RealTime IT News

Online Purchasing Gains

[Johannesberg, SOUTH AFRICA] - A recent report by the Aberdeen Group predicted that companies making use of e-procurement technologies could cut purchasing time and costs by more than 70 percent.

"Companies who move their purchasing online dramatically reduce costs, shorten purchasing cycles and drive improvements to the bottom line," promised the report.

The group estimated that an average mid-size organization could expect dramatic savings of up to 70 percent by converting from traditional procurement methods (involving fax, phone, and paperwork) to online methods.

Based on surveys conducted in 1998 and 2000 Aberdeen found that a far wider range of companies had converted to e-procurement by 2000 compared to only a small percentage of large corporations who had converted by 1998.

"The good news is the same kind of benefits large organizations saw two years ago are now being seen by companies of all sizes," said Aberdeen analyst Christa Degnan. According to Degnan, smaller companies who don't have the capital to purchase procurement apps are benefiting from a proliferation of Web-hosted applications from vendors such as Commerce One, Ariba, and Oracle.

By automating the procurement process companies can transform the average cost of generating a purchase order manually (around $107) to just over $33, stated Degan.

The catch, however, is that the process of conversion is often sluggish and marred by a lack of standards as well as by the immense costs involved. Aberdeen revealed that those companies that had purchased the necessary technologies spent a staggering average of $1.26 million in the process. Smaller players that rented hosted services over the web spent an average of $840,000.

"There has been some hesitation because of the cost, but if they go ahead and do it companies can be assured of the benefits," reassured Degan, predicting that the e-procurement market could generate more than $9 billion in sales by 2003.

Ostensibly, however, the real benefits will only flow once an adequate standard for global e-commerce is in place and the dust has settled around the current downturn. Meanwhile integration issues continue to hamper a smooth transition to full-fledged e-commerce.