Transcript of a BriefingsDirect podcast on how moving to collaborative commerce solutions can reap financial rewards for businesses.

1. Cloud-based Procurement Activities Bring Savings and
Visibility to the Buying Process
Transcript of a BriefingsDirect podcast on how moving to collaborative commerce solutions can
reap financial rewards for businesses.
Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Sponsor:
Ariba
Dana Gardner: Hi. This is Dana Gardner, Principal Analyst at Interarbor Solutions, and you're
listening to BriefingsDirect.
Today, we present a sponsored podcast discussion on how businesses are using cloud commerce
to dramatically improve how they procure by better managing the buying
process. Cloud-based procurement services are improving cash management and
helping to gain an analytical edge and constantly improving the overall buying
process.
We will examine how one company, California-based First American Financial,
has moved its procurement activities to the cloud to save on operational
expenses, even while dramatically increasing the purchases managed.
To learn more about how First American is conducting its businesses better through collaborative
cloud commerce, please join me now in welcoming Jeff Nolen, Procurement Solutions Manager
at First American Financial Corporation. Welcome.
Jeff Nolen: Thank you.
Gardner: Tell me, Jeff, what collaborative commerce is doing for your business. How is it
changing things?
Nolen: First American has existed for a long, long time. We've been in business since 1889.
We're financial services company and we sell a lot of financial products related to residential and
commercial real estate transaction, title insurance mainly, other things of that nature -- home
warranty insurance and specialty insurance that covers the real estate transaction.
It’s a very relationship-driven business. We had existed since 1889 and we started centralizing
procurement in 2006. So, we managed to survive for 117 years without organized procurement as
part of the company. One of the things we've been trying to do is standardize and centralize a lot
of our administrative functions -- IT, accounting, etc., and procurement falls under that.
A few years ago, in the fall of 2006, we rolled out Ariba Buyer and Ariba Spend Visibility to get
control and visibility into what we were spending as a company. And, not only what are we

2. spending, but how can we move it to a smaller number of suppliers, become standardized on
items, things of that nature. You can't do without having a tool that allows us to do that.
Gardner: What sort of problems were you facing when you got into this process of trying to
figure out how to do it better? What was the thing you wanted to solve?
Nolen: This was tricky because, because there was no centralized procurement for 117 years at
our company. People had come up with local solutions. So when we came along in the picture
and said, "We're here to save you," they were kind of nonplussed. They said, "We've already
solved these problems locally."
Regional areas
So, we had an issue where we had a lot of regional areas that had solved these problems locally
and we needed to help them understand that the way they had solved them wasn’t perhaps the
optimal solution, but without doing that in an ego-bruising way.
Generally, we took the low-hanging fruit where it was. Any time that there
was a centralized buying group like IT, where everybody bought their
hardware through one IT group, it was easy to win those folks over.
Things that people were already used to buying online, like office supplies, were real quick hits
that we could do. Once we had some early gains in those areas and built relationships internally
within our company, they started to trust us with more and more areas.
Gardner: It sounds like you had to centralize and standardize a lot of these processes. Tell me
how you did that, other than the benefit of the technology. How did you get people to learn and
change the behavior on that?
Nolen: Change management is a huge piece of it. We were undergoing a lot of standardization
and centralization of various functions at our company at the same time. They were going from a
distributed accounts payable (AP) processes to a centralized AP model, and that really helped us,
because obviously, procurement and AP work hand in hand.
Once we had a single AP group that we were working with, it was a lot easier for us to
standardize our process, because we rolled out Ariba prior to having an ERP system. We would
get purchase orders, and they would go to the vendor, but they didn’t go to any accounting
system, because there was no one central accounting system to push to.
Standardizing the AP process really helped us from a procurement perspective, because then we
had one group that we had to work with in terms of invoicing issues and things of that nature.
Gardner: So, by setting off one domino, it seems as if there were many others that had to fall,
but when that happened, what were some of the benefits?

