Companies often embrace eSourcing or eProcurement technology expecting substantial cost reductions and a more streamlined process. However, software alone is not sufficient. Organizations must have the knowledge and policies in place to support these tools. Recognizing that, the leaders today are establishing Centers of Excellence (CoE) to fully capture the value and savings from eSourcing technologies.

A Center of Excellence is a small, center-led group of procurement experts within an organization who focus on standardizing processes, leveraging eSourcing technology, capturing best practices, sharing knowledge, and streamlining procurement activities. The CoE model allows the flexibility to tailor purchases at a local level, such as snow removal and landscaping services, while leveragins corporate spend for strategic categories and commodities.

A CoE can help companies fully utilize their eSourcing technology and capture more value than those organizations without such a group. A recent Aberdeen Group research study points to a gradual erosion of savings rates from eSourcing events. Specifically, the average identified savings per event has decreased from 14.3 percent in 2005 to 11.9 percent today. Savings realization continues to present a challenge as 21 percent of identified savings are not captured. The Aberdeen study also found that companies with active eSourcing programs only source 20 percent of their total spend.

One reason given for this erosion is that companies are re-sourcing the same categories each time, resulting in lower savings. At the same time, companies are hesitant to source more advanced categories. In order to sustain and increase eSourcing proficiency, studies from both CAPS and Aberdeen recommend that companies develop a Center of Excellence. Those organizations that have established a CoE perform at higher levels than other companies. Their savings performance is 39 percent better than their competitors; they are 32 percent more likely to employ advanced sourcing strategies; they have a 54 percent edge in their proficiency in the usage of eSourcing technology; and they achieve 83 percent on-contract spend with 25 percent less maverick spend than all other enterprises.

Leading procurement organizations have established Centers of Excellence in response to a wide variety of situations. The one common theme is that they felt they were underutilizing their eSourcing technology. These companies have a strong desire to make eSourcing an integral part of their overall procurement strategy and understand the significant benefits of doing so.

There are several indications that a company is a prime candidate for a CoE. These include:

• Lower-than-expected adoption of sourcing technology by company employees.
• No sharing of best practices and lessons learned among the procurement organization.
• Inconsistent messages and materials being sent out from procurement to suppliers or to the general market.

Just because an organization has eSourcing software does not mean that it is utilizing the tools effectively or capturing their full potential value.

Centers of Excellence should be staffed by highly trained procurement experts who can drive the eSourcing process through the entire organization.

If this concept seems appropriate for your organization, you should consider the following steps for developing a fully functioning CoE. A critical action is to obtain senior management buy-in. Without high-level support, the initiative will struggle to gain credibility within the organization.

After obtaining senior management buy-in, begin with a thorough examination of the procurement organization. Conduct a gap analysis by interviewing members of the procurement organization at all levels to secure a broad perspective of the organization's strengths and weaknesses. It is essential that this analysis is conducted openly and that employees have input into the process. Often, management has a rigid perspective of the organization. Yet the reality of the organization's operations may be different from senior management perceptions. The gap analysis is an opportunity to compare the theory of how the organization operates to the actual execution of processes and policies.

While the gap analysis is under way, identify and study best practices in procurement, both internally and externally. Determine what leading procurement organizations are doing that makes them successful. Then benchmark your organization against these best practices to determine what gaps exist and how a CoE may be able to fill the gaps and elevate your organization's performance.

You must demand major improvements in your procurement processes through achievable stretch goals. Involve your best people—top performers should run and staff your CoE. Communication is a critical element to the successful launch and ongoing success of a CoE. Provide success metrics resulting from the effort. Continued high-level support is critical to the ongoing success of the CoE.

Establishing a Center of Excellence can help organizations increase utilization of eSourcing technology and realize greater savings. A CoE will also help them evolve from followers, or average performers, into procurement leaders. With proper internal support and structure, companies can maximize value from eSourcing technology investments.