Building the E-Marketplace in Higher Ed

Patience and persistence might be the most important resources for any college IT staff trying to introduce an e-procurement system, at least judging by Laurie Hunt's experience at the University of Washington in Seattle. Implementation of e-procurement at the university began in 2003 and continues today, with user adoption finally taking off in the past year after a push from the administration, says Hunt, UW's associate director of e-commerce.

The slow pace of adoption had little to do with technology. The Ariba system UW selected works well and offers the features the school wanted, says Hunt. Instead, the long-established way the college bought its supplies and the ingrained shopping habits of shrewd academics were the real barriers to a quicker, more widespread adoption of the e-procurement system.

“Users are pretty savvy – they could go out looking around on other websites and decide they could get it cheaper if they didn't use the university's e-procurement system,” Hunt says.

Improving Adoption

The system began to gain traction when UW changed its purchasing model and secured better prices for users, but adoption still lagged. All that changed when recent budget cuts threatened the university, and administrators saw figures indicating that e-procurement transactions cost on average about $20, compared with an average $62 for those transactions through legacy systems, Hunt says.

“Upper management understood the value of e-procurement in real savings,” she says. “Last July, the administration issued a ‘soft mandate' – a very strong suggestion that if a supplier was in the e-procurement system, users should use e-procurement. Before that, the only voices advocating for the system in a very large university were me and my small staff.”

With system adoption spreading, UW is seeing benefits beyond lower costs in the form of time savings for IT and administrative staff as well as users. Other benefits include increased visibility and tracking capability for transactions, automated reporting and fewer errors in the purchasing process as a result of automation.

Other colleges, such as Iowa State University in Ames, have found that e-procurement also reduces paperwork, fosters improved communication with vendors, speeds transactions and boosts the school's negotiating power, according to Cory Harms, ISU's associate director of purchasing.

But making e-procurement work in higher education can be complicated. At its most basic level, an e-procurement system is an Internet marketplace created by organizations such as colleges and universities to bring together qualified users and contracted vendor-partners. When it works, e-procurement streamlines purchasing for both users and suppliers.

The process is supported by technologies that digitize and automate the steps in the purchasing process. Most of the e-procurement software on the market includes a wide range of features: electronic sourcing, contract management, catalogue management, online purchase approval, electronic requisitioning, purchase order processing and invoicing, shipping order processing, and integration into the organization's financial infrastructure.

But to get its full value, universities should approach e-procurement as a strategic initiative involving the entire procurement process and much of the supply chain, says Doreen Murner, CEO of the National Association of Educational Procurement (NAEP). The steps that make up an e-procurement strategy are supported by technology, but they also require much more by way of planning, persuasion and management.

“You can implement the best technology in the world, and if you don't manage the change from your old system and you don't have adoption, it doesn't do you any good – that's where the human side and technology come together,” Murner says.

Achieving Buy-In

Iowa State dealt with the challenge of customer buy-in by consulting with users from the beginning of its e-procurement initiative, says Harms. And that was only after the purchasing department had secured support from the ISU administration by showing that the system would be self-sustaining as a result of a licensing agreement with its e-procurement vendor.

In 2008, the school wanted to implement an improved procurement system that automated its requisitioning and purchase-order processes and tied into the university's financial systems. ISU purchased a SciQuest catalogue management module, and to provide maximum flexibility in the system, planned to integrate it with home-grown order placement and payment software, says Harms.

The IT staff then assembled a group of pilot users and asked them how the menu should look, what functions they wanted in the system and what information they would need to see. IT then rolled out an e-procurement system incorporating these suggestions to six participating departments. In three months, the pilot users were asked to suggest improvements based on the trial period.

“It was very important that they understood that they represented all users,” Harms says. “They had to talk to a lot of people in their departments and gather feedback. Of course, we made sure we talked to people who did a lot of contract orders with the vendors we knew we wanted to bring onto the system.”

Building Partnerships

Intertwined with issues of buy-in from administration and users, supplier enablement is the other major challenge in developing an e-procurement program. Identifying and contracting with essential manufacturers keeps the system going.

To target the manufacturers the university wanted to include in the e-procurement system, ISU queried its system and identified the contracted suppliers that had done the most business with the university, either measured in dollar amounts, number of invoices or number of purchasing card transactions. The university then contacted the suppliers to find out how much experience and expertise they had in e-procurement.

“Some were a lot better than others,” Harms says. “Vendors want to talk a lot about B2B, but some of them aren't entirely ready. Some things, like overnight shipping, seem very hard. But suppliers are getting there, and there's pressure on the vendor community to improve their B2B potential and add more functionality, or they'll be left behind.”

Now that user adoption is on the upswing at UW, the focus of Hunt's job has shifted toward bringing more suppliers to the e-procurement system to make it more attractive to users, she says. Like Harms at ISU, Hunt reports that forging those vendor relationships has raised technical issues, such as making sure the supplier can manage both cataloguing and invoice management over the Ariba platform.

Besides dealing with technology issues, the other part of the vendor equation is writing contracts that benefit both the university and the suppliers, points out Suzanne Blais, UW's senior contracts manager for purchasing.

Contracts that ensure users will save money are essential to maintaining confidence in the e-procurement system, says Blais.

To build a sense of customer ownership in the contract process, UW also created evaluation committees made up of users who helped select the options they wanted to include in supplier agreements, she says.

“On the contracting side, we try to partner with our suppliers,” Blais says. “We approach the agreement from the perspective that this will benefit both sides and provide efficiencies on both ends. But some businesses just aren't ready from a technical standpoint.”

Many suppliers come to the table with useful insights gleaned from e-procurement agreements with other customers, says Nancy Hobbs, interim director of procurement services at the University of Michigan in Ann Arbor. UM implemented e-procurement in 2005 and currently runs the system using Oracle's PeopleSoft 8.8 and a hosted catalogue application.

“To succeed, [universities] need to start with suppliers with whom they have a strong contractual relationship,” Hobbs says. “And both the suppliers and the university must be willing to invest in the relationship. It really needs to be a partnership to be effective and meet the needs of customers.”