Get your head in the cloud

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.

February 28, 2012
by Michael Power

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.

Collaboration on is king
The cloud also offers stakeholders a new way to work together, says Karen Master, senior director, corporate communications, at Ariba. There’s an open platform anyone with a web browser can use. “Supply chains are much more global, so you’ve got to be more agile,” she says. “To do that you’ve got to have an open platform that any one of your partners or suppliers can connect to regardless of the back-end systems they’re using.” For example, Master says, using Ariba’s recently updated invoice management solution, when a supplier makes a submission an e-invoice goes through an automated validation process. Validated invoices are posted directly to ERP systems for payment and discount capture. Buyers and sellers exchange documents on the network; sellers get paid sooner while buyers have visibility into payment scheduling, Masters says. The entire solution is delivered through the Ariba Network. “The two key objectives for any procurement organization right now are still cost reduction and managing cash,” she says. “The cloud makes that really easy to do.”

Anurag Dixit, VP of global marketing for procurement software company Zycus, also notes the increased traction for cloud computing is part of a shift in the way organizations view their procurement function. Companies are now seeing the strategic value in their procurement departments and want to transform those departments accordingly, he says. Dixit agrees integration is key to ensuring collaboration is possible. “To do so they need solutions which are very tightly integrated,” Dixit says. “That means seamless data integration across different processes and different functions, so they can get better visibility, good reporting and access of data across different procurement processes.”

Buying on the go
Eagan, Minnesota-based Jump Technologies’ president and CEO John Freund notes ease-of-use and implementation, lower entry costs and the fact that providers handle maintenance and upgrades as the major selling points for cloud computing. But mobility—accessing data at any time, anywhere the internet is available—is also an increasingly important factor driving many organizations towards the cloud. “The whole push on the mobility front is a very large trend, as people have the infrastructure in place and want an (smart phone) app for what they do at work every day,” says Freund.

Procurement is adding smart phones and smaller, lighter tablet computers to its technology arsenal. Procurement professionals now work remotely more than ever, they’re looking more and more for mobile capabilities, Freund notes. “That’s the beauty of smart phones and tablets—I can now take my procurement system with me anywhere,” he says. “Anything that I could do sitting down at my PC can now be done right from my phone.”

SAP Canada’s Graham agrees today’s procurement staff isn’t tied to desktop computers and is just as likely to work on smart phones or tablets. That means demand for procurement related apps is rising. For example, SAP offers an app—called SRM Shopping Cart Approval—that streamlines the approval process for an organization’s purchases. The app allows purchasing requisitions to be routed through mobile devices. “Instead of approvals being held up waiting for someone to get back online (at a desk-bound PC), you can have someone in a meeting see a request come in routed through their Blackberry or smart phone,” Graham says. “We’re seeing this trend, and the demand from our customers to see more of our procurement solutions being available to them where they are.”

Caveat emptor?
The cloud offers advantages for procurement professionals. But like any technology, users of cloud-based systems should beware of potential drawbacks of such offerings, says Andrew Bartels, research analyst with Cambridge, Massachusetts-based Forrester Research.
Potential challenges associated with on-demand systems include security issues, integration with existing systems and customizing the system to suit an organization’s needs. But concerns often depend on the category, he notes. For example, contract lifecycle management software remains largely on-premises due to security concerns, Bartels says. With lawyers often weighing in on contracts there’s a bias towards information staying behind the firewall.  But services procurement often caters to single areas like IT, Bartels says. “An SaaS product makes more sense from a price perspective because you can base it on the needs of that department,” he says. “It’s easier to buy SaaS just for that one department rather than for the entire enterprise.”

Cloud computing seems a permanent fixture among technology tools available to purchasers. Whatever the software delivery method, the goal is the same—ensuring cost efficiency while enabling procurement professionals as much as possible.