Sourcing Solutions Deliver Edge-of-the-Enterprise Business Benefits

The manufacturer set a goal of automating 25 percent of its purchase transactions and implemented a spend-visibility and procurement solution.

Many organizations are investing in sourcing applications at the edge of the enterprise for similar performance improvements.

Vendor Recommendations

Sourcing specialists such as Ariba, i2, Manugistics, and SupplyWorks should target organizations with complex back-office systems and expensive-to-integrate ERP systems that are frustrating the companies' spend-management efforts. These vendors must provide undeniable proof they can deliver edge-of-the-enterprise applications with acceptable total cost of ownership (TCOTCO) implications. Many vendors can deliver cost-effective technology at the edge of the enterprise. Quantifying TCO advantages will help line-of-business decisions-makers win approval for sourcing projects. SAP must continue to improve the flexibility of its suites to deliver cost-effective edge solutions. NetWeaver is SAP's response to the unacceptably high integration and customization costs associated with its products. SAP's SRM and NetWeaver initiatives were both a response to SAPMarket's failed e-marketplace initiative. For SRM to succeed, SAP must prove the TCO advantages that the NetWeaver stack can deliver to companies using heterogeneous environments that are considering sourcing solutions. Invest in spend-visibility tools and sourcing applications to reduce the cost of obtaining and acting on spend intelligence. Enterprises best positioned to benefit from this sourcing approach include:

- Organizations running multiple back-office systems that spend more than $500 million annually - these companies will reap significant benefits from integrated spend-intelligence solutions
- Organizations that have invested in other spend-visibility approaches, and want to make the process repeatable and more cost-effective
- Organizations that have invested in sourcing and procurement applications and want to leverage integrated spend intelligence to improve system return on investment (ROIROI) Alles zu ROI auf CIO.de Alles zu TCO auf CIO.de

Enterprise Recommendations

Develop a spend data rationalization strategy as part of any sourcing or procurement technology project. Data quality and buy-side technology ROI are intrinsically linked. ROI will be considerably higher if the data that drives sourcing and purchasing decisions is captured, cleansed and rationalized cost-effectively. One option is to clean the back-office mess, but most companies are unwilling or unable to rationalize the item, customer and vendor masters across multiple ERP instances or across disparate systems. A second, more realistic, option is to leverage a sourcing application vendor's information-capture, cleansing, and rationalization technology. Ariba, FreeMarkets, Manugistics, SupplyWorks and i2 offer data rationalization capabilities as part of their solutions. Don't take the TCO advantages of an integrated ERP suite for granted when considering an edge-of-the-enterprise sourcing investment. Effective sourcing solutions usually span multiple back-office systems and require customization to align software with company-specific purchasing processes. These two needs erode the TCO of integrated suites. Conduct a rigorous TCO assessment to compare incumbent ERP vendor TCO with the costs associated with sourcing specialist product offerings.

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