E-Procurement Initiatives

E-procurement is purchasing implemented through the Internet. It has an important role in achieving efficiency and effectiveness in business today. This results in a reduction in the intermediate costs and labor that are associated with conventional systems.

The e-procurement initiatives involve many issues such as security, the products to be procured and also the investment needed. Despite the various complications, an increasing number of companies are joining the trend owing to the enormous cost savings e-procurement can bring in.

One of the major issues concerning e-procurement initiatives is security. Companies usually desist from sending sensitive information over the Internet for security reasons. The growing number of cyber crimes has added doubts regarding the reliability of the Internet. Security measures such as authentication and encryption are therefore employed while passing sensitive information between companies. Another major issue concerning e-procurement is the type of goods that are procured through the online medium. Companies usually prefer to source smaller, inexpensive goods such as office stationery. Larger complex orders that usually take weeks or months for negotiation are done in the traditional manner. However, the rapid improvement in software technologies has encouraged some companies to employ e-procurement for expensive products also.

Companies launch e-procurement initiative with a view to improve the overall performance of its business machinery. Although the initial investment required in hardware and software may be high, the return is even higher. Some studies indicate that a company can enjoy returns as much as 300% of the initial investment, within three years.

E-Procurement Software

It is estimated that supply chain invisibility leads to 20 to 40% more inventories. The invisibility comes from time delays and lack of communication. Advanced technologies enable real time communication through exchange of documents and they enable many communications.

Ecommerce platforms started with business-to-consumer sales. The characteristics of business-to-business transactions such as multiple decision making process has hindered the progress of B2B ecommerce platforms. The need to save costs has forced firms to look at opportunities provided by the Internet. Many large corporations have started to formulate e-procurement strategies, just like corporations evolved strategies for Internet presence.

E-procurement strategies include category selection for procuring online vendor access to the portal and vendor selection. Category selection decides which items to be procured online. Vendor selection decides the infrastructure access and the nature of access to the vendors and the platform on which the technology has to be hosted. E-procurement software is a web-based interface that is open source or proprietary and integrates email, ERP and legacy systems of the firm and suppliers.

E-procurement software has features to receive proposals, evaluate them, raise purchase orders and track them, and process invoices. In addition to these features, the menu has eMarketplace, where vendors can auction for the items. This is called reverse auction, in which ones bids for the lowest price. The advantage of reverse auction is that many vendors can participate in it; lowest price can be obtained when compared to conventional purchasing prices. E-procurement allows vendors to manage customers' inventory by having access to inventory data.

An E-procurement package comes along with a Supplier Relationship Management suite, in which suppliers and firm communicate using e-mail and other technologies. Suppliers can access the web based software using their own log-in passwords. Connectivity to legacy systems would require long term commitment from vendors and the firm. Many small and medium enterprises, who are the suppliers to large enterprises, lack web savvy, which explains the lack of penetration of B2B commerce when compared to B2C commerce.

E-Procurement Systems

E-Procurement systems include a variety of applications to enhance procurement process electronically. Primarily E-Procurement systems consist of three main categories with each focusing on different business areas. Success of an organization thus largely depends on choosing an appropriate application and successful implementation of these systems.

The first category focuses on improving decision-making that may improve transaction abilities of organizations. Most companies deal with hundreds of transactions every week. Applications falling under the first category simplify the process and help in maintaining a strong and successful buyer-supplier relationship.

The second category is essentially built to manage assets. Inventory management, maintenance scheduling, in-house availability of the product and related services are provided by the second category. These applications are particularly helpful to those organizations that need to maintain a clear idea about quality of material in stock.

The third category optimizes company production dealing with production cycle, procuring materials in case inventory is running low, managing supplier contracts and scheduling production. Disparity in functional area and usability purposes highlights importance on choosing the right system for individual companies. Irrespective of system category, organizations can reap benefits of implementing E-Procurement applications that include saving money, improving process of purchasing, better timelines and reducing loss.

As a result of implementing these applications, the supply chains of such organizations also may be able to undergo great improvement and increase efficiency.

Other businesses, manufacturers and distributors supplying goods or services in the production process could be included in such supply chains. Improved methods of transaction processes could have an impact on the entire economical account of such organization. Electronic process also makes it easier for accounting department to maintain all records of payments. This system offers catalogs providing comparisons of all suppliers under one head, thus expediting choice of company for placing supply orders. Clients need to choose a system suiting individual businesses and industry needs as these systems do not essentially boost up any procurement process automatically.

E-Procurement Systems - Why You Should Start Connecting to Today

Want a piece of a multi-billion dollar sales pie? The one served up by the tens of thousands of buyers who make the purchases for Fortune 500 companies and huge government organizations? Then it's time to connect to the world of e-procurement.

It used to be complicated, difficult, and horribly expensive to play the e-procurement connection game. But as Bob Dylan said, "The times, they are a changin'".

What is e-procurement, why does this challenge exist in the first place?

E-Procurement systems are vastly complex, enormously expensive software applications that allow large organizations to ensure that buyers make all their purchases in the same way.

This has several benefits,including:

* Saves buyers time and effort
* Allows management to control purchasing budgets and eliminate maverick spending
* Allows purchasing to interface with other systems within the company including inventory control, shipping and receiving, and accounting

While these systems are a great boon to the company that invests in them, they create a problem for vendors like you and the buyers who need your products and services. That's because e-Procurement systems are internal to the company.

That means that buyers now have a daunting task; get supplier information - like products, prices, and ordering methods -- into their e-procurement system.

That also means the suppliers who want to do business with a company that uses an e-procurement system have to find a way to 'plug in' to their system.

That's exactly why the businesses that have already figured out how to do that are the ones who get the lion's share of these enormous sales. Just take a look at these supply categories and the companies who dominate them:

E-Procurement of Direct Materials

In today's competitive business world, the corporations are continuously looking for IT solutions to improve the efficiency of their business processes and there by cut cost of operation to improve their margins. The businesses are under constant pressure to improve their bottom line irrespective of the growth in top line. They have no choice but to adopt the new e-procurement solutions, to improve time-to-market, reduce operations cost, avoid costly mistakes to stay on top of competition and avoid risk of extinction

In order to improve the procurement efficiency and realize maximum potential savings, it is necessary that the entire supply chain must be very efficient. The suppliers and the trading partners, such as shipping agents, clearing and forwarding agents and finance agents must be as efficient in order to provide the right materials at the right time at the right place at the right price at the right quality. This is only possible by a collaborative solution between buyers, suppliers and trading partners. It is important that the e-procurement solution must focus on collaborative supply chain practices in order to realize the fullest savings.

There are various types of procurement activities in an organization based on direct and indirect materials. The direct materials are items that are purchased for the production and the indirect materials (MRO items) are purchased for support of production activities. The features and the specifications of the e-procurement solutions vary for direct and indirect materials, depending on the procurement process of different vertical industries. Due to these varied requirements of e-procurement, different e-procurement providers focus on either different vertical industries or horizontal processes based on their domain knowledge and expertise.

E-procurement solutions come in different flavors and colors to cater to variety of industry requirements.

