With its first e-sourcing event scheduled for January 2003, Bank of America first had to get its lessors onboard with the new online process. Selk says that, at first, the lessors were reluctant to participate in the e-sourcing events. "The big lessors pretty much stated that the relationships would be ruined," she explains, "and that we would be unable to control our lease program because we would be throwing everything out for anyone to bid on. But that's not the case. We realized that there are reasons for not bidding out certain things."
In addition, the Bank of America team had to invest time in understanding how the process would work from the perspective of the lessor. In particular, the bank's staff needed to be able to provide all the information that the lessors would need to submit an appropriate lease proposal. The bank's team had to break out the hard and soft costs and ensure that all the appropriate information was included in the RFP so that the lessors could calculate the residual value of the deal and make their best offer.
The lessors also were concerned that the online process would not be sufficiently flexible in allowing them to offer special terms to win the bank's business, whether that be particular warranty terms, creative financing or some other incentive. In fact, Selk says that she worked with the lessors to assure them that they need only work through the system to provide these additional details via e-mail within a set timeframe, and all these details would be rolled up into the analysis sheet that the lease team would provide back to the internal customer at the end of the online process.
Furthermore, as the bank began conducting its online events, the lessors came to realize that the
e-sourcing process could make their lives easier, too, since the online events took place at a set hour and for a set period of time. Selk does note that her team did have to tinker a bit with the timeframe for the events before settling on a final format, which is a half-hour auction.
A few of the bank's lessors did initially decline to participate, but they had a change of heart when they lost their equipment leases to competitors, according to Selk, who adds that new companies have been coming to her to participate in the online events as well, building out the base of lessors available to the bank's internal customers. "I just trained a new company, and they were impressed because it's the easiest possible way for them to get their information to us," says Selk. Indeed, lessors have been able to gain access to a greater potential share of the bank's business, since the online process opens up all of the bank's leases to the full pool of prospective lessors.
Bank of America wound up running 28 online events for IT equipment leasing in 2003 and is on track to meet that number this year. The turnaround time on the events has been reduced dramatically, Selk says, cutting down the cycle time from 11 to just a few days, elating the bank's internal customers and racking up considerable process savings for the bank, meeting the project's two primary goals.
Moreover, Selk says that the bank's business users are now able to make more informed decisions about their equipment leases because the Procuri solution allows for collecting and cogently presenting a greater amount of information than was possible previously. "Before [the internal business partners] were only given the winner, the lowest lease-rate factor," she says. "Now they are given everyone's information along with the pluses and minuses. They have more information, and they can make a better-educated decision than ever before."
The project has also yielded hard savings, with Selk estimating that the bank saved $570,000 in 2003 on its IT equipment leases.
Moving forward, the leasing department at the bank is considering applying the e-sourcing process more broadly to its leased equipment. The bank already has done an end-of-lease auction, re-bidding a lease that ordinarily would have been routinely extended for an additional 12 months. Elsewhere, the bank is considering putting out for e-sourcing a buyout of a midrange computer and then releasing it so that the bank can get its upgrades at a lower cost.
Asked what advice she might give to a purchasing executive considering applying an e-sourcing solution like Procuri to such an unorthodox category as IT equipment leasing, Selk offers this: "Go for it. And don't accept the initial negative response from everybody. You have to keep telling them that it's going to be OK."