Q&A: Serge Labouyrie, Ariba
Cutting procurement costs is a key aspect of many SSOs - but it can seem a Sisyphean task, with ever more potential savings around the corner. SSON caught up with Serge Labouyrie, Senior Manager Network & EIPP Europe with Ariba, at the 8th Annual Shared Services Week in Barcelona, to discuss how bridging the gap between Finance and Purchasing operations can drive SSOs down the path to success.
SSON: Serge, describe for us if you can the perfect SSO in terms of Finance and Purchasing: how do you see the relationship between the two operations?
Serge Labouyrie: Controlling costs is something that all companies struggle with, regardless of their size or the industry they operate in. But by looking beyond large-scale transactional systems like ERP that fail to provide consolidated and forward-looking views into spend, and forging a strong partnership between finance and procurement, they can succeed.
SSON: How far from this perfect state of affairs do you think most SSOs currently are, and how well (or not) is the industry moving towards it?
SL: Traditionally, there has been a gulf between finance and procurement. But leading finance executives are realizing that in order to achieve their objectives, they must bridge this gap. Financial systems such as ERP can automate routine transaction processing and reporting functions. But they cannot provide timely and accurate information on spend that is needed to support strategic initiatives. Procurement has this information and with the right solutions and processes, finance can access and leverage it to their advantage.
The gulf certainly still exists. But many organizations are taking steps to narrow it. Ariba conducted a survey with CFO Research Services called "CFOs Views on Procurement-Information, Risk and Money" in which we polled senior finance executives to understand how they view procurement and determine whether the function could play a role in helping them achieve their goals. Among the key findings:
- When seeking to control costs, finance executives see the greatest opportunity in managing spending on direct materials and indirect goods and services, sourcing through preferred vendors and improving their interactions with suppliers
- Most companies are unable to gather timely and accurate information on purchasing activities and consequently, have poor visibility into their spending
- Organizations that have adopted and implemented technology-based solutions report greater satisfaction with and better information from their procurement functions
SSON: What are the major obstacles (institutional, practical etc) to collaboration between Finance and Purchasing?
SL: Most organizations operate in a siloed manner. The first step in fostering collaboration is for finance and purchasing to recognize that they share similar goals and that by partnering, they can achieve them more quickly. The second is to put in place processes to drive collaboration – so reach out to key stakeholders and understand their issues and needs, form cross-functional teams to drive adoption of an on-demand spend management solution like Ariba’s offerings, which integrates easily with and complements ERP and other back-end financial systems, on an enterprise-wide basis.
SSON: Can you tell us a little bit about how you have overcome those obstacles during your own shared services journey?
SL: Three years ago, we realized that there was a fundamental shift in the way that companies were purchasing and deploying software. Companies were no longer interested in purchasing expensive software that took a long time to deploy. They wanted to solve problems – quickly. So we undertook a pretty radical shift, transitioning our business from a traditional license model to an on-demand model. At the time, we were already the leader in spend management. Moving to on-demand would require us to reengineer our successful business – technically, financially, and operationally. But the benefits of the on-demand model far outweighed the risks. We made it easier for companies to do business with us by providing them with access to the software and services they needed as they needed them. Our goal was to make spend management affordable and available to companies of all sizes – not just large enterprises.
And we’ve essentially done that. According to AMR Research, Ariba owns a "whopping 50% share" of the market for on-demand spend management solutions. And our latest quarter’s results suggest that we will continue to expand our leadership position in on-demand. We achieved record bookings for subscription software, with subscription software revenue and backlog both nearly double compared to year-ago levels. So customers all over the world are clearly moving with the trend that we spotted three years ago and passing on behind-the-firewall installed software in favor of on-demand offerings that are more easy and cost effective to implement.
SSON: How can small businesses in particular make vital savings from P2P processes when they can’t benefit from the same economies of scale as much bigger firms?
SL: That’s the beauty of on-demand. It enables even the smallest companies to implement spend management and begin reaping the benefits that it provides – lower costs, increased profits and improved competitive advantage. With Ariba On-Demand Procure-to-Pay, for instance, companies of all sizes, across all industries can ensure that savings identified through sourcing actually reach the bottom line, Ariba Procure-To-Pay combines the functionality of Ariba Buyer™, Ariba Invoice™, Ariba Settlement™ and Ariba Analysis™ in a single, integrated solution. Embedded with the knowledge and best practices that Ariba and its customers have developed over the last decade, Ariba Procure-To-Pay enables companies to have visibility into and control the procurement process more efficiently than ever before. Delivered on demand, the solution can be rolled out in just a few weeks to not only buyers, but anyone in the company who needs to buy goods and services, enabling companies to quickly and cost effectively close the procurement loop and realize returns on their investment.
SSON: To what extent are these savings achievable in any industry, and are there industries in which for one reason or another these processes will always be less efficient than in others?
SL: Research suggests that the average organization is losing $15 million per year for every $1 billion in spend from inefficient A/P processes. Transaction costs, lost early payment discounts, and billing errors drive the savings that are possible. EIPP enables A/P organizations to capture much of these savings by leveraging and improving processes, systems, initiatives, investments and capabilities that are already in place.
EIPP is a powerful approach to A/P designed to create a paperless, fully automated process. With EIPP, suppliers can interact with buyers more quickly and cost effectively than ever before. Through a set of integrated capabilities, suppliers can connect with buyers and receive timely, hassle-free payments as source documents are electronically matched. Suppliers like EIPP because it isn’t a burden for them to use, facilitates rapid payment, and generates fewer error situations that are expensive to research and resolve. EIPP also can significantly reduce the cost of compliance-related efforts. To understand the types of results that are possible with EIPP, consider the case of a global telecommunications provider, who was able to capture 95% of invoices electronically after a 10 week deployment. The implementation reduced paper invoice volume by 60%, and cut error rates by over 50%, enabling the finance organization to redeploy A/P personnel (while also improving supplier satisfaction). And this is occurring across industries.