Service companies should be proficient in designing and implementing performance measurement, legacy and ERP integration, change management, program management, and integration with the Web and protocols such as the Extensible Markup Language. "Clients should keep in mind that they're implementing iterative improvements that grow over time," says Palmer.

Other matters to consider include: how easy the system will be; the total cost of ownership, including maintenance and ongoing fees; the time for implementation, which depends on the size of the company and the complexity of the implementation; and whether suppliers will embrace the new approach.

A software or consulting firm's track record in implementing E-procurement initiatives should also enter into the equation. Analysis of a consulting company's competence should be considered both on the organizational and individual levels, Palmer says. "Many potential clients will check not only a company's references, but references for individual consultants who work on the project," he says. "A consultant must be knowledgeable on [a customer's] technology to successfully complete the implementation."

A company's good experience with a particular software vendor can translate to a services engagement. Great-West Life & Annuity Insurance Co., a $2.7 billion Denver provider of managed-care, life, and disability insurance and defined contribution plan services, chose Remedy Corp. to provide services for Remedy's Purchasing@Work software. Purchasing@Work will serve as the underlying platform for Great-West Life's E-procurement initiative, primarily because the insurance company already uses Remedy's help-desk software, says Graham McDonald,VP of corporate finance for Great-West Life.

Rather than hand off the entire project to the software vendor, Great-West Life conducted research regarding the cost benefits of an E-procurement system, selected Remedy, and developed its own implementation plan. When it came time to deploy the software, Great-West Life let Remedy step in because of the software company's expertise with the product. "We might have been tempted to do the implementation work ourselves," says McDonald, "but Y2K has created such a backlog in our IT department that we didn't want to dedicate a lot of our internal resources to E-procurement."

By the end of this month, Great-West Life plans to roll out a pilot E-procurement program that will automate the purchase of office supplies. Remedy's work on Great-West Life's E-procurement project will extend into the fourth quarter, when the software vendor is scheduled to integrate the front-end E-procurement system with Great-West Life's back-end enterprise systems.

McDonald says his company negotiated a fixed fee for Remedy's services, separate from the cost of buying the Purchasing@Work software. An internal E-procurement system implementation wouldn't have been less expensive, says McDonald, because of the learning curve required to properly implement and operate Remedy's product.

For Cargill Inc., a privately held distributor of agricultural, food, financial, and industrial products and services, the search for partners with the technology and experience to deploy an E-procurement system began in 1998. Unable to find a software package that was easy to implement and manage, and a consulting company that could put the pieces of the project together, the Minneapolis company waited until the following year to begin evaluating its options seriously, says Gary Klco, Cargill's senior purchasing manager in corporate procurement.

After selecting Ariba ORMS last October, Cargill put together a project team and brought Deloitte Consulting on at Ariba's suggestion. Experience and reputation were the reasons Deloitte was chosen. "Deloitte had some experience with Ariba implementations, and it's hard to find experience at this stage of the software's maturity," says Klco.

Charging on a fixed hourly rate--an arrangement proposed by Cargill--Deloitte worked with Cargill's team in project management, supplier-catalog optimization, and technical implementation. As these tasks neared completion, Deloitte was increasingly relied upon to transfer product and process knowledge to Cargill's IT staff. At the height of the project, Cargill worked with five or six Deloitte consultants, and by the end of June, Klco anticipates Deloitte will hand over the entire project to Cargill's team.

Even companies that have an internally developed E-procurement system can at some point need outside help. Using its own, internally conceived and created E-procurement system as a stepping stone, Sabre Inc., the $2.4 billion Fort Worth, Texas, provider of IT technology and services for the travel and transportation industry, plans to create a marketplace by the end of June that provides a trading forum for customers. While Sabre had the expertise in-house to establish the basics of an internal E-procurement system, the company is considering professional services firms and software vendors to help design and develop applications for supply and purchase in its new marketplace, says Stan Ratcliffe, senior VP of Sabre Technology.

The growing demand for E-procurement is attracting companies not traditionally involved in E-services, including software and hardware vendors (see sidebar story, "A Variety Of Vendors Suit Up For E-Procurement Services").

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Illustration by Noah Woods
Photo of Klco by Doug Knutson