Is e-Procurement Free For Buyers?
Jan Siderius gives his insight on whether the purchasing organization or the supplier community should bear the cost of an e-Procurement software.
A few weeks ago, I had a great meeting and demo at a medium sized government agency. The 2 purchasers were highly interested and impressed in the solicitation and contract modules we showed and discussed. They said our solution was more powerful than expected and was exactly what they really wanted. I left with a great feeling and followed-up with an email confirming our services and pricing. By telephone, the buyer let me know that the offer seemed very reasonable and that she was going to ask for approval from her manager. As a seasoned buyer, she went to her manager with 2 other offers. One of those offered a license to a solution at no cost. Although our solution was clearly superior in increasing their efficiency and raising the quality of their work, the manager insisted on the no cost option ….
Now why do I think this is not in the best overall interest of procurement professionals? 4 reasons:
- The software company’s revenue for the free solution will come from suppliers, not from government agencies. So, who will be driving the research & development of new features, modules, and services? The suppliers! Why would the ‘free-for-buyers’ solution care about increasing the efficiency and raising the quality of the work of buyers? What is your leverage as a ‘customer’ if you do not pay?
- As suppliers pay, their increased costs will eventually be passed on to you as the buyer. (So you will pay indirectly anyway while the solution focusses on improvements for the suppliers as customers.)
- Compared to a solution that is 100% free for suppliers, it is essentially limiting competition. Some suppliers will choose not to offer due to the associated cost. Less competition increases cost and lowers quality.
- How do you feel about a “free-for-buyers-make-money-on-the-suppliers-side” as a public buyer? Such platforms exploit your public solicitation information. (In the EU, it is prohibited by law to charge suppliers to access and respond to public solicitations.)
We all know public procurement can be made better and more efficient by automating quite a few aspects of your work. This does mean that your organization will need to invest, and mind you, with modern focused SaaS solutions, we are not talking about millions or hundreds of thousands. We are talking about several thousand dollars and an implementation of a week. Most buyers understand this and have begun to ask for such budgets. Their managers ask procurement staffs to do complex, deadline-driven, error-free work, and want reports on anything at any time. For them; managers: Today, software can really help deliver this, but some budget needs to be allocated. Professionals deserve professional grade tools worthy of a small budget.
The public buyer might think, “Sure, Jan’s opinion is self-interest”, and yes, you are right! But I exclusively work for you, the buyer. You pay us and we listen to you. All we do is try to develop and offer things that you need and appreciate. Secondly, I am not the only solution provider out there. Challenge us, see how we stack up to other solutions that do not take money from your suppliers. There is competition in this market, and we are ready to be compared to any competitor in both functionality and price.
Written by Jan Siderius, President, Negometrix Inc.
April 2nd, 2019