Many businesses turned to E-procurement systems during the E-commerce boom to control, simplify, and automate the purchase of goods and services from multiple suppliers. These products let companies aggregate suppliers' offerings into a single catalog, manage approval processing, and control the transaction process. Businesses today are extending E-procurement beyond controlling the purchase of office supplies and goods for maintenance and repair to reap its benefits in the direct-goods arena.

Among those benefits are tighter control over spending authorization and the elimination of redundant purchasing, plus easier transaction processing. Targets for this use of E-procurement applications include raw materials, parts, and components for manufacturing.

Moving E-procurement, or buy-side E-commerce, into these areas means driving it deeper into business-to-business supply-chain relationships. Because of the complexity of these relationships, E-procurement must do more than support ad hoc purchases from a consolidated catalog. Getting real value from E-procurement in supply-chain scenarios requires a raft of additional services.

While most procurement-software vendors are positioning their products as supply-chain-ready, they still have work to do to support complex B-to-B trading relationships. To respond to buyers' demands for managing supplier relationships, those vendors must acquire or build additional technology and capabilities to augment their offerings.

In a recent assessment of E-procurement products, Doculabs evaluated applications from Ariba, Clarus, Commerce One, iPlanet, i2 Technologies, MRO Software, Peregrine Systems, and PurchasePro. This article reviews key capabilities for E-procurement products to fulfill supplier-relationship management needs.

To understand how procurement-system vendors address supplier-relationship management, it's helpful to understand their approaches to procurement. Typically, a product's heritage shapes the vendor's overall approach to supplier-relationship management and the role procurement plays.

For example, one class of E-procurement vendors focuses on optimizing supplier relationships with strong transaction and decision-support capabilities. Ariba and Commerce One fall into this category, because they provide E-procurement products designed to manage the multitude of transactions taking place within and across businesses. IPlanet's BuyerXpert and Clarus' eProcurement also come from a commerce heritage. These products provide additional capabilities for processing transaction billing and settlement. PurchasePro first focused on developing a trading network and an offering for hosting E-procurement applications; the company also offers a packaged software application for E-procurement.

Another approach to procurement comes from vendors that have an asset-management heritage, such as Peregrine and MRO. These vendors' offerings primarily help maintenance and repair operations establish maintenance schedules, track in-house availability of products and other assets, and determine when more products are needed. Over time, these offerings have incorporated procurement functions.

Then there are the supply-chain vendors that provide sophisticated systems for optimizing production operations such as manufacturing and assembly. The leader here is i2, whose i2 5.2 technology addresses the entire production cycle, including resource scheduling and replenishment, planning, inventory and service management, and demand forecasting. I2 recently acquired E-procurement vendor RightWorks. I2 is in the process of integrating related sourcing applications, including capabilities for supplier evaluation and contract management. The integration is expected to be completed this year.

For businesses looking at E-procurement strategies, it makes sense to seek ways to drive efficiencies into their interactions with their B-to-B supply-chain partners. Benefits include faster turnaround time and better forecasting and accounting efficiencies. Such benefits depend on a number of specialized capabilities.

For example, procurement systems must support sourcing: the ability to locate suppliers, evaluate their offerings, and make comparisons. They also require contract-management capabilities to facilitate contract negotiation, maintain contract terms and pricing details, and ensure that the proper contractual terms are applied to each order.

These capabilities are some of the key differences between catalog- and transaction-centric E-procurement products and those that deliver on the promise of supporting supplier-relationship management strategies. Businesses that want to involve their procurement operations in their supplier-relationship management strategies should look for E-procurement offerings that support these capabilities or that have strategic partnerships and integration with third-party products that do.

For any procurement operation, a key goal is to find the best deal, the right products, sufficient product availability, and acceptable prices. Businesses need to evaluate not only prices, but also attributes such as product availability; supplier responsiveness, service levels, and delivery history; and customer-satisfaction ratings.

A big part of supporting sourcing operations is the ability to build requests for quotes, share them with suppliers, and manage the bidding process. This requires tools for creating RFQs that include detailed line-item criteria. Finally, sourcing requires interaction with suppliers to get counteroffers.

