Why Prorizon - Traditional VS Procurement Partnering
Excerpt of an interview of Norman Conway, CEO and Founder of Prorizon Corporation, published in Supply & Demand Chain Executive Magazine
Let's talk about the "Traditional Procurement" model and why it is a liability to companies today?
Really there are two types of Traditional Procurement models. The first involves companies employing a combination of manual and automated steps to manage indirect purchases. Often they've developed their own in-house system for requisitioning.
Of course, anyone who understands e-Procurement 101 says, "the answer is clear, we need to buy a system." This leads us to the second model, those companies who try to buy their way out of a problem by purchasing a brand name Mercedes procurement system. After all, no one's ever lost their job by implementing a name brand state-of-the-art procurement system, right?
Is there anything wrong with buying a system? Very successful companies spend millions of dollars on them annually.
True, there are many well-known companies who have spent big dollars on these systems and eventually they work as advertised. There are also plenty of articles written about the fuzzy math used to justify the ROI.
The truth is in every major city you can find examples of companies who have purchased systems over the last 5 years that have spent $5 to $200 million with less than favorable results.
So Prorizon has the silver bullet, the answer to everyone's procurement prayers. Right?
No, it's not the Holy Grail. It's more like a laser beam approach to procurement and the surrounding ecosystem.
We developed the concept in '99, after spending 7 years servicing the back-office operations of companies like GE Capital.
Our first big breakthrough came when Computer Sciences Corporation (globally the 3rd largest IT outsourcing company) hired us to develop a new procurement approach to manage IT purchasing at ING's North America Headquarters in Atlanta.
Our ASP hosted-procurement model dramatically shortened cycle times and significantly improved attainment of their SLA's (service level agreements.)
Okay, but you're not going to tell me that buying software to manage procurement is a bad thing?
No, but you should do it with your eyes fully open. The purchase of software is only about 30% of the total investment. It starts a domino effect which pushes the REAL ROI out years into the future.
Typically, after the purchase comes:
- 3-8 months of discovery (usually with expensive consultants in tow)
- Customizations, hardware allocations, multi-day staff training, interfaces, time consuming and expensive rollouts
- Resources required to run and maintain
- Per seat start up, renewal fees and upgrade costs
- And don't forget the big "gotcha" enhancement fees required because of ever changing business requirements
Often, portions of the burden are hidden among operating expenses the company has come to expect. I'm willing to bet if they could do it all over again, they would choose to get more bang for their buck and put those lost millions on their bottom-line.
But, Prorizon must have all those same costs. There's only one party to pay for it and that's the customer, right?
Yes and No! Because Prorizon was an early pioneer of the "Software as a Service" model, we've tuned our model over the last nine years to minimize or eliminate many of those fees the customer expects to live with.
If you look at the chart on this page, you'll see the average cost of rolling out the big brand name system. Over a 5 year period our model will cost less than 50% of a Traditional Procurement system.
But the model has a greater value to the customer than the sum of its parts. It includes:
- A business process methodology encompassing an infrastructure which is plug-n-play nationally or globally
- Software tuned to turbo-charge the through-put of the purchasing processes
- Procurement and IT staff to manage all the day-to-day support activities
Our customers typically reach their ROI in less than 8 months of operation.
In closing, why is this the right time to consider breaking tradition? After all it's the way companies have always done it!
During times like these, companies need to make significant changes in their operations to stay competitive. The smart money is on those organizations that know how to off load non-core competency tasks to maximize corporate profits. Simplifying operations while increasing profits is always a successful strategy!!
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