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Reining In the Spend

E-procurement solutions can help growing companies put an end to wasteful purchases and inefficient processes.
David Rosenbaum, CFO Magazine
September 1, 2012

When Kristen Lampert took over the corporate-services department at Ziegler in 2010, she couldn't afford to waste time and effort on inefficient processes. The unit, responsible for managing logistics, purchasing, and events for the specialty-investment bank, had been downsized to three full-time employees, yet all of Ziegler's approval and bill-paying processes were paper-based.

"We're over 100 years old," says Lampert, "and we had 100-year-old processes." There was no visibility across the firm, she says. Expenditures were authorized by the wrong people, and the company didn't have a risk-management component in place. Lampert established a work group to design a request-for-proposal for a software service to rationalize the company's processes. Her argument was that if the company could save just 1% of the $16.5 million she managed annually, getting all spending in one bucket, the return on investment would be positive.

The group began by defining the organization's must-haves: ease of use; the ability to manage contracts; an easy-to-configure approval chain; supplier network capability; and electronic links from Ziegler's system to its suppliers' e-commerce sites for electronic catalog purchasing. After reviewing more than a dozen solutions, Ziegler chose Coupa Software, which offers a software-as-a-service (SaaS) purchasing and expense-management platform.

The company implemented Coupa last March, and Lampert says the bank has already recognized $42,000 in second-quarter savings because managers now reach out to multiple vendors to get multiple bids on goods and services. And the visibility the platform provides, says Lampert, helps the company manage risk. "We can now track every contract, point to who approved what, and better understand our contractual obligations," she says.

Palpable Savings
As Ziegler is discovering, palpable savings can be retrieved by automating and rationalizing approval and purchasing processes. A 2009 Aberdeen Group study estimated that by bringing more nonpayroll, tax, tariff, and fee-related spend under the management of a dedicated group, companies could "achieve a 5% to 20% cost savings for each new dollar of spend brought under management."

Coupa is one among dozens of e-procurement vendors vying for corporate customers. According to a 2011 Gartner report, the e-procurement vendor landscape is "fragmented and rapidly evolving," so finance executives need to perform careful due diligence when choosing a vendor that fits their organization's budget and needs. Gartner's report analyzes 42 vendors, from heavyweights like Ariba and Oracle to upstarts like Coupa that grew up in the small-to-midsize business space.

An advantage of SaaS vendors is that users can configure the functionality of the software to their needs without having to rework the software's base code, points out Mark Verbeck, Coupa's finance chief. That means users can alter the approval chain as needed without calling in the vendor to redesign the software.

Verbeck should know: before coming to Coupa in January, he had been a customer of the vendor, as finance chief of Blade Network Technologies. Blade was a 50-person operation when Verbeck joined it in 2008. (IBM acquired the company in 2010 and renamed it IBM System Networking.) Every requisition went to him for approval. Because Blade was small, it had little leverage with vendors and limited ability to negotiate for lower prices or early-payer discounts. Therefore, focusing attention on processes and spend — for supplies, services, and the like — didn't seem worth the bother, since it wouldn't affect the bottom line much.

But by 2009, when Blade's workforce had tripled to about 150 full-time employees, its paper-based "process" — that is, people throwing requisitions over Verbeck's wall for approval — forced him to start asking questions and denying requests more frequently. Like many CFOs, Verbeck was starting to feel like the bad guy, the guy who always said no.

It wasn't so much that money was being misspent as that the work was burning up his and the finance department's time, says Verbeck. Requests and invoices piled up on his desk. Verbeck looked for a better way to do things, and in 2009 he bought Coupa's software.

But software doesn't fix inefficient business processes; people do. "I could have put Coupa in place and not solved the problem," says Verbeck. The software would have just "paved the cow path" (automated an inefficient process). Instead, he began by blowing up Blade's existing processes.

"Instead of requisitions going through the management hierarchy, we created approval chains based on who was buying, what they were buying, who they were buying it for, how much they were spending, and whether the item had been bought before," says Verbeck. "This process ended up with people approving things they had knowledge about. I explained to the managers that in this new world, they were accountable. If something landed on my desk that I had to reject, that was their problem."

And Verbeck was no longer feeling like the bad guy.




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