Technology, Ariba, Procurement

Is e-Sourcing in the Cloud even an option for an organization like us?

Whether Sourcing in a cloud solution is a good option for your organization is a question, which every purchasing organization should take a position on.

The first part of the question is about e-Sourcing in general.
More and more companies are realizing that instead of using e-mail and Excel (with all the challenges these tools provide), they can use an e-Sourcing tool which should both be easy to use as well as direct the potential suppliers to ‘only’ respond in a certain format. Hereby shorten the time spent on analyzing the different responses, act as a single point of reference in the future and be fully auditable.
Still there are some purchasers out there who are claiming that their commodity can’t be put into an e-Sourcing event due to complexity of the commodity itself or that the marketplace simply isn’t ready to accept e-Sourcing events. With the current e-Sourcing tools out there today, it is fair to say that if you can put the requirements in one or more Excel sheet(s), then you can also put them in an online sourcing tool.

Then there is the underlying part which is about whether this will harm your relationship with your supply base in the long run? This part is actually trickier because there is no single answer that fits all scenarios. In some markets running an auction can indeed provide large savings, whereas in other markets the supply base will not even consider participation. In most – if not all – market situations, a serious supplier should have no hesitation to participate in an online RFP. And running an Auction can indeed provide the highest savings, but it is also not always the best approach to take…The thing to consider here is how you as a buyer can and should approach the marketplace. Should you go in and make firm demands on cost savings or should you for instance focus more on long term cooperation with your suppliers?

Read the guide: Ariba Strategic Sourcing in a nutshell

The second part of the question is Cloud related.
One could just look at the advantages of Cloud solutions such as a faster ramp-up, lower total cost of ownership, all leading to a faster ROI and less maintenance cost. But before you get to those parts there is the question whether you can allow your information to be stored outside your firewall in the Cloud?
The answer to that question has probably never been more loaded then now. This question needs to be broken down into several parts. I would like to focus on three common areas: technical, legal and ‘let’s be realistic’.

On the technical side, the Cloud provider must have all their security according to the latest international standards, they should have a third-party perform regular ‘tests’ of the safety of their environments (and of course be willing to share the reports with their findings as well as their steps to improve). In short they should be performing all of the tasks that any self-respecting IT Security department should do. The Cloud provider should guarantee a high level of their up time and should only perform their upgrades during non-working hours. The Cloud provider should also have a clear strategy (road map) of how the solution will develop in the years to come.

On the legal side there are also a multitude of questions to be answered. Should the Cloud provider be allowed to do anything with your data besides storing it? Which governing law is applicable on the data itself? Can the data be hosted in for instance the USA or must the data be stored inside the EU?
All of these are valid questions which must be look at, but also these questions/requirements are possible to accommodate.

On the ‘realistic’ side it actually is time to question one’s own requirements and the easiest way to do this is by asking yourself; How are we doing it today?
For instance, a common requirement is that under no circumstance should any of our contracts be sent outside our own firewall. The question to ask yourself here is; How are you sending the contracts to your suppliers for signature today? If the answer to that question is via email then the question becomes – Are emails containing the (draft) contracts always properly secured?
Of course this may not be the best example (since data security should never be taken lightly!), but the underlying point of challenging your own requirements is still valid.

All organizations should at least consider using an e-Sourcing tool to assist with their purchasing processes. The benefits of such a tool are simply too high to ignore off the bat.
Using cloud based tool might sound scary at first, but if you if you compare the list of requirements/concern and compare them to what is currently available it might not be so scary after all.

Curious to learn more about strategic sourcing ? Check out our White Paper Strategic procurement


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