Earlier this year, a company called ProcureApp entered the procurement space. Unlike most of the recent market entrants, ProcureApp is not a cloud solution but an application focused on reducing maverick or off contract spend by alerting the buyer at the moment the purchase will be made.
As we recently heard in an ISM/CapGemini Webinar, when trying to increase savings, procurement’s focus should be on contract compliance rather than spend under management. We all know that negotiated savings and realized savings are not the same; there is always leakage, or lost savings. Unless you focus on compliance, the fact that spend is declared “under management” means very little. Just because a contract has been signed does not also mean that anyone is actively managing that spend. The fall out in terms of technology is that emphasis should be on spend analysis and contract management solutions rather than eprocurement. (Click here to read the rest of our posting on this webinar).
Buyers Meeting Point recently had an opportunity to speak with Phil Hammer, ProcureApp’s VP of Business Development, about their new offering. We also got to see a live demo of the solution, and found the idea both unique and compelling as a solution in a centralized contract but distributed buying situation. Below is our interview, but we encourage you to contact ProcureApp directly if you are interested in learning more.
Buyers Meeting Point: To give people a sense of where the ProcureApp idea came from, tell us a little about your background.
Phil Hammer: As an early employee of the Orbitz Worldwide’s (NYSE: OWW) corporate travel unit, I led product strategy and new client acquisition. I’m passionate about new technologies and helping corporations save on expenses via new internet applications. Companies are looking for incremental savings from new technologies and I’m excited to help procurement professionals realize the promise of cost effective demand management applications. With employees focused on driving business initiatives, purchasing & travel departments are looking for ways to influence, communicate and educate without having sourcing initiatives distract. Capturing additional spend allows companies to reduce costs and improve supplier negotiations.
BMP: What categories of spend work best with ProcureApp to increase contract compliance?
PH: Indirect categories are the primary focus, especially those goods and services that can be easily purchased by employees on public websites with company credit cards. Such categories include: travel, office suppliers, IT/telecom, tablets, shipping/parcel services, and MRO.
BMP: Since ProcureApp is such a unique solution, you must have heard some concerns about your value proposition. How do you overcome those concerns?
PH: The biggest concerns that we’ve seen here at ProcureApp are companies ignoring how much purchasing employees do with company credit cards and on company PC’s outside of a managed procurement program. By analyzing expense and purchasing card data, we help companies understand how much maverick volume can be redirected or captured into existing centrally managed programs. We also hear from non-procurement employees that they just don’t know what corporate purchasing policies are and are looking for assistance to comply with and to act in the best interest of collective buying power. ProcureApp provides this real time communication for finance, travel and purchasing executives to educate employees how and where to buy goods and services. Employees are delighted to be shown how they can help the company to save money and ProcureApp shows them how to do this with one click.
BMP: Does ProcureApp have any built in reporting or tracking capabilities to help document the value of increased compliance?
PH: Compliance data is already available by comparing supplier reports to expense and credit card data. ProcureApp effectively reduces the gap that on average is 30%-40% at most companies. After implementing ProcureApp, companies are capturing 50% of additional volume – that the company was already spending; effectively saving money that’s being spent anyhow. Additional reporting capabilities from ProcureApp are coming in 2012 and will help managers to identify where, when and how compliance can be improved.
BMP: How much cooperation does the implementation of ProcureApp require from IT?
PH: ProcureApp technology is safe, secure and is deployed by IT just like any other business application via the company network. All maintenance, service and support are provided by ProcureApp and once deployed; IT does not need to be involved to adjust the messaging and active components. ProcureApp is just like installing a messenger or webinar tool through your network. ProcureApp is well received by IT departments because they don’t have to maintain anything and deploying to new employees takes no additional time.
BMP: In addition to the above, I think people would be interested in any cost structure information you are willing to share.
PH: ProcureApp’s cost structure is low and designed with a 90 day ROI.
This screen capture (left) shows an example of the popup message received when a buyer attempts to go to a site that is an alternative of or competitor to a site where the procurement group as a contract in place.
ProcureApp Case Study
ProcureApp is working with a large technology consulting company where 55% of indirect spend goes direct to supplier websites. There is a strong procurement team in place and discounts are available with nearly every supplier possible. The client chose ProcureApp to help alert employees to discounting opportunities and to take advantage of contracts even when the purchase was ultimately completed on a supplier website. Contract usage has increased 500%, suppliers were able to be consolidated, and messaging, capabilities and options are in the full control of the purchasing team to allow for easy supplier program changes with no IT support. Employee feedback was positive as they found the messaging to be timely and helpful.