Procurement software fails to deliver

Procurement departments are being put under the spotlight as businesses attempt to cut costs during the recession but technologies used to streamline how...

Procurement departments are being put under the spotlight as businesses attempt to cut costs during the recession but technologies used to streamline how businesses buy goods and services are not delivering expected benefits.

According to the Global Procurement Survey 2009 from CapGemini, two thirds of big businesses said the current economic conditions are having a significant impact on procurement activities.

The survey also revealed that, although companies have been using software, such as e-procurement systems and online auctions, to streamline buying products and services for ten years, they are not making the most of them.

For 60% of the companies surveyed, less than 20% of their total spend went through procurement tools. Only 7% of the companies questioned made over 80% of purchases through these systems.

"Given these systems have been about for more than ten years, we expected to find a healthy amount of use of them, particularly in the large organisations ($1bn plus revenues) which made up the majority of respondents. What we found was quite the opposite," said the survey report.

The report said most procurement tools do not suit certain types of purchases when they cannot, for example, be chosen in a catalogue. Because of this, buyers often bypass them.

"Building a solution is one challenge but getting people to use it is another. Too often people find ways to bypass the system and revert to traditional ways of transacting; for example employing the phone as an easier medium. Unless a robust compliance strategy is in place, the amount of spend directed through a system is likely to remain low," the report said.

The report revealed that 67% of procurement departments within large companies said economic conditions are having a significant effect on their strategies. It said over half of the companies surveyed were targeting savings of more than 5% with some aiming for double-digit growth.

BP said last week that it has cut its IT suppliers from 40 to five in a drive toward simplicity, standardisation and efficiency. The oil and gas company has consolidated its IT for application development and maintenance over the past 12 months. It announced a series of contracts yesterday, which it claims will save $500m over five years.

Read more about procurement:

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Compass Group improves procurement in face of recession >>

UK public IT handicapped by procurement process, say Indian IT suppliers >>

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