Vertical and Horizontal Exchanges

Public exchanges for various vertical markets

Private exchanges sponsored by corporations

ASP solutions

The above technologies can provide efficient e-procurement solutions, but have limited scope in their effectiveness. Vertical exchanges focus on transacting goods in a single industry, product or material. They typically exist in industries where buyers and sellers are fragmented and inefficient. Horizontal exchanges focus on leveraging expertise in a particular business process across number of industries. Service industries lend themselves well to a horizontal exchange. The most active horizontal exchanges today are competing in the realm of e-procurement.

Jul 07 Are Spend Management (or SRM) Apps Suited for the Mid-market? – Part 1

I could think of at least the following five key issues and challenges that in turn lead to tremendous opportunities to save money, time, and bolster the bottom line of companies of all size.

Issue #1 is excessive spending for direct and indirect goods and service
—i.e., more than a company should for it needs. The opportunity here is to reduce the company’s spending by minimizing maverick purchasing practices, reducing transaction costs, and leveraging the aggregated (collective) purchasing power of the enterprise to negotiate more favorable pricing, service, and contractual terms and conditions.

Issue #2 is a lack of visibility and accountability. Many companies are not exactly sure what they are currently spending their money on. The pertinent historical and snapshot data is lacking and is likely inaccessible. Questions like, “How much are we spending? With what suppliers? On what categories? Who is spending it? How long does the approval take? Are we within the budget? What suppliers are (or are not) fulfilling orders on time? Should we rationalize our supplier base? Are there spikes or trends in our spending patterns that require action?” and so on require constantly changing answers.

The opportunity here is for all managers and executives to monitor spending (via personalized interactive analytics and alert messages) by category, location, cost center, department, project, you name it. These metrics should be known/viewed as transactions are happening, instead of only after they are booked to the general ledger (GL).

One way to solve this conundrum could be via procurement data marts that provide prepackaged spend analysis over a few dozens metrics and dimensions for fast answers to the above questions. These answers should be based on fresh (real-time, or close to real-time) data rather than on “rearview mirror.” This hindsight speed-of-thought spend analysis should measure and optimize savings via packaged buyer analytics, key performance indicators (KPIs), and proactive control and supplier collaboration.

Issue #3 is that most companies have a legacy of too many vendors that supply disparate operations and manual approval processes that make it impossible to exercise reasonable control. The opportunity here is to have an overarching system that enforces controls, drives requisitioning and purchasing clerks to preferred suppliers and items, and makes an approval workflow a snap. Essentially, the idea is to make it patently easy for everyone to do the right thing consistently time and again.

Issue #4 is that many existing procurement and payment processes are labor-intensive and fraught with errors and rework. As a result, too many people are spending too much time on clerical tasks. The opportunity here is to lift that burden and focus the company’s human resources (i.e., requisitioners, managers, and purchasing professionals) on more strategic activities.

Finally, Issue #5 is fragmented enterprise systems (and islands of information), which are difficult to navigate and almost always require duplicate data entry. Astute integration technologies should solve this problem without costly IT input, even if the enterprise is integrating diverse solutions (i.e., procurement and sourcing with different front-office and back-office solutions). There is often a need to integrate procurement to accounts payable (A/P), GL, and inventory management systems, whereas both procurement and sourcing systems often have to be linked to supplier catalogs, Web sites, and sales order management systems.

Are Spend Management (or SRM) Apps Suited for the Mid-market? – Part 2

Generally speaking, sourcing is the process of identifying a company that provides needed goods or services. APICS Dictionary further defines strategic sourcing as “The development and management of supplier relationships to acquire goods and services in a way that aids in achieving the immediate needs of a business. It is entirely aligned with the sourcing portion of managing the procurement process.”

In other words, strategic sourcing is the continuous evaluation of preferred suppliers, goods, services, price, and non-price attributes to achieve the optimal mix of all parameters. The group of (preferably electronic) “request for” documents collectively called “RFx,” which entails requests for quotation (RFQs), requests for proposal (RFPs), and requests for information (RFIs), facilitates the supplier evaluation efforts.

Actual buying or selling (sourcing) takes place via a number of auction events that will be described shortly. Purchases can be direct or indirect, depending on whether they entail direct or indirect materials.

Direct materials are materials that become part of the final product in measurable quantities. These are raw materials for manufacturers, and finished goods and components for distributors. Conversely, indirect materials are materials used in manufacturing that are not normally charged to finished production, such as cutting and lubricating oils, machine repair parts, glue, or tape.

Indirect materials also include maintenance, repair, and operations (MRO) supplies, or items used in support of general operations and maintenance such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations. Office supplies, computer equipment, professional and temporary services, catering services, facilities services, travel, internal suppliers (e.g., computer, telephone), and so on are other examples of indirect purchases.

There is a third kind of sourcing/purchase, spot purchase, which is a purchase made for standard off-the-shelf material or equipment, on a one-time basis (”on the spot”). Spot purchase could apply to non-catalog items requisitioned through the procurement module and also to single sourcing events for large purchases that warrant competitive bidding. In the first case, the sourcing module logically must be integrated with the procurement counterpart.

The sourcing process starts from an actual requisition for a certain material or service that follows the creation and posting of an event, bidding, evaluation of bids, selection, and approval of the winner, and transmitting the actual purchase order (PO) or contract to the winning supplier.

Are Spend Management (or SRM) Apps Suited for the Mid-market? – Part 3

Epicor Software Corporation is a global company dedicated to providing integrated enterprise resource planning (ERP), customer relationship management (CRM), supply chain management (SCM), and professional service automation (PSA) software solutions to midmarket companies and divisions of the Global 1000. Founded in 1984 and headquartered in Irvine, California (US), Epicor serves over 20,000 customers in more than 140 countries, providing solutions in over 30 languages. For more details on the company’s offerings, see my blog series on Epicor in early 2008.

The Epicor SRM suite stems from Epicor’s acquisition of certain assets of formerly Atlanta, Georgia (US)-based Clarus Corporation in October 2002, as part of its strategic initiative to offer a comprehensive and integrated enterprise solution. For more information, see TEC’s 2002 article entitled “Epicor Picks Clarus’ Bargain At The Software Flea Market.”

The acquisition brought an initial set of SRM solutions covering Web-based procurement, sourcing, online invoice presentment and payment (settlement), and the ePortal Supplier Pack for secure supplier access to relevant information. Then there was View BI, a business intelligence (BI) module for spend analysis, and finally eTour, a training and reference application available 24/7 through a Web browser.

eTour has since been retired, since it was underused and too expensive to maintain. For its part, View BI has meanwhile been replaced with Epicor Enterprise DecisionStore for spend analytics. The invoice presentment and payment module was never really completed by Clarus, and Epicor chose not to invest in it because the company felt that procurement, sourcing, and spend analytics were the most important and most value-add midmarket SRM solutions. Indeed, electronic invoice presentment and payment (EIPP) solutions have long been offered by Ariba, Basware, and J.P. Morgan Xign.

Product Development Goes On

Since 2002, Epicor has delivered three major releases and several minor releases, especially of the Procurement module. These enhancements have all required internal development, since there have been no other SRM-related acquisitions. In late 2003, the vendor announced the release of Epicor eProcurement 7.3, a purchasing management solution that provided a connection between buyers and suppliers for the purchase of direct and indirect goods and services within the framework of defined business rules.

