On-demand Supply Management Seen Increasing Spend under Management

Aberdeen study finds Web 2.0 capabilities available in supply management communities

Aberdeen study finds Web 2.0 capabilities available in supply management communities

Boston — July 26, 2006 — On-demand supply management solutions increase the amount spend under management, a key indicator of an enterprise's ability to reduce costs, at a faster rate than traditional license solutions, according to the newly published from technology consultancy AberdeenGroup.

In its new report, "The On Demand Supply Management Benchmark Report," based on surveys and interviews of more than 135 industry executives, Aberdeen reports that on-demand solutions achieved an increase of 27.5 percent spend under management versus 21.5 percent for traditionally licensed software.

Among the report's key findings were that enterprises are focusing not only on cost (38 percent of the respondents) but also on faster implementation and return on investment (65 percent of the respondents), as well as the ability to deploy a solution enterprise-wide and utilizing fewer IT resources (47 percent and 45 percent of the respondents, respectively).

"By enabling faster, enterprise-wide rollouts of a supply-management solution, enterprises utilizing an on-demand model deploy the value proposition of supply management at a much faster rate than traditional 'license-and-install' solutions," said Sudy Bharadwaj, vice president of global supply management at Aberdeen.

By dividing the supply management space into seven areas, the research firm found that on-demand specialists are the preferred vendor for content/catalog management, supplier enablement, contract management, sourcing and spend analytics. On-demand offerings from incumbent enterprise resource planning (ERP) vendors were the preference for the transaction-heavy areas of procurement and invoice reconciliation and payment, according to Bharadwaj.

Addition key research findings include:

  • A preference for Web 2.0-style community metrics to help supply management professionals benchmark their performance vs. peers.

  • The preference for a "shared-instance, multi-tenant" approach vs. separate instances of a solution by enterprise.

  • An on-demand solution is a three-year decision and may be re-evaluated compared to the 10-15-year ERP decision.

  • The strong preference (twice as many respondents) was for a flat-fee on a monthly subscription basis, inclusive of software, support and hosting costs.
A copy of the report is available at http://www.aberdeen.com/summary/report/benchmark/RA_Smaas_SBVP_3190.asp.

Additional Articles of Interest

— It's best-of-breed versus supply chain suite versus ERP in supply chain solutions: How will your company decide? Read more in "The Great IT Debate," in the June/July 2006 issue of Supply & Demand Chain Executive.

— What's next after Lean? Author Patricia Moody believes that companies facing the "big squeeze" must look to their procurement organization for the next level of savings. Read more in The Analyst Corner column in the June/July 2006 issue of Supply & Demand Chain Executive.