In the past, Ariba Inc. and Commerce One Inc. have offered rapid implementations for small and midsize companies. Although Oracle currently has no customers for Procure-to-Pay, the company is convinced its prenegotiated procurement contracts, preintegrated software, and low start-up cost will appeal to large companies, or at least departments within larger companies.
All Procure-to-Pay purchases are made from an online catalog populated by WorldCrest, a goods and services content provider and subsidiary of Kohlberg Kravis Roberts & Co. Procure-to-Pay will cost about $235,000, which includes consulting services, access to Oracle's E-procurement application, online support, and training. Oracle will charge an additional $5 for every transaction made using its software. Customers will be charged a fixed fee for the service, even if the installation extends beyond 30 days, which Oracle says isn't likely to happen.
Oracle is aggressively pushing its E-procurement products by offering them as a hosted solution, says Albert Pang, an International Data Corp. E-commerce software analyst. What remains to be seen is whether Oracle's hosted software, particularly this E-procurement offering, puts pressure on competitors like Ariba and Commerce One to lower their prices. Another potential ramification of Procure-to-Pay in 30 Days' hosted model could be confusion in Oracle's sales channel. If Oracle pours an inordinate amount of resources into its hosting business, it could affect the quality of service provided to customers who want to host Oracle software themselves.
Although 30 days seems like an ambitious time frame for implementing and integrating an end-to-end procurement system, Pang says it's more than enough time when you consider that Oracle has already prenegotiated the purchasing contracts with supplier WorldCrest and preintegrated its hosted E-procurement software with its financials applications. "Oracle is tightening the screw on Ariba and Commerce One and driving the cost of E-procurement down. The benefits are there, as companies can save 5% to 10% off the cost of their purchasing budgets by automating their procurement processes," he says.
The rapid implementation time that Oracle is proposing is the new service's most appealing feature, says David Lachicotte, CIO of Commercial Net Lease Realty Inc., an $81 million real-estate investment trust that builds, owns, and manages retail properties throughout North America. Commercial Net Lease Realty in late May deployed a hosted version of Oracle 11i, upgrading its financials and accounting systems from Oracle Financials. The company plans to begin using the E-procurement component of 11i next year, once users have become acclimated to the new 11i system.
Lachicotte knows that once Commercial Net Lease Realty decides to automate its procurement processes, management and users will want to see results in short order. "Rapid deployment is key to automating procurement processes because it involves changing the way people do their jobs," he says. "You can't drag out an E-procurement implementation, forgetting about the user side, particularly because they're not likely the ones to have called for this change."