New in eProcurement 7.3 was the integration of inventory management and back-office purchasing modules (e.g., with the back-office purchase order approval routing and end-user requisition capabilities). Blanket purchase orders and releases was another major group of capabilities within the 7.3 release.

For example, permissions to create blanket purchase orders are configurable, and blanket orders can be used for either private or public consumption. Blanket orders’ characteristics (or specification of the goods or services that the order covers) can be specific items and quantities, a monetary amount of one or more product categories, or a general monetary amount, regardless of items or categories. Blanket orders also support effective dates and consumption priorities, while order releases can be done individually or on a schedule.

IT Services E-Procurement

Despite retrenching in the dot.com world, analysts project business to business e-commerce to grow to a multi-trillion dollar market over the next few years. This market has driven the development of many e-procurement solutions. While most of these solutions focus on the optimization of the material supply chain, several solutions focus on the optimization of the service supply chain. Some focus specifically on optimization of the IT service supply chain. What are these solutions and how do they work?

The first step towards answering that question is to consider the concerns of the service supply chain stakeholders. These concerns shaped the current solutions.

On the buy-side the stakeholders include the service supply manager, the IT manager, and the organization's legal, finance and human resource functions. The IT manager is concerned primarily with access to quality service and the speed of the service acquisition process. The service supply manager is concerned with leveraging the organization's total buying power, managing the suppliers, and maximizing the efficiency of the entire service chain. The legal, finance, and human resource functions are most concerned with the administrative aspects of the transaction that fall within their scope of expertise.

The sell-side stakeholders include independent professionals, professional service companies and staffing agencies. The independent professionals are concerned with exposure to organizations that need their expertise, opportunities to bid on those organizations' projects, and being able to provide services that will minimize the administrative burden of running a small business. The professional service companies are concerned with knowledge of project opportunities, the length of their sales cycle, and client communication. The staffing agencies are concerned with finding new prospects, strengthening client relationships, and streamlining the service acquisition process.

The concerns of these stakeholders have shaped the various solutions and the different functionalities they offer. At a high level the solutions fall into two groups. The first group is the expert marketplaces. Though the functionality of these marketplaces varies, they each have a directory of suppliers and offer some degree of matchmaking. The second group is the service supply chain optimizers. The functionality of these optimizers also varies, but each attempts to maximize the efficiency of the service chain.


The core of each expert marketplace consists of a database of service suppliers. The basic value the expert marketplace delivers is access to this database and the capability to match an organization's needs to resources in the database.

Using these marketplaces is straightforward. You either directly search the database using some combination of criteria (e.g., skills, location) or you post your project requirements and interested suppliers respond with proposals. In either case, once you've identified a potential resource, you initiate discussion. Many marketplaces offer some degree of collaboration functionality that facilitates those discussions.

Table 1 provides a list of several expert marketplaces. Although all these marketplaces offer searching and matching, they do differ in focus and functionality. The first six marketplaces include a mix of professional services including some types of IT services. The last five marketplaces focus specifically on IT services.

Table 1.

Expert Marketplace	URL	Service Focus	Comments
ProSavvy	www.prosavvy.com	General	1700 prequalified firms. 160,00 registered users.
Guru	www.guru.com	General	470,000 users
Ants	www.ants.com	General	Over 100,000 members
Freeagent	www.freeagent.com	General	Mission: To help free agents achieve long-term wealth, success, and a balanced life.
Smarterwork	www.smarterwork.com	General	Global marketplace active in 8 languages with experts in more than 110 countries.
eLance	www.elance.com	General	Over 200,000 businesses and individual professionals from 140 countries registered.
Rent A Geek	www.rentageek.com	IT	Online source for independent computer professionals
HelloBrain	www.hellobrain.com	IT	Marketplace for sourcing technology solutions
NuAspect	www.nuaspect.com	IT	Software developers marketplace
Sourcexchange	www.sourcexchange.com	IT	Open Source developers marketplace
IT Radar	www.itradar.com	IT	Marketplace for IT services

The IT manager should understand that some of these marketplaces focus heavily on promoting the independent professional. Marketplaces like Guru, Ants, and Freeagent focus on the independent professional with each offering some mix of business support services. ProSavvy is an example of a more evenly focused marketplace with functionality that addresses concerns of both the buy and sell-side stakeholders.

Supplier qualification serves as a significant differentiator for several marketplaces. Smarterwork, eLance and ProSavvy all place a heavy emphasis on supplier qualification. Marketplaces such as Rent A Geek that function primarily as directories perform little or no supplier qualification.

Several marketplaces offer some type of competitive bid functionality. This ranges from collaboration functionality that facilitates proposal delivery to auction functionality. Ants, NuAspect and ProSavvy each offer competitive bid functionality.

A final differentiator is back end services. The primary example of this is billing and payment services. Smarterwork, eLance, and HelloBrain each offer some type of billing or payment service.

These marketplaces can provide access to previously unknown resources, but how well do they address the speed of the service acquisition process? Although they speed up some aspects of the service acquisition process, these marketplaces do not focus on the total service supply chain. You have to look at the service supply chain optimizer solutions for that.

These solutions focus on reengineering the total service procurement process. These solutions vary in focus and functionality, but they all attempt to optimize the basic service supply chain. From requisition to the payment process, these solutions look to streamline service procurement processes and provide organizations with the information they need to strategically manage their service suppliers.

Utilizing these solutions is a much greater undertaking than accessing expert marketplaces, but the potential benefits are far greater. Since theses solutions deliver the greatest benefit when utilized enterprise wide, organizations should assess their constraints prior to implementation. Implementation planning may require process redesign and organizational buy-in. Most of these solutions offer web-based implementations, but integration with the organization's existing enterprise should be considered. Consequently, if we're talking about process redesign and system integration work, we could be talking about a significant project.

Such projects can generate significant benefits. Companies with a contingent workforce in the 400-1,000 contractor range have realized annual savings in the millions of dollars by implementing these solutions. How do these solutions generate such savings? They generate them by automating service procurement tasks, by providing visibility into the organization's spending patterns and by enabling the monitoring of supplier performance.

Table 2 provides a list of Service Chain Optimizers. These solutions all attempt to streamline the service chain, but their focus and functionality vary. A review of the following characteristics will help to understand those differences.

* Business service focus

* Supplier network

* Matching function

* Requisition/RFP function

* Enterprise system integration

Table 2.

