Could the Online Marketplace Be a Catalyst For Procurement Transformation?

The rest of the world has been buying online for a long time now, and with Congressional permission, our government agencies will finally get to try it out.

A section included in the annual defense authorization bill allows the Pentagon and other government agencies to buy directly from online marketplaces such as Amazon, Grainger and Office Depot as part of a pilot program.  

Section 846 could be the catalyst for far-reaching change, leading to new procurement business processes and innovative procurement technology. If the federal government wants to make this initiative as successful as possible, there are a few key things they need to consider.

Thinking and Rethinking

There are many stakeholders and a lot to think through. The first part of the implementation plan includes examining existing rules and requirements that contribute to things like the infamous $700 hammer—as it should. Online marketplaces have fundamentally changed the way we buy things, so the rules may need to fundamentally change, too.

The first phase should also include re-evaluating government procurement technology in light of the business goals of the initiative. When talk at the recent stakeholders’ meeting turned to how to customize legacy systems to accommodate online buying, you could hear the groans in the audience. That would be the worst path to take. Not only would it be expensive and time-consuming, it’s a paradigm that is outdated in the private sector.

Large private-sector companies face many of the same challenges around online procurement—sourcing and procurement in general—that their government counterparts do. Many have already solved them with cloud technology and there’s an opportunity for government agencies to do the same.

Not So Unique

Without a laser-like focus on the high-level, measurable goals of the project, it’s easy to get distracted by the details of specific processes. That’s the path toward customization. I’ve been selling to the public sector for most of my career, and practically every government agency I’ve ever worked with insists that their processes are so unique that their system has to be customized. 

That kind of thinking is not limited to government organizations by the way—but it’s rarely true.

As private-sector businesses have embraced multi-tenant cloud systems, there’s a growing recognition that core operational processes are roughly 80 percent the same across organizations of all shapes and sizes. There’s also a recognition that simplicity leads to greater user adoption, which is much more important than customizing every last detail.

Companies in every industry are replacing legacy, on-premise systems with best of breed cloud solutions. Yes, government procurement is different than private-sector procurement, but it’s roughly 80 percent the same. The practice of hard-coding rules into the system is outdated. With modern software, users can configure systems themselves to accommodate localized compliance requirements or workflows, allowing organizations to adapt much faster to changing conditions.

Not Opening the Floodgates

When this legislation was first proposed, reactions were mixed. The thought of allowing federal buyers to make purchases with a consumer-like shopping experience was enticing, but within agencies, there was concern that online buying would open the floodgates, spending would be unmonitored, vendors currently under contract would be bypassed, and most importantly, they would lose visibility and control.

Private companies faced these same concerns a decade ago. Like the government, they need to monitor spending against budgets. They need to get employees to buy from contracted vendors, and they need to see who’s buying what from whom.

Private-sector companies have solved this problem with technology that allows employees to perform effective market research, shop competitively, use existing vendors under contract, or to punch out to sites like Amazon to buy what they need. And they do this while maintaining control, visibility and compliance.

Green Screens Gotta Go

New technology has also gotten corporate employees to buy through official channels through vast improvements in user interfaces that make it as easy to fill out a purchase requisition online as it is to shop on e-commerce sites. In contrast, some of the government systems we’re talking about customizing are so old they may still use green screens. It would be a tragic waste of taxpayer money to try to retrofit that kind of system for the world of online buying.

The paradigm of customized software is dying in the private sector. If government agencies can focus on the high-level goals and let go further customizing their customized systems, they’ll find that the system they envision already exists in cloud technology. Not only that, it can be deployed faster and more economically than they could customize the current systems. That would transform government procurement and free up even more taxpayer money for each agency’s mission, ultimately making Section 846 a legislative success.

Andy Malay is a regional vice president of public sector for Coupa Software.