Supply Chain

Choosing Suppliers: Vendor Bender

When it comes to choosing suppliers, IT and non-IT execs don't exactly see eye-to-eye. Plus: why forecasts are usually off.
Scott LeibsApril 1, 2003

How do companies decide which IT suppliers to do business with? That depends on who’s doing the deciding — and on who’s assessing corporate practices.

According to Jupiter Research, non-IT executives tend to favor companies whose products meet business requirements, while IT executives put the emphasis on performance and reliability. So much for teamwork.

To be fair, both camps put total cost in the top spot, but after that they tend not to see eye to eye. And given that 89 percent of the executives (both IT- and non-IT-focused) surveyed by Jupiter said they help select technology vendors, that disconnect could be serious.

The company found that IT and non-IT execs tend to blame each other for dominating the selection process. Worse, they dominate based on totally different approaches: IT executives tend to rely on tools and research that focus on technology criteria, while two-thirds of non-IT execs rely on (brace yourself) word of mouth.

Jupiter recommends a dual focus: on business value (which includes absolute cost and cost predictability, quality, and usability/effectiveness) and market suitability (that is, vendors’ overall stability and focus on a given market or technology). Often these two criteria are at odds: the best technology may come from new and unproven vendors, for example, so companies may have to use a matrix to decide.

Yet perhaps CIOs and other IT execs aren’t as focused on technical specifications after all. Nicholas Wilkoff, an analyst at Forrester Research Inc., says that IT executives do in fact put features and functionality at the top of their list of buying criteria, particularly when creating a “short list” from which to make final selections. Final choices are also influenced by cost and ROI considerations. Could it be that CFOs and CIOs are cooperating after all? Maybe not. In Wilkoff’s survey, 59 percent of respondents said the CIO/CTO makes software-buying decisions, with little input from other execs.

Top Technologies for 2003

  • Information security
  • Business-information management
  • Application integration
  • Web services
  • Disaster-recovery planning
  • Wireless technologies
  • Intrusion detection
  • Remote connectivity
  • Customer relationship management
  • Privacy

Source: AICPA Survey

Tomorrow’s Forecast: Way Off

Companies expend a lot of effort (and money) in assessing where they are and where they’re going, but even the best don’t think they do it very well. The Hackett Group, which benchmarks best practices at more than 2,000 companies, found that only a third of the companies it classifies as “world-class” in terms of their finance operations believe that their forecasts and reports are accurate and reliable; for “average” companies, the figure drops to a mere 9 percent.

Among the problems as cited by Hackett: companies rely on two or three ERP systems to provide the data for budgets, reports, and forecasts; and nearly half continue to rely on spreadsheets for much of the process. World-class companies stand out from their peers for their ability to spend only half as much on transaction processing (0.19 percent of revenue) and discrepancy resolution (8 cents per line item). That is, they crunch numbers more efficiently, and in so doing pave the way to become more than mere number crunchers.

Business-intelligence software aims to streamline much of the data-collection process (and it’s worth noting that Hackett is owned by AnswerThink, a BI software and consulting firm), but Hackett argues that another key component is to move beyond an anecdotal reliance on what constitutes “best practices” and toward those that are “data-driven” (that is, proven). With Gartner predicting a flat BI market for 2003, bringing best practices to bear may be essential.

Putting T&E on Autopilot

Is there an ”expense irony” that could save your company money?

Aberdeen Group Inc. analyst Christa Degnan says that while many companies have systems in place to price and track the smallest component within their supply chains, they often have no idea how much money employees spend on travel, or how much time internal staff spend processing travel and entertainment reports.

Up to 20 percent of a company’s total indirect costs stem from travel expenses, which are usually reimbursed via an intensely manual paper-shuffling process. Expense management automation (EMA), which entails Web-based technologies that cut people out of the process, can lower both the costs of processing and the amount spent on airfare, hotels, and so on.

But Degnan warns that corporate-culture issues pose a challenge: since expense reimbursement touches on employees’ personal time and money, getting them to adapt new Web-based systems can require some coaxing. She says to start small, have patience, and make sure your EMA system captures all policies and rules. That way, no one can claim ignorance about what will and won’t fly.

Another tip: make the EMA system the only way to get reimbursed. That will ensure that employees take it seriously. EMA software is offered by, among others, Acceleron, Ariba, Captura, Concur, Extensity, Gelco, IBM, Necho, Outtask, and many ERP vendors.