Company	URL	Service Focus	Comments
Uwork	www.uwork.com	General	Services e-procurement (SeP) Platform is a buyer-centric, supplier-friendly online platform that automates the entire process of buying, selling and managing professional services from purchase to pay.
Nitorum	www.nitorum.com	General	E-procurement application for acquiring and managing workforce suppliers. Originated from Merrill Lynch's efforts to automate its professional services procurement process.
Vivant	www.vwvant.com	General	Provides open marketplace to help hiring companies staff projects with contractor talent by matching their needs with firms or online services that represent contractors.
Chimes	www.chimesnet.com	General	Centralized Vendor Management (CVM �) is an e-Procurement Resource Acquisition Solution that manages the supply chain and all aspects of the ongoing staffing process.
CascadeWorks	www.cascadeworks.com	General	Clarity is a web-based hosted application that streamlines the complex processes involved in the procurement and management of contingent labor.
SkillsVillage	www.skillsvillage.com	General	Provides a blended model of applications and services across the entire procurement lifecycle for finding, hiring, and managing contract workers.
eWork Prosource	www.ework.com	General	7 modules providing a front-end sourcing and candidate management system combined with a back-end processing system
XiSource	www.xisource.com	IT	Solution facilitates the quality-centric, cost-effective and timely execution of IT service outsourcing.
CoFix	www.cofix.com	IT	Builds, hosts, and operates online marketplaces and exchanges for automated IT maintenance services procurement.
SolutionHub	www.solutionhub.com	IT	Procurement platform designed specifically for the buying and selling of complex software and Information Technology (IT) services
NeoIT	www.neoit.com	IT	Technology solution for the procurement, management, and delivery of IT services
Mirronex	www.mirronex.com	IT	MxConnect is an e-commerce hub that streamlines business-to-business transactions. Its first business focus is the IT outsourcing industry.
IQ4hire	www.iq4hire.com	IT	Brings together high-quality Buyers and Sellers of complex IT implementation projects.

The solutions listed in Table 2 exhibit one of two-business service focuses. They either focus on the IT service chain or the general service chain. The first seven solutions listed focus on the general service chain. Their functionality contains no IT specific characteristics, though it can be applied to the acquisition of IT resource.

E-Procurement Is Not Electronic Purchasing - Part II

This second part of an extended note on e-procurement examines the necessary steps after a business decision to go with e-procurement has been made based on the information and criteria covered in Part I.

E-procurement is an integrated system of services and technologies that provides a seamless bridge between buying and selling businesses. The e-procurement process begins at the planning stages within the buying company and extends through to the delivery and collections services of the selling company and the receipt and payment services of the buying company. E-procurement shatters walls, enhances controls, and eliminates time delays in the requisition to receipt process.

About This Note

This Technology Note covering the e-procurement is presented in two parts. The first part covers:

1. The Promise of E-Procurement

2. E-Procurement Myths and Reality

3. Preparing for an E-Procurement Initiative

The second part covers:

4. E-Procurement Architecture

5. Selecting an E-Procurement Partner(s)

6. Implementing E-Procuremen
Procurement automation begins with budgeting and ends with the retirement of capital assets or consumption of raw materials. Failure (or choosing) not to include any of the following dimensions of the process de-optimizes the investment at best and opens the process for subversion at worst. Following are features found in product offerings and customer requests with examples of what each function addresses.

1.

Budgeting - is the basis for Automated Expenditure Authorization for Cost Center-based controls and accounting. When a Requisition is either initiated by an authorized individual or authorized by one, the Procurement Engine should compare the Requisition against Budget Levels and other Authorization Rules then forward it to the supplier for fulfillment.

Budgeting services include:

* Expense items

* Capital items

*

Cost Allocation Rules

2.

Project Structure - is the source of Automated Expenditure Authorization project-related controls and accounting. It establishes approval and authorization routings that override or clarify normal budgeting processes. Where Project Accounting is employed, it also establishes the hierarchy of accounts that will be used to capture project costs.

Project Structure services include:
*

Expense items
*

Capital items
*

Cost Allocation Rules

3.

Purchase Contracting - establishes commitments and agreements between suppliers and buyers. Requisitions, Receipts, and Payments leverage Purchase Contract data to set up Purchase Orders and Validate Billing. Goods Receipt and Payments post attainment of purchase commitments and consumption of sale commitments.

Purchase Contracting deals with:
*

Quantity minimums
*

Commitment levels
*

Expiration dates

4.

Bid Management - involves a series of steps from Request for Information to Purchase and Post-Acquisition activities. These steps leading up to a Purchase Order are time consuming and highly prone to contention. Bid Management is concerned with:

* Request for Bid posting (Open and Directed)

* Supplier response posting

* Standard Terms & Conditions


5.

Approval & Automated Authorization - are two distinct process steps. Approval is a statement of concurrence that no known conditions exist to prevent authorization. Authorization empowers action. A combination of automated and manual intervention steps leads to commitment of a purchase order.

Approval services include:
*

Budget comparison rules
*

Authorization Rules
*

Approval Rules
*

Workflow
*

Escalation Rules
*

Bypass Rules
*

Exception Handling Rules

6.

Requisitioning - initiates the procurement process. The more simple and comprehensive this process is, the more useable and less subverted the entire process will be.

Requisitioning services include:
*

Catalog of standard goods, services and information
*

Standard kits
*

Alternative product selection assistance
*

Order amendment
*

Custom routing
*

Shipping, handling and delivery instructions
*

Price variance allowance
*

Delivery variance allowance
*

Cost allocation
*

Order consolidation and contingency

E-Procurement Is Not Electronic Purchasing - Part I

Buyers of e-procurement are looking forward to reduced inventories, lower procurement costs, lower product costs, shorter procurement cycle-time, higher (internal) customer satisfaction and higher value-add from procurement professionals. Suppliers of systems and services promise those benefits plus secondary cost reductions and efficiency improvements in enabling organizations as Finance and Inventory Control. Following is a compilation of benefits derived from case studies and supplier references.

Accounts Payable: obtained increased efficiency through reduced matching work, automated payment vouching and reduced invoice errors.

Treasury: reduced cash requirements through increase predictability.

Project Accounting: efficiency improved through automated posting of purchases and costs.

General Accounting: improved performance from automated invoice remittance, reduced use of general journal entries and more efficient audit and control activities.

Budget Performance: improved by including committed costs as they are recorded.

Receiving Department: efficiency improved as a result of less frequent matching problems and automated recipient locations as well as from being able to predict future workloads.

Inventory and Production Control: obtained higher accuracy and increased yield through more efficient inventory handling and production capacity.

Every business function that is involved in the procurement process from budgeting to requisition to receipt and payment must be engineered into a seamless system with an absolute minimum of inherent delays and maximum use of automated transaction handling.

About This Note

This Technology Note covering the e-procurement is presented in two parts. The first part covers:

1. The Promise of E-Procurement

2. E-Procurement Myths and Reality

3. Preparing for an E-Procurement Initiative

The second part covers:

4. E-Procurement Architecture

5. Selecting an E-Procurement Partner(s)

6. Implementing E-Procurement
E-procurement is an integrated system of services and technologies that provides a seamless bridge between buying and selling businesses. The e-procurement process begins at the planning stages within the buying company and extends through to the delivery and collections services of the selling company and the receipt and payment services of the buying company. E-procurement shatters walls, enhances controls, and eliminates time delays in the requisition to receipt process.

New Partnerships Add to Remedy's E-Procurement Strengths

Remedy Corporation (NASDAQ: RMDY), a supplier of a range of service management and infrastructure applications, announced two partnerships that are intended to enhance its e-procurement offering. Remedy will embed technology from Requisite Technology, Inc. into Remedy's e-procurement product Purchasing@Work. Requisite offers a patent-pending search engine BugsEye� and catalog management tool, eMerge�. Requisite's technology also appears in products by Oracle and SAP, among others.

