Introduction

The advent of the Internet, digital connectivity, the explosion and use of e-commerce and e-business models in the private sector are pressuring the public sector to rethink hierarchical, bureaucratic organizational models. Customers, citizens and businesses are faced every day with new innovative e-business and e-commerce models implemented by the private sector and made possible by ICT ( Information and Communication Technologies) tools and applications, are requiring the same from governmental organizations. Citizens are referred as customers for governments, since governments need to empower rather than serve, to shift from hierarchy to teamwork and participation, to be mission oriented and customer focused, and to focus on prevention rather than cure. Governments worldwide are faced with the challenge of transformation and the need to modernize administrative practices and management systems. Recently, the public sector has began to recognize the potential opportunities offered by ICT and e-business models to fit with citizens’ demands, to offer better services to citizens and to increase efficiency by streamlining internal processes. ICT causes a “paradigm shift” introducing “the age of network intelligence”, reinventing businesses, governments and individuals. Paradigm shifts prevail in the public sector too. The traditional bureaucratic paradigm, characterized by internal productive efficiency, functional rationality, departmentalization, hierarchical control and rule-based management is being replaced by competitive, knowledge based economy requirements, such as: flexibility, network organization, vertical/horizontal integration, innovative entrepreneurship, organization learning, speed up in service delivery, and a customer driven strategy towards procurement functions. These new paradigms thrust the shift toward e-Procurement paradigm, which emphasizes coordinated network building, external collaboration and customer services.

E-Procurement in Government 

The e-Procurement process is unique to government. While corporate purchasing has become supplier management and driven by business partnerships, government procurement remains dedicated to leveling the playing field between competitors by use of the sealed competitive bidding and awarding bids to the lowest bidder meeting specification. Government records are open and the prices revealed in the public arena. Thus, under public scrutiny, public purchasers must attempt to conserve the taxpayer’s money in an open arena. Fortune 500 companies boast of maintaining a key supplier base of 10-15 first and secondary suppliers which is miniscule to what a Government has as registered vendors and many more that bid, but never make it to the vendor list. Given this divergence, a Government has to adopt e-procurement solutions that take into account the above factors. Government must forge its own model of e-procurement and, by doing so, encourage the competition so heartily sought. The deluge of requests via the Internet from companies seeking to compete will have to be managed. Government must create a model that pays for itself, thus maximizing the taxpayer contribution without damaging small and emerging businesses.

Government must implement a solution that weaks the procurement cycle without paralyzing other functions. This e-procurement process recommendation should improve the procurement cycle without upsetting the government policies and procedures necessary to the successful governance of the populace and businesses.

Government to Business consists of the electronic interactions between Government agencies and private businesses. It allows e-transaction initiatives such as e-Procurement and the development of an electronic marketplace for government. Companies everywhere are conducting business-to-business e-commerce in order to lower their costs and improve inventory control. The opportunity to conduct online transactions with government reduces red tape and simplifies regulatory processes, therefore helping businesses to become more competitive. The delivery of integrated, single-source public services creates opportunities for businesses and government to partner together for establishing a web presence faster and cheaper.

Challenges

One of the main challenges for an e-Procurement project is the establishment of an appropriate and context tailored strategy. Every project or initiative needs to be rooted in a very careful, analytical and dynamic strategy. This seems to be a very difficult task, requiring a focus on many aspects and processes, a holistic vision, long-term focus and objectives. Many public institutions limit their activities to a simple transfer of their information and services online without taking into consideration the re-engineering process needed to grasp the full benefits. The government must have a clear strategy to overcome the barriers to change. Part of the strategy is to engage in a rigorous assessment of the current situation, the reality on the ground and the inventory of projects, articulate costs, impacts and benefits of programme as well as continuously monitor and evaluate the project upgrading. Borrowing a lesson from the private sector, e-Procurement must be customer-driven and service oriented. This means that a vision of e-Procurement implies providing greater access to information as well as better, more equal services and procedures for public and businesses.

In a typical large PSU and Government, procurement runs into hundreds of crores and complexity is inherent in the procurement process. What is required to be procured is wholly dependent on the nature of its business, and therefore varies from enterprise to enterprise. In today’s scenario, adopting an effective cost saving mechanism is integral to any company’s continued existence. Companies across different sectors of industry have been trying to simplify this extremely crucial aspect of their business, in extracting optimal quality, and timely, speedy transactions at the minimum possible cost.

Another important aspect that the Government and PSU’s need to look into is driving organizational compliance with negotiated contracts. This would enable Governments to keep and sustain their savings.

Opportunity

E-procurement, a new avenue for buying direct and indirect goods and services, is an effective procurement system, making waves in purchasing circles. The service provider plays a crucial role in offering sourcing and procuring solutions that satisfy customer needs and provide ample value addition to the service provided.

