Socialized Purchasing (Part 2): Calculating the true value of the virtual world

Posted on July 27, 2011


Brands mature to social easily measure efforts within a larger digital marketing dashboard as they natively understand how social, web, sales and marketing analytics work together. They focus less on the fuzzy and less actionable details within platforms they don’t control and instead measure the critical few.

Brands immature in social think measurement is difficult because they aren’t savvy about web metrics in general. They chase irrelevant datapoints like increasing their Klout score vs. focusing on outcome oriented metrics.

from the July 13th, 2011 Future Buzz post titled Mature Vs. Immature Social Media Efforts by Adam Singer

The above excerpt from a very interesting article in the Future Buzz certainly speaks directly to the heart of today’s post, at least from a general organizational perspective.

While the significance of this key area of an enterprise’s overall social networking/social media strategy is pertinent (and worthy of a discussion in its own right), with purchasing professionals there is an added operational element that is equally if not more important to consider.  Especially when it comes to calculating a tangible return.

I am of course talking about the emergence of SaaS-based applications which operate in the cloud (or to the uninitiated, the Internet), whereby you can connect through multiple contact points with the largest number of potential suppliers, while still maintaining a best value standard in terms of vendor relations and the integration of information across different functional areas of the enterprise itself.

The concept is quite simple in that the implementation and management of the technology is no longer confined to the IT department, but can instead be integrated directly with the purchasing department thus streamlining accessibility to functionality and the resulting savings.  In fact, the only interface with the IT department that would be deemed necessary is limited to self-hosting scenarios or the download of spend data into the back-end ERP system.

Beyond the savings associated with implementing a SaaS-model solution, in which the end client only pays for actual usage (usually on a transactional basis), savings relative to specific areas of spend are notable particularly when it comes to Indirect Material acquisitions such as MRO.

The following white paper, which was originally published in 2005 has for many become the reference point for the origins of how savings can be achieved through the introduction of a SaaS model into the procurement process.

Six years later, the paper actually represents a road map of sorts in that it provides a key starting point for understanding the alignment of technology with specific areas of spend to achieve maximum savings.  Therefore it should prove useful in terms of both identifying and calculating savings.

Once again, and from an operational perspective, it is the ability to reliably access a broader, extended global supply network of qualified vendors through social networking platforms such as Twitter or LinkedIn on both a manual and automated basis that is most exciting.

The only question surrounding the full utilization of social networking and the realization of its potential is tied to those instances where company policy either restricts or limits employee access to the Internet, the continuing fears of IT personnel that the cloud is more smoke than substance (refer to today’s earlier post Fear and loathing in Washington: Why a recent survey found that 92% of government IT leaders have reservations about making the move to the cloud) and, the general lack of understanding of social networking/media to which Singer referred in his article as being an immature brand.  Specifically, the inability of an organization to grasp the changing dynamics of the virtual world within which businesses now operate, and therefore fail to capitalize on its potential.

In the next installment in this week’s Socialized Purchasing Series, we will examine the manner in which you calculate the value of social networking in terms of professional development and networking.