Remedy has also partnered with FutureNext Consulting, Inc. FutureNext is a mid-market systems integrator specializing in e-commerce. FutureNext will integrate Purchasing@Work into its consulting practice and provide implementation and best practices consulting to Remedy customers. It also has partnerships with Ariba and Concur.
Each of these partnerships is an incremental addition to Remedy's total offering in the e-procurement arena. Neither provides a unique capability but the combination adds polish to Remedy's relatively new e-procurement product. Of the two, the partnership with FutureNext will probably be more important as it will bring Purchasing@Work into more product selections and turnkey implementations.

An important extra for both programs is that they will help Remedy support its Guaranteed@Remedy rapid implementation program; FutureNext will contribute as an implementation vendor, while Requisite, by offering access to its eLeader collection of pre-configured catalogs and suppliers, will make it easier for Remedy to bring customers to the point where they can make their first meaningful use of their new product.

'Collaborative Commerce': ERP, CRM, e-Procurement, and SCM Unite! A Series Study

In the early 90's, ERP came of age. Everyone had to have the functionality ERP packages promised. Since then, as Web and Internet technologies have matured, CRM on the front end, and e-Procurement and Supply Chain Management on the back end, have come into their own.

Now in 2001, the catchphrase is "Collaborative Commerce," where we unite all of the above elements into one coherent system within and between organizations. This is the Big Kahuna, the zero latency, fully transparent, 360 degree exposure that is the stuff systems integrators dream of. Is it here? Are the technologies mature enough? Simple enough?

This, the first of a series of articles on Collaborative Commerce (C-Commerce), examines what it is and can be. Additional articles in the series will look at the initial efforts of the leaders in this game; namely, the big ERP vendors, including SAP, J.D. Edwards, Baan, IFS, Oracle, and PeopleSoft.


Let's review the very high level attributes of both ERP and CRM systems, in order to set us up for evaluating the state of various vendor C-Commerce solutions.

ERP

Enterprise Resource Planning, which came into its own in the early 90's, is typically comprised of the following key high-level components:

* Manufacturing and Logistics

* Finances and Accounting

* Human Resources and Payroll

For a complete definition of the scope of ERP, please refer to the article: Essential ERP: It's Functional Scope.

ERP has extended backward, outside the organization through e-Procurement (electronic Purchasing) and Supply Chain Management (Distribution and Inventory Management).

CRM

Customer Relationship Management, which has followed on the heels of ERP and is just now coming into its own, can be thought of to comprise the following key high-level components:

* Sales Force Management (SFA)

* Enterprise Marketing Automation (EMA)

* Customer Interaction Center (CIC) - formerly called Customer Service; now with a broadened scope.

* e-CRM

* Field Force Automation (FFA)

* Professional Services Automation (PSA)

* Partner Relationship Management (PRM)

* Analytics

e-Procurement Is Not Electronic Purchasing - Audio Conference Transcript

When my grandmother needed heating oil, ice, produce or milk, she placed the appropriate card in the front parlor window and when the delivery service came by, they rang the door bell, took the order, made the delivery, got paid and left.

On the other hand when a client at a large media and entertainment company needed a tablet of paper, she called her administrator who wrote a purchase requisition, brought it to her for approval and sent it to the division controller who batched it and sent it to purchasing where the MRO (Maintenance, Repair, and Operations) buyer batched it, summarized quantities of common items then called the supplier to place the order. The buyer then made copies of the purchase requisitions and sent them to mail room. The supplier boxed up the goods and delivered them to the mail room where they were matched up against the copies of purchase requisitions, bagged and loaded into mail bins for the journey through the walls to the mail room on the administrator's floor. The supplier meanwhile sent an invoice which the mailperson checked against the purchase requisition, initialed the purchase requisition and sent it to Accounts Payable. At Accounts Payable, the Purchase Requisitions were matched with the Purchase Order and the supplier was paid forty-five days later.

Seven days and $150 dollars of handling later, the Tablet of Paper arrived. This is not a pretty picture. But it is not the entire story either. While this person waited for her tablet, hundreds of other employees were drawing from 'office stocks' that had been hoarded over the months and hundreds more were stopping by The Office Superstore on the way back from lunch and submitting Expense Reimbursement Vouchers to Accounts Payable for the same types of materials.

My grandmother had three suppliers and four items to buy and she barely had to leave her rocking chair. How can a company connect 20,000 employees with 10,000 suppliers and 200,000 items?
The first order of business recommended by the Selection Consultant was to simplify:

1. Reduce the number of items by standardizing on 10 pens and 5 tablet colors

2. Reduce the number of suppliers through consolidation

3. Provide the employees with a catalog that is easy to navigate

4. Provide an Order Form that is Faxed directly to the Supplier

5. Have the suppliers package items for delivery directly into the mail system

6. Eliminate the Purchase Requisition / Purchase Order Match

This alone reduced MRO Spend both through unit cost reduction, purchase order count reduction and reduced (measured) time spent by all parties. Thankfully, Requisition Volume did not increase (at least in the short run). At $85 per Requisition, there was still a lot of room for improvement. Automation came next.

The chosen approach was to build the catalog and order forms on the corporate intranet and duplicate the rest of the process. That yielded $65 unit cost reduction. New goals were set to hit:

1. Two day cycle time (Requisition to Receipt of Goods)

2. $25 per Requisition

3. Greater than 50% reduction in 'office stocks'

4. An additional 5% Cost of Materials reduction

These goals defined the Business Level Requirements of an e-Procurement Solution.

Next Operational Requirements had to be set:

1. An average of 30 seconds to locate an item on the catalog

2. An average of 1 minute to locate and Request an item that had previously been Requested

3. On line feedback to Procurement and Suppliers regarding item quality and delivery service

4. Real-time authorization

5. �

There were more than 30 suppliers to consider but key choices reduced the count quickly to 8.

Note, some of the original suppliers did not have the ability to meet key requirements such as:

1. Integration with Financial Accounting Systems

2. Ability to Buy to Stock and Charge at Issue to employee

Also note that this was a while ago, but more on this in a bit.

Technical review of the eight candidates and assessment of internal support needs revealed tremendous differences:

1. The complexity of making multiple suppliers fulfilling a single Requisition seem transparent to the employee ranged from simple to prohibitive.

2. Ability to track workflow including activities at the suppliers facilities and during transport of goods varied widely.

3. The catalog, the catalog and more about the catalog.

credit Accounting Firm with E-procurement Initiative

As a $17 billion company, privately held PricewaterhouseCoopers has tremendous leverage when it goes to the marketplace to make purchases. Now the company is offering to share that leverage by creating a purchasing consortium. Its new e.conomy marketplace will offer members the ability to purchase products, services, travel and software. It will also cover best practices, contract negotiation, and other content areas. The marketplace was launched in the United States and will expand to Canada, Europe and countries in Asia and the Pacific early next year.
Like the similar announcement by TD Bank of Canada (See TEC News Analysis article: "Bank is First Mover in Canadian E-Commerce" December 27th, 1999), PricewaterhouseCoopers is taking the position that anyone can create a marketplace. While the largest financial consulting firm is hardly "anybody," what we see here is the beginning of a flood of similar ventures from companies of all kinds, including similar consulting companies, banks, other large companies with purchasing leverage, and potentially anyone else. Look for a lot of confusion at the beginning of 2000, with some serious shakeouts near the end.

