The consulting and services company has inked a $5.4 million contract with the state of California's Procurement Division to build an online ordering system to fill its contracting and purchasing needs.
Ariba's software lets companies set up online catalogs of goods and services from authorized suppliers so individual departments and employees can order via a corporate intranet, without going through a purchasing department. Automating routine purchases is designed to save on labor costs, and channeling purchases to approved vendors aims to lower prices.
The state of California buys about $4 billion in goods and services annually. Shifting 10 percent of those purchases online should pay for the project, according to Andersen. But the speed of that return on investment depends on how fast users adapt to using a mouse instead of the phone or paper to make orders.
"My estimate is that two to three years from now they'll be able to get a return on investment and that's pretty conservative,'' said Greg Morgan, a partner at the state government practice at Andersen, which is jockeying to be a leader in electronic procurement installations.
The system, expected to be up and running by 2000, will link the state's buyers to hundreds of existing government contracts, enabling them to purchase everything from office supplies to computers on the Web.
With electronic procurement, employees will also have more access to information about products, which will be hot linked from the product listing to the vendor's Web site. Andersen expects more than 1,000 purchasers to use the system.
"These [procurement] contracts are underutilized in many ways because of the old technology," Morgan said. "They're remote and hard to get to. Being able to do this over the Web is much more customer oriented."