e-Procuring Complex Services

CascadeWorks upgrades procurement platform to cover more services, bolsters contract compliance capabilities

San Francisco, CA  September 27, 2002  Software company CascadeWorks is set to release version 4.0 of its Clarity solution for online services procurement, adding support for complex services and integrated contract compliance to its flagship application.

Denali Consulting, a strategic sourcing firm, has estimated that Fortune 1000 companies spend from 30 percent to 70 percent of their purchasing dollars on services, depending on the industry, and technology consultancy Aberdeen Group has reported that businesses around the world spend more than $2 trillion on services every year.

At the same time, corporate purchasing departments control only 59 percent of all those purchases, Aberdeen says, making this sector a significant opportunity for cost savings by reigning in maverick spend and consolidating the services supply base. In fact, Denali has pegged the potential savings rates from using strategic sourcing and e-procurement technologies to purchase services at 10 percent to 29 percent.

Due to be released on September 30, Clarity, CascadeWorks' platform for the procurement of professional services, allows companies to manage their services spend online and in an automated fashion. The latest iteration of the solution, version 4, adds features to help a company manage the requisitions, agreements, tracking, change orders and payments associated with complex services, those that combine time-, project- and fee-based metrics.

Such complex services might include construction, facilities services, training or specialty services like pipeline maintenance, areas that CascadeWorks says typically command five to ten times more spend than simple service categories like temporary staffing. As an example, a service contract for machinery installation might involve a variety of discrete services, each measured and evaluated in different ways. For instance, installation workers might be paid by the hour, with different pay rates and overtime for foremen, welders, mechanics and general laborers, while project inspectors might be paid per inspection, with different rates for the type of work inspected plus reimbursement for expenses such as mileage and cell phone charges. Equipment rentals could be charged at actual or stand-by rates plus mark-up. The new version of the solution includes features for handling these various factors.

CascadeWorks is also seeking to use Clarity 4 to link contract compliance with services procurement and supplier management as a way to ensure that the initial savings delivered by sourcing continue to be enforced over time. The solution captures the master service agreements between the enterprise and its suppliers, including such terms of the relationship as service types, rates and payment policies.

As each subsequent requisition runs through the solution, the system enforces the use of certain suppliers through ranking (for example, preferred or approved) as established in the sourcing program. The system also verifies that the terms for the services requested comply with the master service contracts.

Clarity provides controls for rates, fixed, variable and limited fees, and it can incorporate bidding in the proposal process. In addition, the platform provides for verification of each service invoice to ensure invoicing and payment accuracy, as well as line-item-level visibility into a company's services spend through a variety of reports.

CascadeWorks offers Clarity 4 either under a hosted model or as installed enterprise software. The company says that for an enterprise looking to manage between $100 million and $200 million in services spend  which is about the minimum level at which an investment in Clarity would make sense, according to Stephen Zocchi, CascadeWorks' vice president of marketing  the cost of the solution would be around $400,000 to $500,000, with a nine- to 12-week implementation cycle and a return on investment (ROI) likely within six to nine months.

Zocchi said that the ROI on Clarity typically comes in several categories, with savings of 4 percent to 7 percent from increased compliance and reduced maverick spend, 4 percent to 8 percent savings from improved cash management, and 1 percent to 3 percent savings from reduced payment costs through the application of prompt payment discounts or the elimination of charges from the use of purchasing cards.

The solution provider is currently implementing Clarity with one customer and expects the application to go live with that customer in mid-October.