New Dimensions in EC and SCM Part 3: E-Procurement Can Broaden the Supplier Pool

Every business is a purchaser as well as a supplier, with many routinely processing hundreds of buying activities daily. Typically, purchases represent 50 to 90% of a company's cost structure — making procurement strategy and execution a critical lever for effective supply chain operations and superior business profitability.

Electronic commerce offers exciting new possibilities for businesses to improve their performance on this important "upstream" supply chain activity, both for indirect or support items and, increasingly, for materials that are direct components of the products and services that businesses make and sell.

As in many areas of e-commerce, the wide variety of alternatives can be confusing. This article outlines some of the major recent developments in e-procurement and the important strategic and tactical choices that companies need to make in order to answer these questions and to take full advantage of new "buy" side e-commerce developments.

This part discusses how e-procurement can Broaden the Supplier Pool and the pros and cons of this approach to procurement.


Objective: Broadening the Supplier Pool
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* Plethora of horizontal and vertical marketplaces makes comparison shopping easier.

* Don't expect to get the best prices just cruising the Web.

* Repeated switching of suppliers to chase lowest prices can be hard to manage and cause other problems that offset savings.

Broadening the Pool of Suppliers Discussion

Typically, a 1% improvement in the overall cost of purchased materials and services can increase a company's bottom line by 10 to 20% or more — a dramatic impact on profitability and shareholder value. It is no wonder a wide variety of e-procurement solutions have been developed to help companies access a broader range of suppliers and achieve price and service improvements.

This has quickly become a crowded and confusing area, with trade magazines and television ads touting the benefits of alternative Internet sites and start-ups that have emerged to improve the process of bringing buyers and sellers together in a more competitive way. These marketplaces or exchanges offer a defined set of materials and services from a number of different suppliers, where you can view and compare supplier catalogs and price lists, seek supplier quotations for specific needs, and make supplier selection decisions.

These services are typically organized in one of two ways:

* Horizontal marketplaces focus on product lines that companies in a number of different industries utilize, such as Maintenance, Repair, and Operations (MRO) items, office products, and capital equipment. As well, there are sites that focus exclusively on categories of purchased services that have become increasingly important in today's economy — information technology, shipping, management consulting, and others.

* Vertical marketplaces are designed to meet the unique needs of particular industries - plastics, high-tech, and automotive to name a few. Here, you can access information and pricing from suppliers of resins, integrated circuits, castings, and a broad range of other parts and components used extensively in your specific industry. Exchanges have also developed to cover excess inventory, used equipment, and other items and types of transactions that historically have been particularly inefficient or time-consuming.

The primary e-procurement benefit of these marketplaces is that they facilitate much easier comparison shopping. The substantial legwork that used to be required to identify potential new suppliers, understand what they offer and obtain price quotations from them now can often occur in a matter of minutes. In an increasingly global economy, it has become more and more important for companies to find and use appropriate suppliers anywhere in the world, and e-procurement marketplaces provide a valuable method for increasing the access to these new potential supply sources.

These marketplaces and exchanges initially focused mostly on indirect materials and support services, since they were arguably the items that are critical to a business and least risky to buy through these new methods. However, there has been a rapid expansion of categories that are covered, and now just about anything a business needs, including critical raw materials, components, subassemblies, and even basic commodities such as fuel and agricultural products can be bought using horizontal or vertical exchanges.

E-Procurement Is Not Electronic Purchasing - Part I

Buyers of e-procurement are looking forward to reduced inventories, lower procurement costs, lower product costs, shorter procurement cycle-time, higher (internal) customer satisfaction and higher value-add from procurement professionals. Suppliers of systems and services promise those benefits plus secondary cost reductions and efficiency improvements in enabling organizations as Finance and Inventory Control. Following is a compilation of benefits derived from case studies and supplier references.

Accounts Payable: obtained increased efficiency through reduced matching work, automated payment vouching and reduced invoice errors.

Treasury: reduced cash requirements through increase predictability.

Project Accounting: efficiency improved through automated posting of purchases and costs.

General Accounting: improved performance from automated invoice remittance, reduced use of general journal entries and more efficient audit and control activities.

Budget Performance: improved by including committed costs as they are recorded.

Receiving Department: efficiency improved as a result of less frequent matching problems and automated recipient locations as well as from being able to predict future workloads.

Inventory and Production Control: obtained higher accuracy and increased yield through more efficient inventory handling and production capacity.

Every business function that is involved in the procurement process from budgeting to requisition to receipt and payment must be engineered into a seamless system with an absolute minimum of inherent delays and maximum use of automated transaction handling.

About This Note

This Technology Note covering the e-procurement is presented in two parts. The first part covers:

1. The Promise of E-Procurement

2. E-Procurement Myths and Reality

3. Preparing for an E-Procurement Initiative

The second part covers:

4. E-Procurement Architecture

5. Selecting an E-Procurement Partner(s)

6. Implementing E-Procurement
E-procurement is an integrated system of services and technologies that provides a seamless bridge between buying and selling businesses. The e-procurement process begins at the planning stages within the buying company and extends through to the delivery and collections services of the selling company and the receipt and payment services of the buying company. E-procurement shatters walls, enhances controls, and eliminates time delays in the requisition to receipt process.

Myth	Reality
It is a Purchasing Function	It impacts every function in the enterprise. It extends to suppliers and may introduce new suppliers and / or new roles for existing suppliers such as banks and logistics companies. In most cases, financial control procedures and commitment policies will have to be adjusted. In many cases, project management and departmental procedures will have to be adjusted. Failure to adjust policies, procedures, and processes; and to create a new operating model for procurement will negatively impact investment payback.
Everyone can use the Web interface	Finding a product in a catalog is not as simple as finding one through a person. Buyers translate written requests into supplier-speak and suppliers then translate these requests into their products. Catalogs lack this intelligence, demanding careful attention to create an intuitive catalog.
Catalogs are easy to build	Each supplier will provide data and images in different formats. Some of them will not have the material readily available for use. Some suppliers will use different product numbers in their electronic gateway from those used in printed catalogs. Pricing negotiations will be required to maximize catalog stability. Suppliers that serve multiple industries will use different terms for the same product.
Systems can be purchased	Only some components can be purchased. The remainder of the system must be cobbled together from tools provided with the purchased product and additional products that are necessary to interface with existing systems. Failure to create essential interfaces will bog down the e-procurement process or it will create new work for people who must manually transport or transcribe data.
Suppliers are ready	Many suppliers are not equipped to participate in an electronic procurement process. They will have to make custom interfaces and in some cases will simply decline to participate. Some suppliers will prefer to work only through marketplaces that they either currently or plan to belong to. Those relationships may use interfaces that are incompatible.
Purchasing surrenders control	The business rules and catalog capabilities of e-procurement provide procurement professionals with capabilities that they never had before. By focusing attention on rules, product selection, and supplier management, the procurement function can achieve unprecedented control with far less imposition than could be achieved with manual systems. It is critical that this control be phased-in to allow the 'one-off' transactions to flow faster than before and to allow the 'maverick buyers' to show up on the exception reports and be dealt with through management intervention. This is important to avoid having the 'imposition' be interpreted as a system fault.
Purchase price will go down	Optimizing the end-to-end process will often lead to higher prices for some items due to supplier selection criteria that maximizes total procurement cost at the sacrifice of individual product cost. Reducing the number of invoices, negotiations, payments, receipts, and system interfaces will offset higher individual product costs in a well implemented system.
Total supplier count will be reduced	This is not necessarily the case. When Request for Information and Request for Proposal processing is automated, more suppliers can be canvassed and employed with lower total cost. This is due to the transfer of non-value adding work done by procurement professionals to value adding work.

