Business & Technology Nexus

Dave Stephens on technology and business trends

Procurement System: Build or Buy?

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With all the latest technology advances, you might be wondering whether a packaged Procurement solution is any better than a homegrown, tailored system.

It’s a very good question. And to be honest, I’ve been wondering the same thing.

The first step in determining the answer is to look at your business requirements. Some aspects of Procurement seem simple on the surface, yet can prove surprisingly complicated.

For the sake of specificity, why don’t we narrow down our discussion to a particular area within the Procurement domain – after all, there are systems for tactical buyers, Sourcing tools for strategic commodity experts, portals for suppliers, self-service buying tools for users, and lots of additional toolsets for dedicated problems, from linear price performance to category sourcing optimization.

So, let’s take a supplier portal. What if you have a basic Purchasing system but are wondering if you should build out a capability for suppliers to log in to interact with their data 24×7 and deflect calls, inquiries, etc from your tactical buyers.

Whether to build or buy depends on what you want your supply base to be doing. Many firms make it a point to offer prospective supplier registration – a simple mechanism for alerting the buying organization of a new supplier’s presence in the market. But whether to build or buy may depend on how you choose to work with the data afterwards. How do you propose a prospective supplier who registers be promoted to your true supplier master? Can it be manual because of its rarety? If so, the process & data collection can be stand-alone and the piece of work really is very simple. With new tools a simple registration flow would likely take less than 2 person weeks to build.

Okay, let’s assume prospective registration is a good fit – now how about dealing with existing suppliers – how do they log in, maintain their password, check their Purchase Orders, and perhaps submit Invoicing information?

Again, newer technology makes build-up of these functions a snap – salted MD5 login encryption is available as a plug-in to many technology infrastructures. It’s like having the best available login security “for free”. As for showing data, that’s a breeze to – as long as your requirements are not real-time from your source systems. But when it comes to initiating transactions, you have some work to do. You must figure out a number of exception cases if you can’t perform the transaction at the same time in you back-end system & your homegrown supplier portal. The more “digital divides” you have, the more likely hidden costs will creep into your homegrown solution (and turn it into a quick & dirty solution).

Does that make homegrown start to sound like a problem? Remember, you have other options. If you use Oracle Advanced Procurement, iSupplier Portal provides some good transactional functionality & is architected right on top of your central e-Business Suite database. Of course, if you don’t have a centralized system, it doesn’t fit at all.

Also, you could go SaaS and use the new-age VAN’s out there like Ariba or Perfect Commerce. If the price is right, passing your supplier portal problem to them may make some sense.

But for many of you, it’s quite possible a homegrown solution just broad enough in scope to hit your top requirements may be just what the doctor ordered.

I’ve received a few build vs. buy questions over the last month – and I find them enjoyable. So, feel free to send me your question & situation. I’ll be happy to provide my advice on where some of your tougher areas might be.

Good luck!

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Written by Dave Stephens

04/27/06 6:15 AM at 6:15 am

Posted in Opinion

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