10. eProcurement Model Overview EDI Buyer EDI VAN Supplier TDCC standardized railroad communication format in 1968; later refined into “X12”. Heavy adoption in 80s/90s. Being replaced by XML. Internet Portals Buyer Portal Supplier(s) Suppliers and distributors leveraged internet in mid 90s by creating Portals. Direct Connect (AKA Hub N Spoke) Buyer (Hub) Supplier(s) Internet technologies allowed buyers to connect to supplier directly or via a gateway or “hub” Third-Party Integration Buyer Third-Parties Supplier(s) Beginning in late 90s buyer used connection tools to integrate ordering process with preferred suppliers. High Level Time Line 1968 Present
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14. EDI – Maturity Scorecard Immature Maturing Mature Comments Supplier Mgt Not Offered RFx Not Offered Content Mgt Not Offered Order Mgt Established, mature, scalable, safe transaction communication technology Settlement Not Offered Transaction Mgt Limited (supplier can manage through hub, requester most often disconnected from managing transactions) Overall Value Overall value substantial when compared to performing tasks manually, less valuable when compared to using newer technologies. Costs tend to outweigh benefits in relation to using newer transaction communication methods – especially when the management of those communications are outsourced to a third-party content mgt firm. Maturity Assessment While the EDI model is established, scalable, and secure, it offers limited functionality and is expensive to support. It is currently being replaced by newer “messaging” technologies. In addition, the mgt of these technologies and their transactions can be outsourced; hence, they can be performed more effectively and at a lower cost. This model has no “net new” implementations and is continually being replaced. For these reasons, the EDI model is rated “MATURE - IN DECLINE”.
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18. Internet – Maturity Scorecard Immature Maturing Mature Comments Supplier Mgt Not Offered RFx Offered, but all data exists in external applications which are not integrated; limited reporting, additional technology costs, and rekeying of data Content Mgt Offered, but not integrated; data must be rekeyed, high error rate, limited value Order Mgt Not Offered Settlement Not Offered Transaction Mgt Not Offered Overall Value Overall value substantial when compared to creating and managing items internally, less valuable when compared to using newer technologies or “managed services” (having a content mgt firm share this resource across all its clients). However, this model was completely replaced as technologies improved and buying orgs integrated their applications with supplying orgs in future models. Maturity Assessment While the Internet model is established, scalable, secure, and simple in a technology sense, it offers functionality that has since been replaced by newer technology (B2B shopping carts via fully integrated applications with XML messaging for transactions). For this reason, the Internet model is rated “MATURE - OBSOLETE”.
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22. Direct Connect – Maturity Scorecard Immature Maturing Mature Comments Supplier Mgt Supplier management activities can easily be performed using supplier portals. These portals allow supplying orgs to easily manage their own information within the buying org’s SRM/ERP application. This is a big upgrade over previous models. RFx RFx functionality was offered and represented a major advancement over prior models. These tasks can now be performed within the buying org’s ERP/SRM application. In addition supplying orgs can access their information and manage their bids within the sourcing event. Content Mgt Content management can be performed, but only with limited value. Content support costs are reduced, but requester confusion, transaction support, compliance, buyer admin tasks, and change mgt efforts ramp considerably. Order Mgt Transactions can easily be transmitted via XML technologies. This model is replacing EDI – easier to implement and much more cost effective Settlement Invoice transmission is supported, but no “managed services” component is available for payment/settlement. Value gain is good, but limited. Transaction Mgt This was a great advance for this model. ERP/SRM applications provide for “my requisition” page allowing requesters to follow their transaction through its lifecycle – major transaction support cost reduction…for the requesters who could figure out how to create requisitions Overall Value This model represented a major advancement; supply mgt and transaction support costs were dramatically reduced, reverse auctions reduced item price and created revenue from unused inventory, and XML technologies w standardized documents made transaction communication cost effective and widely adoptable. However, catalog support for non-punch-out, the lack of control with punch-out (pricing, scope, contract id), limited requesters adoption (general acquisition confusion), and the huge change management efforts required by this model limited its promise. Maturity Assessment The Direct Connect model is established and impactful. However, it remains ill-suited for highly dynamic pricing, services procurement, non-requisitionables, cap ex and more, while offering little in payment automation. At present, this model is not considered “best practice”; its content mgt and settlement mgt functions are being replaced via third party niche applications and services. For this reason, the Direct Connect model is rated “MATURE - IN DECLINE”.