New Dimensions in EC and SCM Part 5: E-Procurement for Process Improvement

Every business is a purchaser as well as a supplier, with many routinely processing hundreds of buying activities daily. Typically, purchases represent 50 to 90% of a company's cost structure - making procurement strategy and execution a critical lever for effective supply chain operations and superior business profitability.

Electronic commerce offers exciting new possibilities for businesses to improve their performance on this important "upstream" supply chain activity, both for indirect or support items and, increasingly, for materials that are direct components of the products and services that businesses make and sell.

As in many areas of e-commerce, the wide variety of alternatives can be confusing. This article outlines some of the major recent developments in e-procurement and the important strategic and tactical choices that companies need to make in order to answer these questions and to take full advantage of new "buy" side e-commerce developments.

This section deals with how e-procurement can lead to Process Improvement and How to Get Started.
Every business is a purchaser as well as a supplier, with many routinely processing hundreds of buying activities daily. Typically, purchases represent 50 to 90% of a company's cost structure - making procurement strategy and execution a critical lever for effective supply chain operations and superior business profitability.

Electronic commerce offers exciting new possibilities for businesses to improve their performance on this important "upstream" supply chain activity, both for indirect or support items and, increasingly, for materials that are direct components of the products and services that businesses make and sell.

As in many areas of e-commerce, the wide variety of alternatives can be confusing. This article outlines some of the major recent developments in e-procurement and the important strategic and tactical choices that companies need to make in order to answer these questions and to take full advantage of new "buy" side e-commerce developments.

This section deals with how e-procurement can lead to Process Improvement and How to Get Started.
* New e-procurement providers can help you apply a full range of strategic sourcing "best practices" through the Internet

* Most comprehensive approach, but also requires greatest discipline and management support

* Does not replace working with suppliers the old fashioned way on continuous improvement and other key aspects of relationship

Process Improvement Discussion

While outsourcing is a broad business trend today and can be used effectively for procurement, as discussed in Part 4, many companies continue to be interested in improving their own internal capabilities to strategically manage their supply base and execute programs that drive down costs and increase service and quality levels. For them, the relationships with suppliers are considered to be an important element of their overall business success, and they are reluctant to hand them over to a third party - even if doing so would help them leverage volume or otherwise reduce costs.

Historically, companies have turned extensively to management consulting firms to help them understand and apply best practices within their purchasing departments. Normally, the consulting team begins by assessing the company's situation and improvement potential, and develops a set of customized strategies and action plans. Subsequently, the consultants work jointly with purchasing staff on a set of "pilot" spending categories to execute the improvements and provide training in new techniques, which the client is expected to use on an ongoing basis without additional consulting support.

While it sounds good in theory, and has often provided a strong short-term payback, many companies are finding that institutionalizing these improved strategies and purchasing techniques is a major challenge. Achieving the benefits typically involves applying a disciplined and complex methodology that includes substantial internal data gathering and external market research, extensive use of analytical and scenario modeling tools, in-depth strategy development and planning, and disciplined execution by a staff team that is devoted exclusively to the effort - what is typically called a "strategic sourcing" program.

Since the level of effort and discipline required by strategic sourcing is often difficult to sustain once the consultants are gone, purchasing procedures sometimes revert back to traditional ways of doing business and the bottom line gains are not maintained, both reducing value to the client and undermining the reputation of the consultants.
New players in e-procurement have emerged to address this situation as well, offering Internet-based tools and processes that give users the ability to access and apply best practices tailored to their specific situations and that allow users to remain fully in control of their own procurement activities.

For example, B2eMarkets, Inc., offers users a Strategic eSourcing Management solution that walks online users through each step of a consulting-type procurement methodology, including gathering data, analyzing requirements, and setting strategy, as well as executing e-procurement through shopping e-marketplaces, conducting reverse auctions, and using other methods that are built into the application. Based largely on the strategic sourcing approach used by Accenture (formerly Andersen Consulting), one of the largest firms in procurement consulting and an investor in the company, the subscription-based service includes industry and commodity templates, evaluation tools, "coaching" and related on-line support.

Initial results from using this approach to e-procurement have been impressive. Across about $400 million in spending volume, B2eMarkets' customers have achieved cost reductions averaging 25%, and have achieved them in about half the time of traditional strategic sourcing processes.

Epicor's Mid-Market Pitch Becomes Higher For (One) Scala Part Five: More Challenges

Epicor Software Corporation (NASDAQ: EPIC) and Scala Business Solutions (formerly Euronext: A.SCALA), an Amsterdam, the Netherlands-based provider of collaborative enterprise software for mid-size enterprises and subsidiaries of global corporations, have completed a merger that began in late 2003. The merger creates the largest independent global mid-market provider of collaborative ERP, customer relationship management (CRM), and supply chain management (SCM) applications based on Microsoft's .NET platform and Web services, with approximately $250 million (USD) annual revenues, nearly 1,500 employees, and with over 20,000 customers. The combined company hopes to expand its global presence with worldwide coverage of sales, consulting, and support for mid-market and large multinationals as well as local enterprises, offering a broad suite of integrated solutions.

The situation may become even more complex in Epicor's Manufacturing Solutions Group, which contains 6,500 of Epicor's 20,000 customer base, and which, as mentioned earlier on, features Vantage (for new business opportunities), Manage 2000, and Avant� as its major mid-market ERP products and Vista for smaller discrete manufacturers. As for specialization, Vantage remains the preferred system for MTO, job shop enterprises, while Avant�, which has not been actively marketed in the U.S. since 1999, leans towards complex manufacturing and project work environments as well as towards repetitive manufacturing with one of its product variants; Vista, on its hand, is the low-end product for much smaller discrete manufacturing enterprises.

However, even with this simplified product set, Epicor still has a substantial rationalization and abridging job to do. For example, the vendor has to utilize open database technology to provide flexible, yet integrated enterprise business applications. Namely, Vantage and Vista, developed on a single framework, are designed for Progress Software Corporation's Progress RDBMS, but they are also available on the Microsoft SQL Server .NET Enterprise Server platform, while the Avant� product leverages UniData (a.k.a. U2) open database technology from IBM Corporation.

Thus, the above-described product roadmap strategy within Vantage 8.0 calls for a common platform that has a single layer of business logic and multiple UIs that sit on top, letting manufacturers migrate from their current installations at their comfortable pace. Epicor first delivered on the new roadmap with the early 2003 announcements that its Vista 6.0 and Vantage 6.0 enterprise systems now share that common platform, with UIs and workflows tailored to the markets they serve (see Epicor Reaches Better Vista From This Vantage Point). At the same time, Epicor rolled out the product strategy and roadmap to all of its manufacturing customers, thereby sharing the vision of how all products (Avant�, DataFlo, Manage 2000, and ManFact) would fit into the future constellation, including plans to continue development on those solutions releasing new upgrades every 12 to 18 months based on customer feedback. Logically, Vantage and Vista have taken the front seat as the solutions for new business, owing to their sexier technological foundation.