Among the products we evaluated, Ariba's Enterprise Sourcing, Commerce One's Enterprise Buyer, and PurchasePro's e-Source provide strong built-in sourcing tools that support the RFQ and negotiation process.

MRO's Maximo and Peregrine's Get-It suite provide more-limited sourcing capabilities. But both offer trading-partner information that includes visibility into a wide range of processes that support transactions, along with strong integration capabilities that are leveraged to support sourcing decisions.

Clarus offers robust RFQ and auction tools built into its eProcurement suite, and is turning its focus toward direct-materials purchasing in its next release. IPlanet offers sourcing capabilities in a separate product, iPlanet Market Maker, that must be integrated into the BuyerXpert E-procurement platform.

Businesses that place a high priority on sophisticated sourcing requirements should also consider standalone offerings. FreeMarkets Inc., a leader in the field, offers packaged sourcing software and services that leverage its vertical-market expertise. Other leaders include Moai Technologies Inc. and MaterialNet, but the breadth of their products is fairly narrow; they focus on maximizing returns for buyers over a series of sourcing events. To play a longstanding role in managing trading-partner relationships, such systems must be integrated with buyers' procurement systems or back-office applications, such as ERP, asset management, and supply chain.

Another key requirement of sourcing is to help a buyer identify potential suppliers. Several E-procurement vendors provide supplier networks, aggregated supplier information that gives users access to a broad group of suppliers. Ariba, Commerce One, MRO Software, and PurchasePro have built such networks, which offer a mixture of public and proprietary access to facilitate partner identification while preserving security or anonymity as required.

Once a trading relationship is established, buyers and suppliers conduct a series of interactions that may or may not be tied to a specific transaction and provide opportunities for increased efficiencies. Trading partners can share information about the state of their companies to improve forecasting and demand planning, and can promote efficiency by coordinating business processes.

This requires integration between the purchasing process and information residing in inventory systems, logistics systems, and other supplier back-end systems. Some E-procurement systems are making the process easier by providing packaged connectors to systems commonly found in supplier environments. While almost all the E-procurement systems provide connectors to major enterprise resource planning systems, Ariba's Buyer and MRO's Maximo also provide various connectors to specific ERP modules and to other third-party applications, such as supply-chain management and logistics systems.

But in general, deep integration with third-party systems requires custom development or use of enterprise application integration or B-to-B integration technology. Such integration calls for investments in time and resources that can be more than three times the initial software-licensing costs. In addition, businesses that integrate and expose their systems to outside partners must address security concerns to ensure that their IT architectures can deliver enough privacy and security to mitigate risk.

A final type of collaboration lies on the supplier end. Suppliers may need to respond to detailed RFQ specifications or to demand-stream requirements received through integration to the buyers' ERP systems. When a buyer's E-procurement systems can expose this type of data to the supplier, the supplier can respond with contract adjustments, new product or service packages, or other proposals.

Such capabilities are the first step toward collaborative forecasting and planning. Procurement applications have had limited experience in this area, but they provide the mechanism to support the negotiation required for collaboration.

In most ongoing B-to-B trading relationships, specific terms are governed by contracts that dictate pricing, delivery-time commitments, remedies for certain foreseeable scenarios, and rush-order surcharges.

Ideally, the E-procurement system goes beyond ensuring proper pricing and provides the ability to manage contract terms and monitor contract effectiveness. This requires process-management or workflow tools for administering contract terms within the ordering process or for handling exceptions.

Among the systems we evaluated, Ariba's Buyer is a clear leader. Ariba recently introduced capabilities to reference contract terms within the purchasing process, monitor contract effectiveness and thresholds, and administer exception-handling processes. Most other E-procurement systems provide only basic features, such as the ability to maintain contract terms for pricing and shipping.

Overall, contract management is clearly a gap for most E-procurement systems. I2 is adding contract-management capabilities to its product through a partnership with diCarta Inc., while Clarus and MRO are working to add them in upcoming releases. We expect most other procurement vendors to follow in the next year or two. Meanwhile, businesses may want to consider integrating specialty contract-management technologies such as those from UpSide Software Inc. and I-many Inc.

