This BriefingsDirect discussion, from the recent 2013 Ariba LIVE Conference in Washington, D.C., explores how SHI International teamed with Ariba to streamline IT product discovery and purchasing processes for large agricultural machinery builder AGCO.
A global provider of IT products, procurement, and related services, with more than $4 billion in annual sales, SHI has tapped into the networked economy to improve their business productivity and sales. To learn more about how agile procurement works well, we're joined John D’Aquila, Applications Support Manager at SHI International Corp. in Somerset, New Jersey.
The interview is conducted Dana Gardner, Principal Analyst at Interarbor Solutions. [Disclosure: Ariba, an SAP company, is a sponsor of BriefingsDirect podcasts.]
Here are some excerpts:
Gardner: What’s different now about buying and selling IT products and services than, say, three or four years ago?Listen to the podcast. Find it on iTunes. Read a full transcript or download a copy. Sponsor: Ariba, an SAP Company.
D'Aquila: One thing that has really changed is that IT asset management is a hot topic right now. Customers want to track their purchases much more efficiently than in the past, so they can know exactly how much they have at all times. They want to know if they're over-licensed, under-licensed on the software side, or as far as hardware goes, they want to make sure that they have enough hardware in stock, but don’t have too much. You don’t want to have whole closets and warehouses full of equipment.
Gardner: You have to be very precise, and therefore, you need to have the data about what’s going on across your supply chain.
D'Aquila: Correct. That's where electronic commerce comes in, in IT asset management. I always say that it starts with a great PO, because we want to make sure that when we receive that purchase order, we have as much information that the customer is going to be looking for us to report on downstream.
Years later, if they come back to us and say, how many desktops did we purchase over the last three years and who are they for, the only way we could tell them who it was for is if they told us that information on the purchase order.
So the best way to get that is to have a streamlined solution that everyone is using when they're procuring their desktop PC, versus the situation where one PO came over handwritten, one PO came over via fax, and the level of information on each of those POs would be different.
At SHI, as part of every customer QBR or RFP demonstration, we definitely focus on the shi.com portal, which is a standalone website solution to provide them the ability to procure their products from a customized catalog solution.
Then we show them how we can leverage our check-out question process to collect the information, to make sure that every request and purchase order comes over with that same level of information. If a customer has a solution like Ariba, then we explain to them how we can work with that.
Gardner: Tell us about your organization, how it came about, what you're doing, and why this whole notion of being ultra-efficient across your purchasing processes is essential to your business.
D'Aquila: SHI is a global provider of IT products and solutions. We're headquartered in Somerset, New Jersey, and as you mentioned before, we had over $4 billion in revenue last year. This year we expect to surpass $5 billion.
The number of employees has doubled in four years. So there is definitely an investment internally to enhance the backbone of SHI, which is the sales force and the operations departments.
One thing that I always like to talk about is that as I walk in in the morning -- and all employees walk in -- Above the SHI logo it says "Innovative Solutions and World Class Support." This reminds every employee, as they walk in, that our customers are the reason we're successful, and the way we retain those customers is by providing those innovative solutions and world-class support.
Gardner: How are we getting people to be more efficient and more data driven when it comes to procuring their IT services and products?
D'Aquila: The whole Ariba process is typically driven by the customer. In the early stages of evaluating a solution, we can tell them, if they ask us which one have you worked with and what are the benefits of each, but typically the decision has already been made by the time they come to my team.
We'll explain to them our capabilities around that, and how we could seek benefits from little pieces of information on either the punch-out setup request or on the purchase order.
For example, AGCO has been a customer of SHI’s for many years. The spend was at some growth, but it was really a slow trend up. Eric Deese is the contractor who is working on the project of enabling Ariba throughout AGCO.
We had a conference call to discuss the requirements and his scheduling and understanding his expectations of what we were going to do. From there, we put the resources in place. We did some testing with Eric, a full test, from the purchase order to invoice, to make sure that everything worked properly. Then, I handed it over to Tammy Wagner, who is the Account Executive for AGCO.
One thing that we really like to focus on with customers is, rather than show them everything we could sell, we show what they actually need and want. So we've tailored a catalog around the requirements that Eric provided to make it easier for his users to find products.
Since we've gone live, the number of products purchased from SHI and the different product lines has tripled. So it's been a great success story.
Gardner: How are these trends around more process-driven efficiency goals translated into actual savings or efficiencies?
D'Aquila: One thing is that they control their spend. In speaking to Eric, he explained that the AGCO users were buying software from everywhere. Some people would buy a shrink-wrap copy of software, which is really not the right way to buy software. They would use their P-Cards, and then they would just do an expense report, so it wouldn't be captured properly within their cost centers and the internal accounting.
Now, he said, all the employees of AGCO are going into the Ariba application and procuring their software from SHI. So maverick spend has been controlled.
Also, we can show Eric the spend with SHI and how it has grown. We work with you. Your overall spend has helped you secure better pricing with the manufacturers and with SHI, which in the long-term will turn over savings for AGCO.
Gardner: As IT organizations, in particular, are looking to move more toward an operations expenditure (OPEX) approach rather than the capital expenditure (CAPEX), they're looking for services, for leasing, and for outsourcing types of services. How is that impacting your business and how does that also impact the buying and selling process?
D'Aquila: There has definitely been a trend of more operational expense, versus capital. We notice that customers are no longer treating a desktop as a commodity. It's more of a rental. You're going to use it for a few years and it's no longer going to be expected to run the life of an employee.
So the catalog refresh cycles, have changed, as far as the number of items in the catalog. There is definitely standardizing and making sure that everyone in the organization has the same type of product, so they can get better imaging and so forth.
There is also a trend toward bring your own device (BYOD) that has been coming our way. Organizations are telling their employees, here is your minimum specifications, you can buy any PC, but it's out of your own pocket. It's up to you to purchase it, but you can bring that to work, whether it's a mobile device or even a laptop.
Today, there may be a customer that only purchases software from SHI. We want to introduce them to the fact that although we were Software House International, we are SHI now, because we sell all products that are IT related -- hardware, services, and solutions.
Gardner: And because we are here at Ariba LIVE, what are you hearing that excites you. It may be the spot-buying information. Is that something that would be of interest to you?
D'Aquila: Yes. I've used Ariba Discovery in the past. I think there were a lot of empty requests we would respond, and then they wouldn't be viewed. I'm expecting that with the Spot Buy, because it will come directly out of the SAP application and will be someone keying in a request and looking for the bids, we'll get better leads from the solution. I'm looking forward to see what comes of it.
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