While the long awaited porting of Epicor's flagship products onto Microsoft SQL Server and Progress as well as continued focus on .NET framework should significantly relieve the company's R&D burden (the vendor spends 12 percent of its revenues on R&D, and has over a quarter of its total headcount in R&D), create incremental revenues opportunity in coming years and improve its general competitiveness, the remaining work of delivering single .NET compliant application framework remains major. At best, 80 percent of current install base will be covered by the first release of Vantage 8.0—namely, the earlier users of Vantage and Vista, whose migration (or mere "cherry picking" of new Web service-based enhancement) should be reasonably painless.

Epicor's Mid-Market Pitch Becomes Higher For (One) Scala Part Four: Merger Synergies and Challenges

Epicor Software Corporation (NASDAQ: EPIC) and Scala Business Solutions (formerly Euronext: A.SCALA, delisted in July 2004), an Amsterdam, the Netherlands-based provider of collaborative enterprise software for mid-size enterprises and subsidiaries of global corporations, have completed a merger that began in late 2003. The merger creates the largest independent global mid-market provider of collaborative ERP, customer relationship management (CRM), and supply chain management (SCM) applications based on Microsoft's .NET platform and Web services, with approximately $250 million (USD) annual revenues, nearly 1,500 employees, and with over 20,000 customers. The combined company has an expanded global presence with operations and customers in 143 countries, including worldwide coverage of sales, consulting, and support for mid-market and large multinationals as well as local enterprises, offering a broad suite of integrated solutions.

If for nothing else, the acquisition should result in minor functional overlap or possible adversarial internal competition between the respective product lines and target industries, while producing at least the following two apparent synergies between the two merged companies

1) geographical coverage—Epicor has a strong presence in the US, where Scala has never succeeded to develop an infrastructure, while Scala can provide a conduit for Epicor's entry into many Eastern European and Asian markets that it could ill-afford to tackle alone (whereas in some regions like the UK, Australia-Pacific, or South Africa the vendors can join existing force and possibly rationalize them, with resulting operational synergies), and

2) the strong relationships that both independently have with Microsoft.

Namely, Microsoft recently acknowledged Scala as one of its most important partners when Scala was selected as one of fourteen European independent software vendors (ISV) to participate in Microsoft's early adopter program for the emerging business application platform, code-named Microsoft Business Framework (MBF). This means that Scala might be able to accelerate delivery to market of additional iScala functionality in the coming years in response to possibly strong customer demand. With the support for XML and Microsoft BizTalk Server, Scala offers e-commerce applications that are tightly integrated to the Scala back-office, as well as the interconnectivity to third-party products. The Scala Connectivity solutions architecture (that includes iScala Data Exchange Server and the iScala Manager) provides a way of directly remotely accessing the functionality within the ERP system, in such a way that does not compromise its business rules and security. Scala has already released support (i.e., exposed through XML web services) for over sixty of the most common business processes and documents, including orders, delivery documents, invoices, etc., and is regularly releasing more.
On the other hand, Epicor has embraced .NET even more zealously than its creator Microsoft, often leaving Microsoft staffers in their development labs with their dropped jaws. As a good example, over two years ago, the vendor released Clientele CRM .NET as a pure .NET-based product (see Epicor Claims the Forefront of CRM.NET-ification). Further, at the company level, Epicor's standardized technology direction currently embraces the Microsoft .NET Platform for XML-based Web services. Through .NET, which is the next generation of Microsoft's Distributed interNet Applications Architecture (DNA) and Component Object Model (COM), the vendor hopes to be able to provide comprehensive support for Web services deployment and enterprise application integration (EAI).

This technology strategy should enable Epicor's still diverse development teams to leverage Microsoft technology, while allowing each product group to continue using the individual databases and development tools appropriate to the requirements of each product's target market. For example, with the release 6.0 of both the Vantage and Vista manufacturing products early in 2003, Epicor executed on a critical milestone of its manufacturing product roadmap—incorporating a single application framework across the two solutions through the alliance with Progress Software Corporation, as well as with Sonic Software Corporation for its enterprise service bus for transactions services and security.

Furthermore, in late 2004, Epicor will introduce its .NET-based Vantage 8.0 manufacturing solution (formerly code named Project Sonoma), which features an n-tier architecture that has been architected from the ground up to support the .NET platform and Web services. Rather than wrapping existing applications with Web service-like interfaces, the new Vantage and Vista presentation layer has completely been rewritten in C# and Visual Studio.NET, while the extensive business logic has been preserved and wrapped around with stateless Web services (i.e., which are connected or invoked only when the information is needed).

The platform will supposedly deliver unrivalled flexibility and performance for both developers and customers, and allow for the development of applications based on Web services that have either a smart client or browser-based UI. Version 8.0 will include frameworks for exposing all applications interfaces as Web services, plus an orchestration engine for constructing composite applications using both Microsoft BizTalk Server and Sonic. The solution aims at enabling all (both existing and future) Epicor manufacturing customers to adopt Web services piecemeal, on their own time frame, while protecting the existing technology investment, since software reuse and integration have been on Epicor's mind during the software revamp.

Also at the corporate level, the vendor has incorporated numerous features into its UIs to simplify the operation of and access to all its products, which incorporate the popular Microsoft Windows graphical user interface (GUI). Epicor's GUI tools include industry-standard field controls, pull-down menus, tool bars, and tab menus that facilitate the use of the software, while the products incorporate the latest and most advanced GUI features such as process wizards, cue cards, advanced on-line help, and on-line documentation, based upon today's single document interface (SDI) standards. As the model for distributed computing continues to evolve through the advent of Internet technologies, Epicor also offers additional client deployment models, including thin-client, browser-based, and mobile client access.

Therefore, Epicor has lately created three diverse and yet streamlined product lines (i.e., Epicor Vantage, Epicor iScala, and Epicor Enterprise) that cover different industries (i.e., distribution, industrial, manufacturing, services, non profit, and hospitality verticals) with a minimal overlap, which should mean more opportunities without much clash amongst different sales forces. Epicor is striving to become a cross-trained, functional organization, given some cross-selling opportunities in hospitality, as well as localization of manufacturing with Scala accounting and payroll solutions. However, the other side of the coin is that because of these seemingly unrelated product lines, Epicor may mean different things to different people, which does not really help mind share creation in particular segments of interest.

Epicor, as well as its product groups, have had a share of tough history that they now must get far beyond to gain traction in the market. For example, first DCD, then DataWorks, and then Epicor's Manufacturing Solutions Group, the reborn manufacturing group must remind its customers and the marketplace of its historic success and forget about so many years of financial pressures which nearly sunk it into oblivion. There would be an analogy with the Epicor Enterprise Solutions group, that started as Platinum, and has meanwhile been awkwardly and confusingly till recently referred to as the "e by Epicor" umbrella brand. Consequently, since the late 90's Epicor's business has been less visible to the market, and customers and the marketplace may have forgotten who Epicor Manufacturing or Epicor Enterprise are and what they represent. The positive industry coverage for the last two years for its plausible strategy, modern products, and record performance are certainly a great step in the right direction.