InformationWeek

April 3, 2000

Buying Power:
In-House E-Procurement Projects Can Be A Good Fit

Illustration by Noah Woods -procurement services aren't for everyone. Companies with the internal resources to implement systems on their own often prefer to keep the development of automated procurement processes in-house.

Texas Instruments Inc., the $9.5 billion Dallas semiconductor maker, took the steer by the horns and installed Intelisys Electronic Commerce Inc.'s IEC Enterprise software in just 60 days, says Alan Daniel, the company's procurement tools manager. For Texas Instruments, which is coming off a multiyear SAP implementation engagement with Andersen Consulting, it made sense to use a few members of its IT staff to handle the IEC Enterprise deployment, particularly for the amount of money that could be saved, says Daniel.

Before turning to IEC Enterprise, Texas Instruments' procurement process used a legacy transaction system running on an IBM mainframe to produce a green-screen online catalog that had to be maintained within the company's IT infrastructure. In January 1999, Texas Instruments installed an SAP enterprise resource planning system to handle direct-material and capital-equipment purchases. Rather than burden the SAP system with large volumes of maintenance, repair, and operating (MRO) transactions, Daniel decided to have these transactions routed to an Intelisys IEC application running on a Windows NT server.

Texas Instruments' purchasing department procures more than $4.5 billion annually in three categories: direct materials such as silicon and gold wire; capital equipment, including production machinery; and MRO items such as office supplies and computer equipment. Of the three, MRO goods and services account for 80% of the transactions managed by the company's purchasing department.

Texas Instruments established three goals for its E-procurement system: reduce the company's supplier base so the purchasing department could concentrate on its relations with suppliers rather than on processing transactions; leverage cost savings by dealing directly with suppliers; and reduce the overall operational cost of purchasing.

"With Intelisys, the purchasing department no longer has to act as an intermediary between buyer and supplier," says Daniel, who estimates the cost for managing transactions through IEC Enterprise is $30 per transaction--about $100 per transaction less than the cost to manage direct and capital-equipment purchases on the SAP system.

Like Texas Instruments, Chase Manhattan Corp., the $406 billion New York financial-services institution, did most of the integration work itself when designing and implementing its E-procurement system using Intelisys software. By relying on its own IT staff to get Chase's E-procurement project off the ground, the company learned more about the project's underlying technology than if it had used an outside implementer, says Pierre Buhler, senior VP at Chase Manhattan.

Chase has been an Intelisys customer since last spring, when it began replacing its homegrown procurement applications in favor of IEC Enterprise. IEC links Chase to its suppliers, letting Chase employees access supplier catalogs via a company intranet.

In February, Intelisys became an alliance partner with Chase and Deloitte Consulting for Web applications and the creation of online purchasing communities. Chase and Deloitte plan to form an as-yet-unnamed company to help Chase customers procure goods and services over the Internet. The new venture, to be launched in the second quarter, will use IEC Portal as the infrastructure.

Illustration by Noah Woods

Return to main story, "Buying Power."

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