3 Questions to Ask About Procurement in the Cloud
There are very different business requirements between how large enterprises and small-to medium businesses (SMBs) source goods and services. Yet the goals are the same: provide a consistent experience for end users who manage procurement, focus on supplier management, drive product quality and lower costs.
With procurement now a strategic part of indirect and direct business operations, there is an imperative for more capable and modern systems to be deployed sooner rather than later. The good news: thanks to the cloud, companies of any size can now take advantage of the full functionality of procurement systems while leveraging existing ERP investments. Today’s cloud solutions are also a great way for companies to begin their journey from on-premises ERP to an integrated SaaS environment.
Based on my experience with real customers, you should always consider these three questions when deploying a procurement cloud solution with any on-premises ERP system:
1. Do I have the right procurement cloud components?
Deploying a successful hybrid procurement model requires integrated functionality for sourcing. Understand all the procurement requirements critical to your organization and how procurement solutions are integrated to support your company’s needs.
One example: in many organizations, tracking supplier qualifications (such as supplier diversity) is a critical process, but it is too often done outside of the procurement system. The result is that it is difficult to incorporate supplier qualifications into sourcing tasks and subsequent contract awards. Evaluating and pre-qualifying vendors to maintain compliance, avoid risk, or maintain a list of certified vendors is often a critical pre-requisite for full visibility into sourcing, as well as the ability to flag, track, and identify critical vendors.
Another important capability: identifying high-risk vendors that should be excluded.
Also consider whether negotiation of contract terms should be part of the sourcing cycle or pushed downstream to the contract execution stage. Many companies prefer to take on the (often laborious) task of negotiating terms during sourcing, to speed up the contract execution stage once an award is issued. Incorporating contract management capabilities into a procurement system helps companies build out legal terms and conditions, and include them in the sourcing event. Vendor collaboration then starts earlier in the procurement process.
2. Do I have the right integration strategy?
How and what you integrate often depends upon whether you are a direct or indirect purchasing organization; what the on-premises system is; and the integration options available. In a hybrid procurement model, payables are often processed in the on-premises system because this is where the financials system of record resides. Typical approaches include:
- Create an agreement or purchase order via a stand-alone sourcing system with direct integration to on-premises ERP
- Create an agreement via out-of-the-box integration from cloud sourcing to procurement cloud contracts, then integrate from procurement cloud contracts to on-premises ERP
- Create a purchase order via out-of-the-box integration from cloud sourcing to cloud purchasing, then integrate from cloud purchasing to on-premises ERP
3. Do I have a well thought out training plan which includes suppliers?
In a hybrid cloud sourcing and procurement environment, you may have two vendor-facing systems, depending on where invoices and payments are processed. Whether using a supplier portal for negotiations and quote responses, or for the entire process (onboarding to invoice and payment submission), this is a transition for suppliers. It’s easy to underestimate the amount of assistance and training a supplier will need. However, they are a critical part of a successful rollout. Absolutely incorporate them into your training plan.
Similarly, your end users will now be working with a hybrid solution including cloud and on-premises applications. End-user understanding of the business flow of data in a hybrid solution will make for more effective collaboration across departments, to ensure business flows do not break down.
When implementing a hybrid procurement solution, always complete the following before you begin: map your business requirements to the solution, understand your integration strategy and business data flows, and plan for training both internal users and suppliers. With detailed answers to these three upfront questions, you will experience successful user adoption, a successful project and an exciting project go-live.