In the past, traditional methods of procurement offered little transparency and lesser satisfaction of negotiation with suppliers. E-procurement offers the benefits of greater transparency, wider geographical reach and lesser time of transaction and better pricing. Also sustained savings can be achieved through automated, easy-to-use purchasing, invoice management, and supplier enablement capabilities. E Procurement Solution would help Government capture and settle all spend and readily obtain global user and supplier adoption. This improves process efficiency, increases compliance, and garners sustainable savings across the enterprise.

All said and done, is this a trend that is catching up in the Indian scenario or would it also face the same fate as the dotcom with not much of response after a couple of years? Unlike the dotcom boom, e-Procurement has a compelling business proposition, which is cost savings and this affects the bottom line directly. Hence it is a sustainable business model and the trend is expected to be on the rise in the future. Trend is catching up within the industry as requirements for transparency, be it in the Government or the PSU sector, are catching up.

But the flip side to it is that if it has to sustain itself, it not only has to have enough to pamper the existing clientele, but newer additions of products and an expansion of supplier base would need to be carried out. There is no point in expecting higher revenues every year from the same existing lines of business or the panel. They have to diversify and bring in newer products as also larger number of clients. Also contract compliances have to be ensured.

Conclusions

What the Government needs to do

For a successful implementation of an e-Procurement initiative the government must ensure that the following parameters are taken care of, in the solution which they intend to implement:

1. Analyze

Accurate, thorough analysis provides:
• Spend visibility: Businesses know which suppliers are used for the most spend and what departments generate demand across all spend categories.

• Opportunity identification: Companies can readily determine key areas for spend improvement and supplier management to fully understand total cost of ownership.

• Spend and supplier management strategy: Comprehensive data on supply-side market microeconomics, supplier performance, and contract compliance enables companies to develop a cohesive, effective strategy.

2.Source

Efficient, in-depth sourcing provides:
• Supplier management: Knowledge about existing supplier performance and compliance—and access to qualified new suppliers—allows companies to drive spend towards the best suppliers.

• Spend leverage: Businesses can actively source most or all of their spend to improve spend practices and negotiate better deals

• Win-win contract collaboration: Detailed information exchange enhances relationships between buyers and suppliers; buyers can assess supplier bids on multiple attributes in addition to price.

3. Contract

Effective contracting delivers:
• Centralized contract management: Creating a central repository for all enterprise contracts gives even large, fragmented companies better spend visibility and the chance to aggregate spend across divisions.

• Improved compliance: A centralized, accessible location for all contracts and catalogs along with rapid workflow and approval capabilities enhance both end user and supplier compliance.

• Higher accuracy and control: Electronic support of contractual terms reduces errors and ensures that negotiated pricing, discounts, and terms are delivered.

4. Procure

Efficient procurement provides:
• Streamlined purchasing: Automating procurement enables companies to eliminate paper driven processes and expedite workflow and approvals for all purchases.

• Better supplier access and communication: Online access to a large pool of global suppliers allows businesses to locate and effectively interact with the suppliers best qualified to meet their needs.

• High end-user and supplier compliance: Automated requisition and purchase order management capabilities for all participants and commodities increase enterprise-wide compliance and boost savings.

5. Settle

Effective settlement offers companies:
• Shorter cycle times and fewer errors: Automating invoice creation, submission, and reconciliation improves speed and accuracy and minimizes problems.

• Early payment discounts: Faster bill settlement through accurate invoicing procedures allows businesses to qualify for extra savings from early payment discounts.

• Improved buyer-supplier relationships: Fewer invoicing disputes and rapid, correct payments improve cash flows and enhance relationships between buyers and suppliers.

How Ariba can help the Government

Ariba is the world’s leading Spend Management organization providing technology and consulting services to reduce, control and manage enterprise wide spend and improve profitability. Ariba is a NASDAQ listed, global organization working with more than 500 large corporate and Governments (including more than 50 of the fortune 100 organizations ) in 22 countries. Ariba works with different state governments in USA, like California, North Carolina, Virginia, Florida, Washington DC to name a few. North Carolina, which received the best e-governance state award runs on Ariba solutions.

Integrated Ariba Spend Management solutions provide world-class tools and technology for businesses to engage, manage, and leverage Enterprise Spend Management (ESM) throughout the spend lifecycle. Ariba Solutions Delivery can give the Government a single point of connection to the expertise required to leverage and extend their ESM successes.

Rapid time to value and quantifiable results that enable dramatic spend reductions are key success that a partnership with Ariba can achieve. Only through Ariba Spend Management can companies fully integrate their analysis, sourcing, and procurement processes with any legacy system into a cohesive solution that works backwards and forwards across the enterprise. Buyers and suppliers are empowered to transact globally in a participative way that delivers true value.

To truly manage spend, sourcing, procurement, and financial, Government needs solutions that give them Government-wide spend visibility and closed-loop processes—capabilities that Ariba Spend Management delivers.