I wanted to bring you the key criteria that you should consider when sourcing or considering a digital procurement solution.
A lot of the best of lists and a lot of the white papers out there don’t really seem to consider these in their analysis.
If you’re more of an audio person, we also ran a recent episode of the podcast covering some of these, which you can access here:
What are the top 10 criteria to consider when buying procurement software?
So, without any hanging around, here are 10 things that I think you definitely need to have in your evaluation process when you’re doing any sort of due diligence or tendering for digital procurement tools and solutions.
1. TOTAL COST AND PRICING MODEL
So let’s start off with probably the obvious one, and that is cost. Or, more specifically, what type of cost model does the procurement software provider use for their pricing?
If you’re purchasing software-as-a-service (SaaS), which is what most digital procurement applications are, then usually they will either charge you:
- an unlimited user, annual or monthly fee where you can add and you have as many accounts for that programme or for that software as you want to;
- or they will charge you on a per user basis;
- Possibly, they may even charge you a mixture of the two and have more of a modular-based cost structure.
What is the right procurement software pricing structure for your business? Well, it depends on:
- The size of your business;
- The number of users. Important here is also how many of those users will be buyers / approvers vs. just requisitioners or view only access to access reports. Some software solutions will price differently based on the user permissions.
- How quickly you are likely to grow or roll out the software to other locations? If it’s something that’s priced on a per user basis, then scaling or roll-out can get quite expensive very quickly.
2. FEATURES
When I say features, I’m particularly talking about best of breed procurement technology here versus some of the legacy, all-in-one procurement suite applications.
Do you want it to do one thing very, very well? Or do you want it to be versatile and to be able to pick up and do other things over time.
If it’s the latter, then you may want to consider a solution provider that has more of a modular structure that you can add on to as your procurement organisation matures or as your digital journey progresses.
What if if it’s a very specific problem that you really want to laser focus down on, for example, Contract Lifecycle Management (CLM), or Supplier Relationship Management (SRM). Then, you’re going to be better off just going for a best-of-breed solution that tackles that specific problem and offers a rich set of features in a neat user experience.
It’s really all about starting with the end in mind. Is it just one specific problem that you need to fix? Or is it a little bit more fluid, and you want to have a digital procurement tool that is a little bit more versatile, that can grow with you if you need to add different modules or different features over time?
3. TIME AND RESOURCE REQUIRED FOR IMPLEMENTATION
A lot of the big enterprise suites have really complex implementations and often take months, sometimes years to plan, execute and implement. Not only that, but you may also need an army of consultants in some cases to actually do the implementation.
So, especially if you’re a smaller or mid-market business, and you have a limited amount of IT resources, then two of the questions that you need to be asking of the providers are:
- Give me an estimate of how long it takes to implement?
- And how easy is it in terms of connecting it up to existing systems that you have in place?
For example, if you need to connect it to your ERP system, then how easy or how complex will it be to do? How open is their interface? Many modern, best-of-breed solutions have modern API’s, which really reduces the time and complexity to get different systems talking to one another.
The problem with that is legacy ERP systems, which a lot of the time are built on a tech stack that is 20 plus years old in many cases. So, they may not have that open ecosystem that a lot of these more nimble, cloud-based SaaS applications have.
If you need it to communicate with other best-of-breed procurement tools, or maybe even legaltech, or supply chain tech tools, that’s probably not going to be such a big problem. But if you need an ERP integration, then you should ask a few more questions of your provider. Maybe get them to give you some case studies of other customers that have integrated it successfully into something like SAP or Oracle.
4. USER EXPERIENCE (UX)
To my amazement, UX is often overlooked, but I am deeply convinced that it’s an absolutely critical factor. How easy is your procurement software for your stakeholders to use? How easy is it for your suppliers to use (if they need access to it?) And finally, how easy is it for procurement practitioners to use?
I’ve been in a situation in my career where we’ve had an e-sourcing tool that has been so complex to use that even experienced, tech-savvy procurement professionals just didn’t use it. Because for the two or three times a year that they needed to do a complex tender, they just didn’t see it as being worth the hassle to have to learn and figure out how to use this system.
Not only that, but also having to walk the suppliers through being able to register on it and get to grips with how everything works.
Along with people and change management, UI (user interface) and UX are essential success factors of a digital transformation. You want users to adopt this, you want it to be software that they actually like using rather than actively trying to avoid. If you’ve got a system that’s clunky or inuntuitive, then you’re kind of shooting yourself in the foot from the offset.
Make sure that whatever solution you choose, you get to see a really detailed demo, and maybe even try and get trial access to it just for just just for a couple of days just to play around with it and to get the look and feel of how easy is it to access the key features in there.
5. CUSTOMER SUPPORT
Customer support – or a lack of it – is especially relevant if you’re considering sourcing a solution that’s still a startup. They’re very likely not going to have a global customer success team.