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26. Third-Party Integration – Maturity Scorecard Immature Maturing Mature Comments Supplier Mgt Same as Direct Connect Model - portals allow supplying org self-service. RFx Same as Direct Connect Model - RFx/supplier portals allowed supplying orgs to manage their own sourcing events. Content Mgt Major advancement – 95% of content management activities now outsourced. Third-party content managers offer better loading, managing, and requesting tools. Items and ad hoc reqs now easily attached to contracts. Third-party resources educate supply base to understand eprocurement and enablement process/value. Altering supply contracts allows “we source, you enable” model. Expanded content structures allow ALL content to be represented ( “amazonian-simple” acquisition process), change dramatically reduced. Order Mgt Same as Direct Connect Model – transactions easily transmitted via XML technologies. Settlement Major advancement – settlement functions now integrated with third-party settlement services. Per-transaction, per-vendor, per-department, etc transaction accounts created and transmitted to supplier. Maximize control, reduce invoice/payment transaction labor, create revenue from rebate streams. These services are continuously improving and offer major value Transaction Mgt Same as Direct Connect Model – transactions still managed within ERP/SRM application Overall Value Large ERP software vendors build and deploy software. They are not in the business of helping their clients create and manage their internal transactions. This allows a unique set of third-parties to add value. Content mgt SaaS vendors provide better software (improved content mgt and item search) and assist clients with the creation of item catalogs and transaction support. Settlement mgt services allow ERP/SRM clients to leverage global settlement networks, reducing invoice/payment support costs while creating revenue. Third-party apps and services represent the biggest value advancement in business software and services since the packaged application itself. Maturity Assessment The Third-Party Model is established and impactful. Unlike other models it is continuously evolving, particularly its settlement offerings, but at a manageable rate. Its solutions have been widely implemented and are adding dramatic value for 100+ organizations globally. This model has been considered best practice since 2006 by Gartner and others. For this reason, the Third-Party Model is rated “MATURE – BEST PRACTICE”.
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28. eProcurement Model Overview Matrix EDI Internet Direct Connect 3 rd -Party Int. Timeframe 1968 - 1994 1995-2000 2000-2006 2006-Present Players 10+, including GHX, Covalent Networks, ProEDI, Data Masons, Radley, Gentran, True Commerce, Kleinschmidt, and 1EDISource. 200+, including AdAuction, Vertical Net, Freemarkets, SciQuest, Staples.com, WellBid, Grainger.com, Neoforma, & PurchasePro 30+, including Ariba, CommerceOne, Ketera, Vinimaya, Vignette, webMethods, GHX, Requisite Technologies, Perfect Commerce, SciQuest, & E2Open 10+ including Ariba, SciQuest, Perfect Commerce, Emptoris, Ketera, Bank of America, JPMC Xign RFx Not Supported – all RFx actions would be manual & outside ERP Available via 3 rd party (e.g. WellBid), but not integrated into ERP Integrated into “SRM” app and exposed via self-service Within SRM, but supplier contracting leverages 3 rd party applications and services Content Mgt Production: Internal Cats Non-Prod: Ad Hoc, Single Source Production: Internal Cats Non-Prod: Ad Hoc, Copy from Porta Production: Internal Cats Non-Prod: Internal Cats & P-Out, Production: Internal Cats Non-Prod: “Hosted”, Forms Mediated P-Out, & Proxy and Self-Managed Catalogs Order Processing Limited transaction support, one-off configuration effort EDI, Fax, eMail EDI, cXML, Fax, eMail Integration Broker for content “ Portals” for self-service (buyers/Requesters) EDI, cXML, Fax, eMail Integration Broker for content “ Portals” for self-service (buyers/Requesters) Settlement Invoices: EDI/Flat-File Payments: Check/P-Card Invoices: EDI/Flat-File Payments: Check/P-Card Invoices: EDI/Flat-File/PO Flip Payments: Check/Vendor Card Invoices: EDI/Flat-File/PO Flip Payments: Check/3 rd -Party Settlement Pros Electronic transmission of transactions (orders, POAs, ASN, invoices, and more) Contract content available, limited support required to manage non-production content Supplier & requester self-service, outsourced content mgt, true auto-sourcing, product configuration Outsource content mgt, improved content mgt tools, reduced content/transaction/supplier support costs, higher requester satisfaction, increased content control, increased spend under mgt, and creation of significant settlement revenue streams Cons Costly setup, limited adoption, costly support, limited functionality No integration, double sourcing as ad hoc reqs get to buyers, limited adoption Requisition/search process confusing, less cat control , internal content unruly, not easily associated w contract id and limiting mass adoption Production data stored externally, duplication of internal production content Maturity In Decline (replaced via XML) Obsolete (became Direct Connect, marketplace, or died) In Decline (value constrained by high cat mgt/transaction costs, no revenue; highest install, fewest net new) Mature – Best Practice (tools maturing, but stable; value impactful, highest net new; installs move by industry, not broad-based)
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30. eProcurement Model Maturity Assessment ** Although one large US health care firm is planning for a multi-marketplace model, none are in existence at this point. While it is being referenced, no data, implementations, or success stories are available at this time of this report. In fact, at least one was denied (State of Georgia) due to technology limitations, overall expense, and lack of marketplace participants. In short, it is too expensive and will not be supported by the current marketplaces (see the Appendix for more on Marketplace Model). In Development Mature Best Practice In Decline Obsolete EDI Model Internet Model Direct Connect Model Third-Party Model Multi-Marketplace Model **