Executive summary

Background

• The objective of this survey is to gauge the state of eSourcing across organisations, the current level of maturity and to enable organisations to benchmark themselves against others. The report is informed by the 80 organisations that contributed to our study including over 25 FTSE 100 / Fortune 500 companies.
• For this survey we define eSourcing as a suite of collaborative, web-based tools that enable procurement professionals, business stakeholders and suppliers to conduct sourcing activities from research and RFI through to contracting over the internet.
• Of those who participated in the eSourcing survey we found that 62% had been using eSourcing tools for less than five years and over 70% did not use any contracting functionality. This confirmed our suspicions that although these systems have been around for 15 years or so they are still far from core to the average user’s sourcing process.

Benefits

Over 60% of respondents felt that the benefits delivered by eSourcing outweighed the cost with 30% believing that the benefits far outweighed the costs. Less than 10% of respondents believed the costs of eSourcing outweighed the benefits. We found that the key benefits from eSourcing and eAuctions included an improved transparency and audit trail (potentially leading to fraud reduction), more standardised processes and increased savings (particularly significant for eAuctions).

Challenges

• Despite the benefits, most organisations use eSourcing for less than half of their sourcing requirements. Their key challenges are around the complexity and lack of flexibility of many tools, which adds time and effort to the process rather than reducing it. They think that the tools are not designed by procurement people for procurement people, which limits their appeal. Finally there is a lack of resource and commitment put into change management. The money and effort put into acquiring the tool is usually far greater than the investment put into communication, training and set-up, to enable users to utilise the tool efficiently and effectively.
• This lack of resource and commitment is the area most within procurement’s power to address. With 17% of established users doing over 500 eRFX a year and delivering 10-30% additional savings, it is clear what can be achieved. Change management must be the key area of focus when taking eSourcing programmes forward. If not, then the significant investment in the tool will be wasted and eSourcing will remain an administrative burden rather than a facilitator of best practice procurement delivering real benefits to your organisation.
• The survey and our experience of eSourcing mirror our experience of procurement more generally. While a number of organisations are making significant strides forward and delivering increased value across all areas of spend, most still have a limited remit. While organisational culture will have some impact, we believe it is procurement’s inability to sell itself and the benefits it delivers, particularly softer benefits, which are holding it back.
• Looking at the success stories, these have been achieved through an eSourcing plan which delivers incremental benefit year on year and does not over promise.
• Organisations have an increasing focus on risk and value beyond cost out, eSourcing can provide significant support in these areas and they need to be emphasised, when seeking a mandate from allies in finance, legal and on the board.
• Perhaps the simplest way to kick start an eSourcing programme is to run a few eAuctions. They can easily be run through a low cost standalone service and provide great publicity through the buzz generated around them and the significant savings delivered. Some organisations have displayed them through their intranet to raise wider awareness across the business.
• Over 50% of organisations did less than five eAuctions last year, which we find very surprising given the level of savings achieved. We regularly see in excess of 20% savings over tendered prices in the eAuction programmes we run.

Topics of Interest

• Adoption, change management, buy-in and implementation
• Training and development
• eAuctions (set up, weighting, expanding programmes)
• Integrating eSourcing with sourcing strategies

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