With John F. Martin, senior vice president of strategy and technology for IQNavigator, a provider of services procurement software and services.

Question: What are some of the biggest challenges organizations face with their traditional procurement processes?
Martin: Controlling and managing their spending on outside services is one of the biggest challenges they face. Purchased services are more complex, fragmented and difficult to measure than goods purchases. Many services are specific to each region, with different suppliers by geography. People may come on-site to deliver services, which creates security, safety and personnel management issues. Additionally, most services purchases are unique. The requisition format is different for every type of service, and requisitions within the same type of service are often unique for every purchase. Services deliveries are more complex than receiving a box on the loading dock.

JOHN F. MARTIN
Senior Vice President, Strategy & Technology

In some cases, services are delivered without even being ordered. For example, after a storm knocks down trees onto power lines, the supplier responsible for that geography hauls away the trees and sends the electric utility an itemized invoice that must be approved, validated and reconciled to the contract. Goods-focused procurement practices and software packages fall short of being able to handle most services, which is why services purchases remain under-managed in many large enterprises.

Question: How do these procurement process challenges affect an organization's bottom line?
Martin: Without the visibility into services spending, organizations cannot tell how much they are spending - limiting them from negotiating better rates with commonly used suppliers and/or setting up early-pay discounts. For example, for temporary workers, hiring managers often select the supplier around the corner as opposed to using competitive bidding to obtain the best talent for the best rate. Without a system to track the procurement-to-pay process, it is difficult to reconcile invoices that come in, often resulting in overpayment to suppliers. Organizations also run into compliance risks. One of today's hottest compliance topics is Sarbanes-Oxley, particularly Section 404, which requires management to evaluate and assess the integrity of the company's financial reporting system. Services procurement spending is often less controlled and visible than any other spending category, with situations such as contractors or consultants staying past their contract terms, maverick or "off contract" purchases by managers, invoices not being matched to contracts and time cards due to the manual effort involved, and a resulting inability to accurately forecast spending in this area.

Question: How can an organization overcome these procurement process challenges?
Martin: Enterprises have achieved sustainable cost savings and process improvements through implementation of an end-to-end services procurement and optimization solution. These solutions provide cost reductions of 10 percent to 35 percent by implementing best practices for sourcing services; eliminating manual invoice reconciliation; gaining consistent terms and renegotiating with more accurate spending and performance information; and enforcing approvals for all spending, contract extensions and exceptions.
These solutions help companies automate procurement and payment processes to reduce cycle time and cost while improving services quality, contract terms and payment speed and accuracy. And they help companies ensure compliance with company policies, supplier contract terms and government regulations through configurable compliance rules and approval requirements, and enforcement of contract terms and rates. Financial compliance is also achieved through spending approval requirements and process controls, auditability and accurate invoicing and cost allocation. The solutions also help improve business results achieved through outside services by aligning services spending with business priorities and initiatives, continually improving deliverable quality and value, and linking purchased services to internal key business measures. Software with business intelligence capabilities provides visibility and analysis capabilities into spending, supplier performance and business results.