Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: Ariba, an SAP Company.
Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series coming to you from the 2013 Ariba LIVE Conference in Washington, D.C.
I'm Dana Gardner, Principal Analyst at Interarbor Solutions, and I'll be your host throughout the series of Ariba-sponsored BriefingsDirect discussions.
Our next innovator interview focuses on SHI International, a global provider of IT products, procurement, and related services, with more than $4 billion in annual turnover. We'll learn how SHI teamed with Ariba, an SAP company, to streamline IT product discovery and purchasing processes for large agricultural machinery builder AGCO. [Disclosure: Ariba is a sponsor of BriefingsDirect podcasts.]
To hear how they did it, please join me in welcoming our guest. We're here with John D’Aquila, Applications Support Manager at SHI International Corp. in Somerset, New Jersey. Welcome, John.
John D’Aquila: Welcome, Dana.
Gardner: Good to have you with us. Tell me a little bit about the requirements for buying and selling in this era of "fast is better," "more data is inevitable." What’s different now about buying and selling IT products and services than, say, three or four years ago?
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: So it's just as we've heard in a lot of other vertical sectors -- fit for purpose, not too wasteful, just in time, not over-inventory, that sort of thing. 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.
Gardner: How are you doing in terms of getting people to get more digital, more electronic? Is IT a leader or a laggard, or is it all over the map, depending on the individual organization?
D'Aquila: 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.
Gardner: This would be a good point, I suppose, to learn more about SHI. 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: Tell me a bit more about how these low-touch orders are executed, and what Ariba’s role is? 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.
Gardner: Tell us a bit about this example so we can learn more about how a good way to do this unfolds. AGCO -- who are they, how did they become your customer, what are you doing with them, and how do they exemplify what should be going on here?
D'Aquila: 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 cloud, big data, and more process-driven efficiency goals translated into actual savings or efficiencies? Can we quantify it? Are there any metrics of success even for a company like AGCO? What did they gain when they did this better?
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.
As far the cloud, we're not doing anything today with AGCO in that space. SHI does have cloud solutions, backup-as-a-service solutions, and hopefully in the future we can build that out.
Gardner: Can you prove back to them, when they do this with a single point for purchasing and when they have a standard operating procedure that everyone lines up behind? You must get more data in that regard than you can feed back to the customer to prove to them what they are saving. For example, the P-Card tax, that's not involved. How can you quantify this in dollar terms? Do you have a means to do that?
D'Aquila: We don't know exactly how much they've paid in the past. However, 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 towards 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.
Gardner: Are you starting to see any trends with BYOD where they would say, you can buy it, but why don't you buy it through these guys because they get a bulk rate? Is there a sort of a hybrid, where it's the corporation managing the buy, getting the benefits of the bulk sale, the organization around that, but having it be done through the end user, the employee, and then managed by them over time?
D'Aquila: When we're involved, that's the BYOD procedure that I see in place. The customer does pick a standard set of solutions and products and say, here is what you could choose from 20 items, and you should buy this from SHI, because we have secured deals through the manufacturer and through SHI to get discounted pricing. Of course, they can go to a retail shop on a weekend and maybe get one of the five that come in that are on sale, but typically that's not going to meet the specifications.
Although it is BYOD, they're still putting minimum specifications that really require a business-type tool. You are not going to get away with a retail laptop, desktop, or even the smaller mobile devices.
Gardner: John, we've been talking a lot about how the buyer from your organization is benefiting from an Ariba relationship. How about on your acquisition side, your supply chain? Is the Ariba Network coming into play on that side as well?
Net new customers
D'Aquila: We use Ariba as a seller, we have seen great benefit in growing customers, and that's really where we focus. We want to get net new customers and grow the catalogs and offerings to the existing customers.
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 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.
Gardner: I am afraid we will have to leave it there. We've been talking about how SHI has teamed up with Ariba to streamline IT product purchasing, processes, especially for a large agricultural company, AGCO.
Thank you so much to our guest, John D’Aquila, Applications Support Manager at SHI International. Thanks so much.
D'Aquila: Thank you, Dana.
Gardner: And thank you to our audience for joining this special podcast coming to you from the 2013 Ariba LIVE Conference in Washington D.C.
I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout the series of Ariba sponsored BriefingsDirect discussions. Thanks again for joining, and come back next time.
Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: Ariba, an SAP Company.
Transcript of a BriefingsDirect podcast on how the networked economy is improving business and sales for an IT provider and its customers. Copyright Interarbor Solutions, LLC, 2005-2013. All rights reserved.
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