The eSourcing alternative

Why is eSourcing adoption and utilization still so low?

The eSourcing alternative

By Jeff Gilkerson, Manager at The Hackett Group thglogo500


You would be hard pressed to find a TV viewer that would argue watching a show in standard definition is better than watching in High Definition. Similarly, it would be difficult to find a procurement executive that would argue a manual (excel/word/email) based sourcing process is better than utilising an eSourcing tool. It’s almost universally accepted that eSourcing is more efficient, improves quality/standardisation, and generates better results. Yet, eSourcing tool utilisation and adoption is still lagging. Approximately 70 per cent of large organisations have eSourcing tools. While at first this may seem encouraging, it begs the question: why do 30 per cent of organisations not have eSourcing tools when the benefits are widely known and accepted, the technology has been around for decades, and the tools can be obtained for a relatively low investment?

The picture gets even worse when you look at the actual adoption and utilisation of eSourcing tools in the 70 per cent of organisations that have them. Many of these organisations have “implemented” eSourcing tools, but what that really means is they have purchased the tools and have them available to use. It does not mean that the tools are embedded in the sourcing process, that the staff is adequately trained to use the tools, or that the tools are frequently and consistently used for sourcing projects.

We recently helped a mid-size manufacturing client in the midst of a procurement centralisation to design and implement an eSourcing program. While eSourcing was new to this organisation, some of their challenges and learnings are just as relevant to more mature organisation trying to understand why eSourcing utilisation and adoption has not reached its full potential.

Most eSourcing tool providers will tell you they are easy and fast to implement (some say it can be done in only a few days). However, true implementation of an eSourcing tool is more than just making sure the technology works.

The limits of adoption and utilisation go beyond the actual tool, and lay in a range of organisational and people issues:

  • Change is difficult: Former president Woodrow Wilson once said, “If you want to make enemies, try to change something.” Even if you know it’s for the best, change is difficult. Think of moving, even if it is to nicer house in a better neighbourhood, the process of packing, moving, and unpacking is difficult and not something most people look forward to. Similarly, moving from a manual sourcing process to an eSourcing process requires change on the part of users.
  • Required change: As mentioned, change is difficult, and transitioning to an eSourcing tool is change. Just like all change it requires effort and work. Users have to re-learn how to do things they have been doing for years, explain to direct reports, suppliers, and internal stakeholders why they are changing, and often times modify the process they have become accustomed to. Additionally, many of the things that make eSourcing tools efficient (e.g. templates, auto-scoring) have to be built or configured. This work is required upfront before users start to realise the benefits that eSourcing tools provide. It’s not just about having the technology, it needs to be embedded into the process and this requires work and change.
  • Lack of process standardisation: eSourcing tools provide a great resource to improve consistency in your sourcing process. However, in order to do this there must be a generally accepted sourcing process that is consistently followed throughout the organisation. In our experience, many organisations don’t actually have a standard sourcing process. Even in organisations that do have a documented sourcing process, it is common to find that the process is infrequently followed or applied inconsistently when it is followed.
  • eSourcing provides more visibility: A robust eSourcing tool and program gives management more visibility into the status, progress, and results of sourcing projects. While this is great in management’s view, users may not see this as a positive.

To address the organisational and people issues, procurement executives can:

  • Standardise the sourcing process: Ensure there is only one sourcing process for the organisation and that it is consistently and broadly followed. Just as teaching a young child two different ways to tie his shoes is certain to lead to confusion and frustration, designing an eSourcing program around an inconsistent sourcing process will inevitably lead to confusion and partial adoption.
  • Ensure proper training: eSourcing tools have become significantly easier to use, but for most users it is still change. A comprehensive training should be three-pronged:
    1. Basic Functionality: A “how to” use the tool. This is typically done as a classroom style training (in person or via webex) and focuses on the technical aspects of how to do things in the tool.
    2. Best Practices: Another classroom-style training that focuses on best practices for eSourcing (e.g. questionnaire design, eAuction design & set up)
    3. Hands on: The final piece of the training should be a hands on training in the form of pilot projects. The pilots reinforce the functional and best practice trainings.

Note: When planning the pilot projects, it is important to select the right projects and users. If the project is too simple it will not provide enough depth for the project team and if the project is too complex it may distract from learning the eSourcing tool. Users selected should also be carefully chosen as the early users of the tool will have a significant impact on overall adoption.

  • Develop comprehensive documentation: Ample documentation will ensure that when users have questions after the initial training and pilot phase they will be able to easily find answers and complete their projects. The documentation should be widely available and focus on both the functional “how to use the tool” as well as the business processes.
  • Track the outcomes: Too often an eSourcing program is rolled out with much fanfare, only to quickly fade into the background. To ensure successful adoption of eSourcing tools, it must be tracked and reported. In addition to tracking and reporting the results (i.e. savings) form eSourcing widely across the company, it’s just as important to continuously track and report to the procurement organisation on the use and adoption of the tool.

Comprehensively addressing these organisational and people issues will significantly improve the utilisation and adoption of your eSourcing tools.