Author: Nancy Jorgensen
Editor’s note: This article is part of the MyPurchasingCenter content archive. It was originally published in 2015 and appears here without revision.
Microsoft Excel is a great product that has been the mainstay of business data and calculations tools for decades. It's easily available, considerably stable and most computer-savvy users can learn it. However, it does have limitations and as your business grows you'll notice some disadvantages when relying solely on Excel. So how can you tell if your procurement department has outgrown Excel and needs a different technology?
Excel 2003 can manage up to 65,536 rows of information. Excel 2007 is supposed to be able to handle more than one million rows, but if your data gets anywhere near that number you need to be packing some hardcore memory and processing power. Realistically, if your data sets grow to 100,000 rows, you need a better solution. This might sound like a lot, but a company with even a moderate amount of inventory or number of customers can easily reach this threshold within a couple of years.
If you have more than two different types of data to track, Excel quickly becomes cumbersome. For example, if you have to keep up with both inventory and spend, or both orders and suppliers, Excel does not provide flexibility to do this. E-procurement and spend analytics tools are designed to accommodate a wide variety of complex data, whereas Excel was built to manage one single type of data. Procurement software allows you to manage everything from job orders to employee data and customers to revenue projections in a single system.
Excel is programmable, but most procurement departments don't have dedicated coders. If you're having to create difficult and confusing functions like complex formulas, it's a lot easier to just migrate to a system that is already programmed for you. Procurement software allows for high-level functions, analysis, reporting and more without any need for additional programming. All of the features and functions are built into the software, ready to use.
While Excel is handy for many things, it has one flaw: The data is usually fraught with errors. In a one-person shop where a single individual is intimately familiar with all of the data, they can usually find the problems. However, when multiple people are using the spreadsheets, it can be difficult or impossible to find the errors. If your calculations are coming in way off or it's taking serious time to troubleshoot your Excel spreadsheets, it's time to move to a smarter tool.
Excel is built to handle calculations, but it was never designed as an analytical tool. If you need features like analysis of historical orders or a projection of future needs, Excel just doesn't fit the bill. In addition, if your business has invested in financial software that you need to feed procurement data into, there are better options. Procurement software is designed to feed data from other systems. It makes high-level analytics possible and cuts down on the time it takes to do your daily transactions, what-if scenarios and analysis.
Excel works pretty well for one user, and okay for a couple of users. But when too many workers are using the same Excel spreadsheets, problems arise quickly. People enter data differently, which can make the meaning of the data unclear or inaccurate. Someone might enter .30% when they meant 30%, or enter $50,000 per hour when they meant $50,000 per year. When more than one or two people are updating your procurement system, you need a solution that's smart enough to know when the data doesn't make sense.
Business intelligence is one of the hallmarks of this era. Businesses that are able to get to the operational intelligence they need are quickly bypassing those without these insights. If senior management is asking for far more than Excel can produce, you are already in need of a better tool. Procurement software produces far more BI and insight and maintains holds valuable institutional knowledge.
When dealing with business intelligence, proprietary information, intellectual properties or other sensitive data, Excel spreadsheets are too easily compromised. A spreadsheet can be emailed, uploaded to Google Docs, or even printed out and taken off premises. If your procurement department doesn't want its proprietary secrets to get into the wrong hands, Excel is not the answer. Procurement sourcing and contract lifecycle management software can be secured in numerous ways, helping your business keep its proprietary secrets tight.
Many organizations hold onto Excel because it's "just always been there.” It was affordable at the time the company opened, and nobody thought to replace it when revenue grew to the point of being able to afford better. Realistically, when your business cannot ignore the true ROI (Return on Investment) and you need better, modern procurement tools are capable of so much more than Excel, and have the advantage of being able to collect and analyze far more data, deeper and richer data, and even share data from and to other software systems.