifying disparate systems, such as cross-realm reporting, contract aggregation, catalog sharing and centralized but flexible administration for data and processes.

I’ll cover the final Myths & Realities in a follow up later this week. I also encourage you to download the Myths, Pitfalls and Realities Around Services Procurement whitepaper. It expands on the points above and provides a checklist of questions around technology, metrics and process to support your efforts.

Dan Ashton is Senior Solutions Marketing Manager, responsible for Services Procurement & Content, at Ariba.