Even as E-procurement vendors broaden their capabilities, in the short term they may be less adept than other types of vendors at addressing needs for managing enterprise relationships with suppliers. Supply-chain vendors such as i2 and Manugistics Group Inc. have an advantage, because they already provide advanced production-planning, logistics, and collaboration capabilities. ERP vendors will also attempt to play a role. For the E-procurement vendors, the fastest way to enhance supply-chain-readiness is through partnerships and integration.

Short term, bringing true supplier-relationship management capabilities into an E-procurement operation requires a best-of-breed approach, with integration among procurement systems, supply-chain systems, other back-end systems, and specialty products. While supplier-relationship management is being addressed through the convergence of E-procurement, supply-chain, and ERP offerings, this coordination requires careful planning and sound integration strategies that match available tools with available resources.

Pick The Right E-Procurement Product
Vendor/Product	Positioning	Supply-Chain Readiness
Ariba Buyer 7.0 and Enterprise Sourcing 3.0 www.ariba.com	Enterprise sourcing, procurement, and spending-management applications to help large companies manage their purchasing of direct and indirect goods and manage supplier relationships	Offers integrated sourcing, supplier enablement, contract management, and collaboration capabilities Provides access to extensive supplier network (Ariba Commerce Services Network) Offers strong integration capabilities through adapters and through Tibco Software Partnership with MRO software for asset management
Clarus eProcurement 6.1 www.claruscorp.com	Integrated sourcing, procurement, and settlement applications to help businesses manage indirect purchasing and periodic sourcing of direct materials	Focuses primarily on indirect materials but includes robust sourcing capabilities integrated int product Offers integrated settlement services Partnership with Manugistics Group for supply-chain optimization
Commerce One Enteprise Buyer 2.0 www.commerceone.com	Enterprise sourcing, procurement, and marketplace applications to help large companies manage purchasing of direct and indirect goods across multiple channels	Provides access to extensive supplier network (Global Trading Web) Offers strong integration capabilities through prebuilt adapters and partnerships with webMethods and Tibco Partnershps with FrontStep, Indus, and SAP for supply chain, asset management, and ERP
i2 Technologies i2 5.2 www.i2.com	Integrated applications for procurement of direct materials, strategic MRO, and indirect materials; aimed at large businesses that want to incorporate purchasing into their supply-chain management	Integrates with i2's 5.2 suite of planning, forecasting, sourcing, and supply-chain management tools Enhances collaboration through integration to logistics and settlement services Provides access to extensive supplier network (TradeMatrix)
iPlanet BuyerXpert 4.1 www.iplanet.com	Applications designed to help large and midsize businesses in procurement of indirect materials; vendor also provides complementary sell-side commerce, billing, and platform technologies	Provides optional sourcing capabilities through separate iPlanet Market Maker application Includes powerful tools for evaluating suppliers
MRO Software Maximo 5.0 www.mro.com	Integrated system for managing a wide range of capital assets (including plant, machinery, and equipment) through capabilities for sourcing, asset management, and repair and maintenance scheduling	Integrates procurement activities with scheduled maintenance and repair operations Offers its own trading network as well as access to Ariba and i2 networks Provides strong integration through prebuilt integration connectors and partnership with webMethods
Peregrine Systems Get-It 2.01 www.peregrine.com	Suite for managing the asset life cycle and the requisitioning of indirect MRO goods (particularly IT and capital assets)	Procurement features are integrated into asset management workflows and other business processes Offers best-of-breed integration capabilites, as well as extensive support for communication protocols through recent acquisition of Extricity
Purchase Pro e-Procurement, e-MarketMaker, and e-Source www.purchasepro.com DATA: DOCULABS	Sourcing and procurement applications available for marketplace-based procurement, ASP-hosted procurement, and packaged software	Provides optional robust sourcing tools in complementary e-Source product Offers access to extensive supplier network (Global Commerce Network)

Brook Foust and Dennis Shin are analysts and Joshua Shehab is an editor with Doculabs Inc. (www.doculabs.com), an industry analyst and consulting firm. Contact them at info@doculabs.com.