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Procurement software

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Procurement software refers to a range of business software designed to streamline and automate purchasing processes for businesses and organizations. By managing information flows and transactions between procuring entities, suppliers, and partners, procurement software aims to cut costs, improve efficiency, and boost organizational performance.

Software functions include issuing and evaluating tenders, raising and approving purchase orders, selecting and ordering the product or service, receiving and matching the invoice and order, and payment of invoices, enabling the procurement department to see everything that is ordered, ensure that nothing can be ordered without correct approvals, and secure the best value by combining several orders for the same type of good or even getting suppliers to bid for the business. A buying organisation's choice of software may be driven by the particular strengths offered by each individual system and the number of vendors available through them. A multinational or other large organization will use a shared procurement system to take advantage of economies of scale to drive down the cost of purchases. Whilst some services are available to purchase through automated systems, the key strength of these systems lies in the procurement of commodities that are much easier to standardize.

History

The market for procurement software emerged in the 1980s as Manufacturing Resource Planning (MRP) systems such as SAP, ASK and Oracle began incorporating modules for managing procure-to-pay processes. Early solutions focused largely on purchase orders, receiving and invoicing. As the market matured, more comprehensive sourcing, contract management, invoice automation, and spend analytics features were introduced. In the first internet boom, dedicated e-procurement software systems were available from companies like Ariba and Commerce One to automate the purchase requisition process by allowing users to browse online catalogs to view products and services from approved suppliers.

The rapid success of pure-play procurement software firms Ariba and Commerce One in the late 1990s prompted major business software players Oracle and SAP to introduce their own solutions. In 2004, Oracle acquired PeopleSoft,[1] gaining their nascent PeopleSoft eProcurement application in the process.[2] Oracle quickly built out and rebranded this as Oracle Procurement. Meanwhile, SAP quickly launched an E-procurement offering (EBP) which was eventually released as SAP SRM in 2005. Though behind initially, Oracle and SAP's procurement offerings matured over the next few years to provide integration with their broader ERP systems and challenge the first-mover advantage of the best-of-breed procure-to-pay specialists. This established fierce competition continued to pressure innovation and dominate the market for years to come.

However, by the early 2010s it became clear that deeper integration with core business systems was a priority for many buyers. This led Oracle and SAP to align procurement capabilities with their ERP and financial software.[3] But the space was still ripe for new entrants, most notably Coupa in 2007.[4] Ariba was acquired by SAP in 2012.[5] Best-of breeds adopted open integration architectures to flexibly connect with a range of back-end systems.

While the procurement software market remains divided between integrated and best-of-breed options, there is now greater focus on interoperability and joint go-to-market partnerships across vendors.

Benefits

The key benefit for organisations using procurement software include ease of administration, access to information, and potential long-term cost savings. Having a single interface for procurement related management information cuts down the time and effort required to monitor organisational spending. The use of such software also allows procurement managers to control the vendors used by the wider organisation so all employees take advantage of negotiated rates and other terms of service. Notable companies in the market include, SAP, Coupa, Oracle, Infor, Precoro, Workday, Proactis and Procurify.[6]

Common features of procurement software systems

  • Requisitions – Creation of a purchase order with line items to be fulfilled by a vendor. Automated sending via fax or email.
  • Vendor follow-up – Automated or reminders to follow up with vendors to confirm purchase orders.
  • Receiving of goods or services – Maintaining a physical inventory of goods.
  • Financial settlement – Creation of financial and/or inventory-related transactions as goods are physically received.
  • Document management system – To archive relevant documents.
  • Electronic signature – Tool to sign documents online.[7]

References

  1. ^ "Oracle Buys PeopleSoft". Dec 13, 2004.
  2. ^ https://www.oracle.com/us/products/applications/peoplesoft-enterprise/eprocurement-191677.pdf [bare URL PDF]
  3. ^ Ashlock, Justin (2020). Sourcing and Procurement with SAP S/4HANA (2nd ed.). Rheinwerk. ISBN 978-1-4932-1911-7.
  4. ^ "Coupa Launches First And Only Freely Downloadable E-Procurement Solution". March 26, 2007.
  5. ^ Berman, Jeff (May 23, 2012). "SAP to acquire Ariba, expand presence in the Cloud". Modern Materials Handling.
  6. ^ "Procurement Software Vendors, Market Size and Market Forecast 2020-2025". Apps Run The World. 2021-12-24. Retrieved 2022-03-04.
  7. ^ "Top Features that Small Businesses Look for when evaluating Procurement Software". purchasingboss.com. 2012-10-01. Retrieved 2012-02-16.

Further reading

  • Olson, N. (2010). Taken for Granted - The Construction of Order in the Process of Library Management System Decision Making (Vol. 45). Göteborg / Borås: Valfrid publishing.
  • Global Trade Review (2009). Trade Services & the Supply Chain
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