IT Services E-Procurement

Introduction

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.

Expert Marketplaces

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.

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.

Service Chain Optimizers

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.

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.

The last six solutions focus on the IT service chain. Their functionality also addresses the general service chain cycle, but aspects of it exhibit a distinct IT flavor. That flavor includes a heavier focus on requirement definition, RFP generation, and project management. These six solutions also differ in the type of IT service they focus on. For example, CoFix focuses on IT maintenance services for small to mid size organizations while IQ4hire focuses on large complex IT projects.

Most of these solutions attempt to create a service marketplace by providing access to a service supplier network. Three components can comprise the network: the solution provider's network, the organization's private network, and public networks. Each solution approaches the supplier network somewhat differently, but most position the organization to access it's own network along with their network. SkillsVillage and eWork ProSource do this with each providing access to their network of resource. eWork also provides access to public networks. Vivant and Chimes' approach is to develop a network of staffing companies and provide access to them. Each of the IT focused solutions provides access to a network of service providers.

Matching service providers with needs is a function all the solutions address in some manner. The matching functionality differs among the solutions. The IT specific solutions place more emphasis on their search and matching engines. This reflects more complex requirements often imbedded in IT RFPs. For the same reasons the IT solutions also highlight their supplier evaluation and scoring functionality.

The requisition and RFP functionality differ in a similar fashion. The IT specific solutions focus significantly on automating RFP development. This reflects a more complex need for requirements documentation common to IT projects. The general solutions focus on automating the resource requisition process including any required internal approval process.

These solutions handle the requisition and management of third party resources. They deal with the tracking, managing, and compensating of those resources. Consequently, the need for integrating them with financial, human resource and procurement systems is imperative. All of the general solutions state that they will easily integrate into enterprise systems. Four of them (Nitorum, Vivant, CascadeWorks, and SkillsVillage) also cite integration with Ariba's e-commerce platform. On the IT side IQ4hire cites its membership in Commerce One.net's affiliate program.

Conclusion

E-procurement is not just for goods and material. The market now offers IT services e-procurement solutions that open access to service sources and seek to optimize the service chain.

Anyone who has struggled with the workflow associated with acquiring and managing an IT resource knows that the opportunity for these solutions exists. The question is can they deliver benefits to your organization? Understanding your organization's requirements and the solutions the market currently offers is the first step towards answering that question.

About the Author

Mr. Hennigan's experience includes more than twenty years in analytical, sales, financial and IT roles. As a Principal with Technology Contract Solutions (TCS) Mr. Hennigan focuses on helping clients minimize the risk and cost associated with their technology acquisitions.

Previously, Mr. Hennigan spent over ten years in senior management positions in the Information Technology Department of the Liberty Mutual Group, a Fortune 100 financial services company. Mr. Hennigan holds a BS in Civil Engineering - Magna Cum Laude and an MBA from Syracuse University.

Mr. Hennigan can be reached at: phennigan@technologycontracts.com.