Many companies are trying to remain flexible in this uncertain economy by reducing staff and using outsourced services. But buying contract labor, consulting and other services requires a high degree of contract and pricing configuration, which is more complex than simply buying widgets from a catalog. Often, several departments and outside vendors are involved each time a service is purchased, and this creates additional inefficiencies in the process.
As a result, some enterprises are turning to services procurement software from companies such as Elance Inc., KDS and Cirqit Inc. that automates the communications, transactions and collaboration among supply chain partners. At its basic level, such software streamlines procurement processes and ensures contract compliance, thus saving costs.
However, once the technology is widely deployed and used in a corporation, it has the potential to further reduce the prices paid for professional services by giving managers more information to use as leverage when negotiating contracts. In addition, faster procurement of such services can make a company more responsive to customers and supply chain partners, advocates said.
Services procurement software is similar in concept to spend management software, which rationalizes and automates a companys spending on goods used in manufacturing a product or in the maintenance and upkeep of a plant. But users of spend management software said it is different in its particulars.
"Its easy to [use spend management software to reduce the price of] pencils and paper and leverage that spend; its much harder to do [that] in services spending," said Toby Redshaw, vice president of IT strategy, architecture and e-business at Motorola Inc., of Schaumburg, Ill.
In part, this is because services arent physical and because they require more complex contracts than production goods, Redshaw said. "There is also a knowledge component that is hard to see in a chart, but you know it is there." Redshaw said he turned to Elance, of Sunnyvale, Calif., for services procurement software because he believes the software maker understands not just how software works but also how the processes of hiring and managing consultants work. Motorola will deploy Elances namesake software over the next six months and said it expects to annually manage more than $1 billion in outsourced services.
Software that automates services procurement generally falls into three categories: travel services, printing services and contract labor.
Paris-based KDS next month will release Version 5.5 of its KDS Corporate travel services. The offering not only books travel and lodging for corporate employees but also provides software hooks that let supervisors set spending levels, grant approvals and link travel data to a corporate expense management or other enterprise system. The update adds links into travel offers on a variety of Web sites, as well as through a number of European railway systems, increasing the options a corporate traveler may have and increasing his or her bargaining power when negotiating prices.
Separately, Cirqit, of Whippany, N.J., is readying Version 6 of its OrderIt and PriceIt software for automating the purchase of print services. The upgrade provides collaboration software that enables corporate buyers to manage unexpected changes in print orders. It also gives them more targeted tools for pricing and ordering business forms. Another new feature permits authorized managers to set a template that other buyers must use to ensure consistency.
For its part, Elance this week will introduce Version 3.5 of its namesake services procurement software, which adds the ability to contract, procure and manage complex service contracts and SLAs (service-level agreements), officials said. For example, the upgrade lets users define a rate structure for a service that is charged for based on the volume of services rendered, such as call centers do. Version 3.5 supports SLAs for services that are provided continuously, such as hosted Web services.
Users of Elance 3.5 have tighter control over services that are paid for upon the completion of defined milestones or on a time-and-expense basis. The upgrade offers many new contract management features, officials said.
Services procurement software, because it touches so many departments and so many facets of a business, needs to interface with all sorts of third-party software. Motorolas Redshaw said that ideally it should have XML interfaces that, down the road, can be used in a Web services environment. He said he expects to link Motorolas services procurement system to several other systems in the companys IT infrastructure, including software that enables contract collaboration, electronic data interchange, program management and product procurement. It will also interface with Motorolas financials system.
A major goal of the services procurement system is to shave a percentage—Redshaw said only that his target is in the double digits—off Motorolas $3 billion in annual spending on services. To achieve that, the company plans to push every purchase through the system.
"You have to use it for everything; thats the only way you see the payoff," Redshaw said.