eSourcing savings missed due to lack of investment and focus on training and change management.

Emily Richardson

A recent report on eSourcing found that leaders are achieving significant savings and broader benefits but for most this opportunity is being limited by lack of investment and focus on training and change management once systems are in place.

Despite significant benefits including increased savings and better control and risk management, most organisations use eSourcing for less than half of their sourcing requirements. The reasons for this range from perceived complexity of the tools to non intuitive user interfaces; but the biggest issue is lack of resource and commitment put into change management.

Commenting on the report Dominic Hastings, executive consultant at State of Flux said: “The money and effort put into acquiring the tool is usually far greater than the investment put into embedding processes, communication and training, to ensure efficient and effective utilisation of the tool”.

Over 80 organisations including 25 FTSE100/Fortune 500 companies from over 20 industry sectors contributed to the survey. Over 60% of respondents felt that the benefits delivered by eSourcing outweighed the cost with, 30% believing that the benefits far outweighed the costs.

Most organisations significantly under utilise their eSourcing systems with 53% of organisations doing less than 5 eAuctions in the last year, despite consistent reports of 5 to 30% additional savings from eAuctions. EAuctions are the area that seems to suffer most from poor perceptions, yet a number of organisations who have invested in their programmes undertake over 1000 auctions a year.

Better communication and stakeholder management appears key to embedding eSourcing tools and realising a return on the investment in technology. Other key influences on utilisation are company culture, whether eSourcing is mandated, whether clear templates and processes are set in place and the level of ongoing training and support and internal promotion by the CPO.

Change management should be the area most within the procurement department's power to address and the area still in need of greatest focus.

Alan Day, chairman of State of Flux commented “We recommend a measured approach to implementing eSourcing with realistic, incremental goals. While a cost effective approach, we believe it also has more chance of success, which is critical for organisations that are now in their second or third launch of eSourcing and cannot afford to get it wrong again”.

To request a copy of the eSourcing Report 2012 or for further information on eSourcing, please contact Emily Richardson or call +44 (0) 207 842 0600. You can also request to join the LinkedIn 'eSourcing Practitioners' group to be part of future forums and eSourcing discussion.