For all the talk in the technology industry about analysing supplier performance based on attributes such as price, quality and delivery times, when it comes to achieving procurement efficiencies, the heads of purchasing at Europe's largest organisations still resort to the ancient ritual of haggling.
This is a key finding from research carried out by Vanson Bourne Research, on behalf of Ariba. Once best-known as an e-procurement software pioneer, Ariba is seeking to take advantage of depressed economic conditions by opportunistically re-badging itself as a supplier of "enterprise spend management solutions".
By happy coincidence, the report, ‘The Corporate Spend Agenda' claims that through the use of such technologies, organisations can generate substantial savings in the areas of procurement, sourcing and supplier management. In particular, cost slashing may be achieved by moving more of their non-contracted expenditure over to existing contract relationships. Working with contracted suppliers will create average savings of 9.25%, say Vanson Bourne analysts. Based on the average expenditure of the organisations surveyed, this would translate into a saving of £6 million per organisation.
However, Ariba will be less delighted by the fact that 55% of respondents have either cut, or plan to cut corporate spending in the first quarter of 2002 – a trend which bodes ill for IT projects, frequently the first targets for cuts. Ariba has already felt the pinch of corporate cost-cutting initiatives; in its most recent fiscal quarter, licence revenues at the company plummeted a massive 81% to $23.7 million, from $128.911 million a year earlier.
The message Ariba is trying to convey is clear: without its software, it may not be possible to accrue big savings. The good news (for prospective customers) is that, from now on, it may be easier to haggle with Ariba salespeople.