For example, if you’re based in Europe, and your software solution provider is based in Silicon Valley, then bear in mind that due to the time difference you’re probably not going to be able to get hold of their customer support team until quite late in the afternoon.
The other thing to consider is what type of customer support or customer success setup do they have?
Do they have their own employees? Will they give you a dedicated customer success team member as a central point of contact?
Or, heaven forbid, what if they have a ticketing system and their customer support is done by an external company?
You definitely need to be asking some probing questions of what type of customer support they have in place and what you should expect.
6. CYBERSECURITY
This one is often overlooked, possibly due to ignorance among procurement professionals. But if you get your IT team involved early on, they will be valuable partners in navigating you through the questions that you need to ask of your procuretech vendors when it comes to cybersecurity requirements.
There is an ISO certification 27001, which covers cybersecurity. Look on the footers or other prominent places of solution providers’ websites. The ones who have it will display a badge confirming they’re certified. It’s an internationally recognised certification around basic cybersecurity principles that have been adheres to for any companies that are granted that certification.
So, speak to and involve your IT team. Familiarise yourself at a broad level with what’s contained in ISO 27001. And ensure that you incorporate cyber as part of your scoring process in any RFP for procurement technology. This one, especially as time goes on, will become ever more important in terms of protecting your organisation from avoidable risks.
7. SOLUTION MATURITY
How mature is the procurement tech solution that you’re considering?
There’s no right or wrong answer to this, because you may have the philosophy that you want to work with a pretty early stage startup. This has many advantages, especially that you could influence their future product development as an early customer.
However, that will also mean that there may be some bugs in the system, and it may not do everything that you want it to do until it becomes a more mature product. You may also not get fast response times when you need tech support.
Before you go out to tender or before you start having meetings with solutions providers, this really requires alignment internally with everyone who is involved in the sourcing and selection process.
Do you want to partner with a startup and grow with them? Or do you want to establish a relationship a really stable stalwart in this space that’s been around for a very long time, and has already gone through that sort of maturity and growth curve.
8. EASE OF INTEGRATION
What type of integrations do they have with other external providers? This one is becoming increasingly important in a best-of-breed or in a hybrid ecosystem.
What if a piece of software doesn’t have all of the features or modules that you want it to have – and let’s be honest – even the big suites don’t do everything that a procurement professional needs. You may then need to purchase additional best-of-breed procurement SaaS applications as your digital journey matures. Depending on what type of partnerships, agreements and API connectivity they have with different providers, it may be a very easy plug-and-play ecosystem that enables almost seamless integration.
I think the partnership and alliances space among procurement tech companies is really going to grow over the next two or three years. There is a recognition now, if companies are going down the best-of-breed or hybrid tech stack, that they will have to purchase two, three, maybe even five different applications to get everything that they want.
So, ask questions of who they’re partnered with, or who they can easily integrate with. Do these solutions fit with the kinds of systems or kind of problems or challenges that your organisation faces?
9. ARE THEY PROFITABLE OR GROWING SUSTAINABLY?
Is the solution provider profitable? Or are they completely dependent on venture capital money for their growth, and for their continued development?
We’re clearly heading into some economic headwinds right now as I write this. So, it doesn’t really take genius to figure out that there’s probably not going to be as much venture money sloshing around in this space in the months and years to come.
On the one hand, I’m still generally very optimistic that procuretech and supply chain tech in general still has a long way to grow, and a lot more startups will come into this space simply because there is so much opportunity. However, I also think that any company that is very dependent on VC money to just grow and scale as quickly as possible, may not be the best partner long term.
I personally would feel much more comfortable going with a company that is posting steady, consistent growth. Are they able to turn a profit rather than just being on a breakneck journey to scale just to get their next funding round.
I would really look at some of the figures in terms of how many employees they have, how much funding they have, when they were founded, and how quickly they have grown? Is their valuation realistic, based on the number of paying customers they have? Enterprise sales cycles are slow. Is their runway long enough to survive before landing their next big client?
10. ARE YOU A STRATEGIC CUSTOMER TO THEM?
How valuable is your organisation to them as a customer? I’m particularly referring here to startups that utilise AI and machine learning. Those algorithms are very dependent upon getting as much quality data through them as possible so as the algorithm can be trained and improves over time.
Are you sitting on a goldmine worth of data that would be a real asset to the to the procurement technology provider in terms of aiding and improving that product? Then just bear in mind that it could be a nice carrot to dangle as part of your contract negotiations with them.
If you’re a large enterprise and you’re working with a pretty early stage startup they may really need two or three big reference customers to feature on their website. Just make sure that you leverage that as best as you can in your negotiation.
So they are 10 key criteria that one should consider during the sourcing process for digital procurement technology, particularly for best-of-breed procuretech.
What do you think?
Were there any that you think are more important than the others? Just drop me a message on LinkedIn and I would love to hear your thoughts.
