This week we’re doing something a little bit different: A quick solo episode, bringing you ten key criteria to consider when sourcing a digital procurement solution.
This is something that seems surprisingly hard to come by in popular articles and white papers, so here are ten helpful factors to consider.
Let’s dive into the list…
10 Key Factors When Choosing A Procurement Solution
The main question here is which cost model does the solution use?
Most digital procurement tools operate a Saas (software as a service model). These will either charge you an annual or monthly fee for unlimited users, or on a per-user basis. Some solutions offer a hybrid approach somewhere between these two, or use a more modular structure.
Per-user pricing gets expensive very quickly if you need to keep adding users. You may sign up to something like this, thinking that it’s affordable, but then scale up to a point where the fees get out of hand. For established businesses this is obviously less of a concern.
I’m particularly talking about best of breeds here, rather than legacy suites. Less is more is the key thing here - do you want it to do one thing very well, or would you like something more versatile that offers a modular structure you can expand over time?
If you’re laser focused on a specific problem, for example contract management, or supplier relationship management, you’ll want something that can do the job well. But these focused solutions obviously lack flexibility. A more versatile, modular solution can expand as your business does.
It’s important to consider this with your end goal in mind - what do you want to get out of the software, and what will your needs look like down the line?
How much time and resources will it take to implement a solution? Some of the bigger suites can take months to implement, not to mention an army of consultants in some cases!
If you’re a mid market business with a limited amount of IT resources, then you need to be asking providers to give you estimates on the time and ease of implementation.
How easy is it to connect to your existing systems, for example ERP? How open is the interface?
Most modern best of breed solutions have APIs which should facilitate implementation, but be aware that ERP systems - especially older ones - may not have the kind of open ecosystem that modern tools have.
If your solution is trying to communicate with these older ERP systems, then be sure to ask about this up front.
Maybe ask for case studies to see how this integration works in real terms before you commit.
4. User Experience
How easy is it to use - For you, for your stakeholders, and for your procurement practitioners?
I’ve been in situations in my career where I’ve been given tools so complicated that even experienced procurement professionals don’t use them!
If a tool creates extra work for your procurement team, or your suppliers, it might fall by the wayside.
You want users to adopt new tech, and you want them to enjoy using it. If a tool becomes something users want to avoid, it’s not a fantastic tool in the first place.
User experience is an often-overlooked factor, but I think it’s crucially important.
Try to get a demo, or prior access before buying a piece of software - and try to check out how easy to use and accessible the key features for your business are.
5. Customer Support
This is especially important with startups, who may not have 24/7 customer support. If you’re in a different time zone, trying to get hold of a company who don’t have an external customer support team, you could be waiting a while to resolve your problem!
Try to get a picture of exactly what customer support is on offer.
Do they have their own employees? Will they give you a dedicated customer success team member as a point of contact? Or, what if it’s the worst case scenario of a ticket system run by an external company?
This is another one that’s often overlooked.
I have to be honest here, I don’t have the most comprehensive understanding of modern cyber security certification. But speak to your IT people and familiarise yourself with what’s contained within ISO20071 - the international standard on how to manage information security.
Make sure that these criteria are part of your scoring process, because as time goes on, I think that protecting ourselves against cyber security risks is going to be increasingly important.
There are no right or wrong answers here - you may want to work with a fairly young company so that you can grow with them and shape your relationship together, but of course this could lead to more technical issues and teething problems.
You may favour an older solution, but obviously the trade-off here is reliability in exchange for flexibility and customisation.
It really depends on what's best for your unique business philosophy, but it’s still something well worth taking a stance on as a strategic consideration, before you go out to tender.
8. Integration with external providers
This one is becoming increasingly important in a best of breed or hybrid ecosystem. Even the big suites don’t do everything a procurement pro needs, so you may well find yourself needing to integrate other software.
I think the partnership and alliance space, alongside best of breed, is something we’re going to see more and more of in the coming years.
Ask your provider(s) who their software speaks with easily, who they’re partnered with, and which options for integration and expansion are easily available. Having a clear roadmap in mind of how you can combine and partner solutions is key.
Startups and Growing Companies
Numbers nine and ten might not apply to everyone. These points are more relevant to those working with startups, or companies that are still growing.
9. Is the provider profitable?
…Or are they completely dependent on venture capital as their source of investment?
We’re heading into some strong economic headwinds right now, so we can take a guess that venture money may dry up a little in the months and years to come.
I’m still optimistic that the amount of opportunity in the digital procurement space means that we’ll see growth, regardless of these challenges. But any company that’s effectively on venture capital life support, might not be the best partner long term as we enter yet more uncertain times, globally and economically.
Look at the figures: How many employees do they have? When were they founded, and how quickly have they grown?
You want to understand if they’re prioritising growth over everything else, or if they’re growing organically due to their quality.
10. How valuable is your organisation to them?
By this I’m particularly referring to companies that use AI and machine learning. AI systems need data, and they need training. You provide value to AI providers - especially young ones who need to feed more data to their AI.
This means you have value, and you should absolutely keep that in your pocket as a negotiating tool.
But what do you think?
What have I missed out? Are some of these points more important than others?
Get in touch to let me know your thoughts, thanks for listening, and don’t forget to subscribe to the podcast!