Significance of Azure in the procurement world

Dhananjay Nagalkar, VP, GEP Worldwide
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Dhananjay Nagalkar, VP, GEP Worldwide

Consider two companies. Extra-large, global in scale, huge revenues and well-known brands. Both are in the same industry, in direct competition and both, fundamentally spend their money on the same “stuff”.

Depending on the industry under discussion what they buy includes the core materials they need to build their products or execute their mission—–so-called Direct Materials, and then a range of categories of goods and services they need to support and run their business. This range extends across IT and telecoms, office furniture and supplies, cardboard packaging, transportation and travel, professional services and the nuts and bolts used in maintenance, repair and operation (MRO) of their core business. These categories are known as Indirect Materials and Services.

Left to its own devices, a large company’s purchasing of these indirect categories can spiral out of control with multiple suppliers in multiple locations providing the same widget at a huge range of prices. Economies of scale, efficiencies in payment terms and cost reduction through aggregating demand are just some of the strategies a company can employ to effectively manage and control spend.

Procurement and Purchasing

The process by which large, complex, global businesses set up the relationships to buy goods and services through a series of managed steps, is known as Procurement. How the business uses the contracts created by the procurement team to buy from the suppliers, is called Purchasing.

  ‚ÄčThe goal of the procurement operation in the world’s largest, most complex businesses is value creation 

Procurement and Purchasing are processes that can be conducted with the aid of software, from old-school spreadsheets, e-mail and documents to purpose-built integrated procurement systems.

One might imagine that the choice of software systems these firms might make to manage their indirect spend, would have little bearing on their ability to compete head-to-head in their industry.

But, these two companies might have very different futures determined precisely by how they respond to the transformation that is happening across the world because of emerging technologies.

Which way to the Future?

Our two companies now have a decision that could fundamentally affect their future profitability and competitiveness.

Company A has elected to migrate their on-premises business software systems, including procurement and purchasing to a cloud-hosted platform.

Company B has decided to switch to using a state-of-the-art cloud-native procurement software system.

The distinction might not yet be clear.

Company A expects the migration project to take approximately 5 to 7 years.

Company B expects to be live on the new system, globally, within 12 months.

That extraordinary difference in time to completion has a massive impact on Procurement’s agility and ability to execute.

In terms of driving value and savings into the business, Company B can execute new projects faster, with greater cadence, visibility and accuracy by using the latest software, and they can do so years before Company A. Just imagine the evolutions Company B can go through while Company A are still working to get started.

This is the reality that we are seeing as a result of the coming together of procurement software specialists, like us at GEP, and the world-class cloud delivery capabilities provided by Microsoft Azure.

By deciding to build a radical new solution for procurement and purchasing directly in Azure, from scratch, we effectively created the ability for large companies to make a step change in their ability to deliver value from spend.

Why now, and why Azure?

Fundamentally a modular, toolset approach to using software in procurement has outlived its usefulness. The challenge companies face today is not in how to manage the procurement process of finding and setting up deals with the suppliers, nor is it handling purchase orders and paying invoices. The real issue faced by Chief Procurement Officers is how to get the entire process to connect end-to-end so that the opportunities for value created by procurement are ultimately realized.

That is why we built SMART by GEP®, a single, unified source-to-pay software platform that automates the connections all along from opportunity identification to invoice payment.

Azure clearly provides the infrastructural element on which we could construct SMART by GEP but that is only the most basic benefit and reason why a cloud-native model is a game-changer.

A single global platform in the cloud

Today, companies can access one system, one view of truth, one set of data, and one unified process from any site, any country, and from any device. The quantum jump in collaborative efficiency that this alone can deliver is astounding. Procurement and category managers, who have struggled in the past to agree even their own internal vocabulary for procurement across multiple business units, can now all access the same view, in real time, without need for lengthy analysis and the emailing of hundreds of different reports.

Multiple system integration

Mission-critical legacy systems will exist for years to come in global businesses. The notion of integrating all systems can seem a daunting prospect despite the potential benefits of doing so. Azure has made it possible for GEP to create an integration platform designed specifically to bring those ERP and MRP systems together and hence provide that layer of distributed access across the enterprise.

Scalability, Security, Availability, and Cost

SMART by GEP is deployed across the global Azure platform with presence in five continents. This represents a degree of scalability, resilience and future-proofing that no on-premises or vendor-operated SaaS platform can ever hope to replicate, let alone surpass. The degree of redundancy and immediate scalability afforded by Azure would simply be cost-prohibitive for even the most profitable of businesses to establish independently.

This in turn translates into unprecedented system availability. Typically, an SLA will include unplanned downtime of no more that 0.5 percent. Or, in real terms around two days per year. Owing in part to the robustness of Azure, SMART by GEP experiences a total, cumulative down time of around two and a half hours per year, and that is sliced into almost momentary outages measured in seconds or minutes.

The law of diminishing returns puts this level of availability outside the budgetary limits of even the most demanding and well-funded data center managers.

A Platform for Innovation

By completely divorcing the end-customer from any of the infrastructural considerations and risks, the Azure cloud has created an entirely new source of value for the procurement operation to deliver into the business.

With an Azure-native system, we the software developers, are freed from any of the costs, risks and dependencies associated with infrastructure. This is the area where Azure stands apart from SaaS.

Agility, Transformation and Value

Ultimately, the goal of the procurement operation in the world’s largest, most complex businesses is value creation. Savings, cost avoidance, cost reduction, efficiency, cash flow management and improved cycle times are all examples of how an effective procurement operation can contribute to the company’s bottom line.

And today, procurement leaders are looking for the next step in value delivery. They are seeking a means to transform their operations to seek out novel ways to improve performance, to improve agility and create a more robust, resilient supply chain in a rapidly changing world.

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