PeopleSoft, Aberdeen Ally to Offer SRM Benchmarking Service

New service uses "results-based" KPIs to deliver business insight for improved supplier relationship management

New service uses "results-based" KPIs to deliver business insight for improved supplier relationship management

San Francisco — October 4, 2004 — Enterprise software company PeopleSoft has teamed with technology consultancy Aberdeen Group on a supplier relationship management (SRM) benchmarking service intended to help procurement professionals can build return on investment-based business cases for SRM initiatives and implement recommendations to improve supply management operations.

Using the Excellence in Supplier Relationship Management Benchmarking Service, which PeopleSoft announced at its recent Connect 2004 user conference in San Francisco, PeopleSoft customers will be able to assess their sourcing and procurement competency against industry peers and best-in-class performers.

The benchmarking service leverages performance data gathered by Aberdeen Group from more than 2,000 companies and addressing more than 300 key performance indicators (KPIs). PeopleSoft said that, unlike traditional benchmarking services, its new offering utilizes KPIs that focus on strategic business results instead of individual business transactions. "Results-based KPIs ensure that companies prioritize their operational improvements on opportunities that impact the bottom line," the provider said in announcing the service.

"We're putting a stake in the ground and saying that this is the industry's first benchmarking service for SRM that focuses on true results-based KPIs, as opposed to measuring merely transactional activity," said Brian Desmond, vice president of product marketing for SCM/SRM at PeopleSoft.

"People have been looking for this type of benchmarking service for years," Desmond continued, "but the big obstacle has been getting to a critical mass of data. We've done that by partnering with Aberdeen, because they have more than 300 research KPIs across the source-to-settle business process from thousands of companies."

Tim Minahan, senior vice president for supply chain research at Aberdeen, said that the KPI data for the new service are based on more than 20 different studies the consultancy has done across sourcing and procurement areas, covering such areas as spend analytics and contract management, among others.

"Each of those studies included interviews and information from at least 200 — and in some cases over 700 — enterprises, depending on the study," Minahan said. "So it's provided a wide swath of statistically relevant data across process areas, as well as specific spend categories, and we've drilled down into specific categories such as contract labor, MRO, advertising marketing and telecom."

The majority — 55 percent — of the companies included in the benchmarking are North American-based, although Minahan said that the data also cover companies from Western Europe and the Asia-Pacific region. Industry representation is split between sectors, according to Minahan, with some representation of the public sector in the samples, depending on the specific KPI. "For example, the spend analytics study included a higher representation from financial services and insurance-based companies, whereas the global sourcing study had a higher representation from discrete process manufacturers," Minahan said.

The new offering has two levels of service. Level One, or Online SRM KPI and Research Library, provides a list of more than 300 KPIs and assessment models to benchmark SRM performance. In addition, customers and prospects have access to Aberdeen Group's full research library and benchmark reports.

For Level Two, Personal SRM Benchmarking Service, organizations are interviewed by Aberdeen to assess their competencies and critical KPIs for SRM success. Once the assessment is complete, organizations receive a personal benchmark report that provides specific recommendations for business improvement.

Desmond said that the reaction to the announcement at the Connect conference was positive, not the least because of the pricing being offered to PeopleSoft customers. While the full benchmarking service usually lists for $1,500 per named user per year, PeopleSoft customers will be able to use the service for about $1,000 per year.

"If you look at other services that are available out in the marketplace, you're looking at tens of thousands of dollars," Desmond said. He added that PeopleSoft is hoping that by offering the low cost service they can achieve a "network effect," with increasing numbers of organizations signing up for the service and adding value by contributing their own data, anonymously, to the benchmarking database.

Michael Giusti, manager of MRO and procurement enterprise systems at Boise Cascade, said that he had signed up for the new service while attending the Connect show last week. "From my perspective, this is the first real opportunity for us to identify a gap between where we are today and what the best companies out there are doing," Giusti said. "It will allow us to put measures in place, measure against the best in the industry, and then work to close any gaps."

Previously, Giusti said his company had been tracking KPIs and benchmarking internally, but not comparing their own operations to best-in-class companies. "This will allow us to attack some low-hanging fruit," he said.

From PeopleSoft's perspective, Desmond said that the new service will help procurement and sourcing executives at the provider's customers to demonstrate the return possible on investments in SRM solutions and to build the business case for broader SRM initiatives.

"It gives them a real living-and-breathing business case in order to continue their SRM rollout and continue their journey to what we call 'total spend management,' which is managing all spend categories with a complete solution," Desmond said.