3. Nolen: We see a lot of internal process issues that are much, much better. We have a lot more
electronic invoicing now. We had virtually no electronic invoicing before. Even in cases when a
supplier could give us an electronic invoice, we didn’t have any sort of pre-approval going on.
We had paper invoices that came in after the good or service was already consumed. We routed
that for approval, but the horse was already out of the barn.
Now, we have the ability to approve expenses before we have committed anything to a supplier,
which is a huge deal. We have the ability to deny. We have the ability to maximize our visibility,
so we can find areas where we are not optimizing how we buy a particular good or service.
Gardner: So, there are clearly some overall productivity benefits. How about the folks in the
trenches? Have they come around? Do they find this more useful in terms of getting their jobs
done?
Relationship-driven business
Nolen: Yes and no. There are certain areas where they love to use it and they're familiar with it.
There are other folks who are a little more set in their ways, and that’s understandable. But, our
business is a very relationship-driven business. It's the sales people out there dealing with the
local realtors and things of that nature. So, that dynamic is found throughout our company.
We have to respond in kind. We have to develop relationships, find the people who are more
resistant to change, and help them understand that we are not the bad guys. We are here to help.
We help them realize that it's not just about what the requisitioner wants or what that individual
in the office wants, but that there is an AP person down the road. If the way you order makes it
harder for that person to do their job, then it's not really the best for the whole company.
And, if what you order is a nonstandard item that causes the printer to jam, then IT has an issue.
So, it's helping them realize that they are not the only stakeholder in the process, because absent
any process, the requisitioner just does what's easiest for the requisitioner, not what's best for the
whole company.
Gardner: I guess we have to look at this as a lifecycle, at a holistic level, rather than bits and
pieces. How about also bringing in SaaS or cloud-based procurement? How did that work out?
Nolen: That worked out very well. I'm a particular fan of it, because it allows our procurement
group to focus on the things that we're best at, which is dealing with the processes internal to our
company, managing the internal politics, and communicating with the vendors. It keeps us out of
the application management business, which I have no desire to be in.
Gardner: Understood. How has business changed for you generally? Has this been a tough
couple of years, a busy change in terms of what you had to manage? Were there any ways in
which your procurement solutions have helped in that?

4. Nolen: We're in the real estate game. I don't know if you've read a newspaper in the last few
years, but things are a little challenging in the real estate area. But, we're a profitable title
insurance company and there aren’t a whole lot of those out there right now. So, it has been
challenging, but good for us.
In terms of the internal politics and change management piece, it helps us to some degree,
because there is more of a focus on cutting costs in the business. So, we get a little more
mindshare when it comes to dealing with folks out in the field. Previously, it was about getting
new customers and expanding market share.
There certainly still is that desire to expand market share, but when there is a drastically reduced
number of transactions per month, we can't sell our product until somebody buys a piece of
property. When fewer people are buying property, we have to find other ways to increase our
margins.
Gardner: What were some of the metrics of success? How were you able to save some money,
and what were some of the figures involved?
Savings and hard dollars
Nolen: We're a procurement organization. Like everybody else, we track savings and hard
dollars -- old cost minus new cost times volume equals savings -- fairly simple stuff. We look at
cost avoidance figures as well, but that’s a much softer, squishier area. The area that we get credit
for is in hard savings dollars.
We've been doing fairly well. We have had, on average, about $8-9 million of savings credited to
our organization for the last five years. We've been very pleased with that, but obviously we want
to go further.
Some of the key metrics we look at -- obviously the percentage compliance, both on a dollar
volume basis and on a transaction basis; how many invoices we had; how many of those were on
PO, because obviously when you are looking at processing issues, you care about the number of
documents more than the number of dollars. From a savings standpoint, you want to get those
dollars through the tool, so you can get pre-approval on those.
There are other areas that we look at in terms of degree of supplier aggregation, like how well
are we doing in a given commodity space in getting most of our spend with the smaller number
of suppliers, so that we can manage them easier. In some areas this is very easy, because there
are only a few players. In overnight shipping, for example, there are only a couple nationwide
players in that category. There are other areas like print and promotional, where that’s a much
tougher nut to crack.
Gardner: How has this helped you in terms of dealing with your suppliers, and bringing in the
analytics capabilities that you have now that you didn’t have before? Analytics plus a
competitive bid and visibility help in what way?

5. Nolen: It helps a lot. It increases our ability to increase our share of wallet with the suppliers that
are performing well for us. There are some suppliers who grouse about it initially and see this as
the enemy, because it’s just going to drive prices down. Well, also, if you are a good partner for
us, it helps us communicate better with you. It’s not just about increasing efficiency within the
four walls of our company, but it’s also about increasing efficiency between organizations.
We can do everything right in house, but there’s still a lot of stuff between our company and the
companies that we do business with that, if that’s inefficient, then we're not really gaining as
much as we should.
This electronic invoicing initiative that we have. In office supplies, we would receive one paper
invoice per purchase order, and that’s thousands of purchase orders for a year. We've reduced that
now, where we have summary invoicing and we receive an electronic invoice, basically one
electronic invoice for the month. We match that way, and it’s just a lot more efficient than it had
been previously.
Gardner: What’s your 20/20 hindsight of having gone through this the last few years, for those
folks who are looking to standardize and centralize around procurement using cloud-based
services? What recommendations could you offer? What lessons learned that you could share?
Nolen: I would say focus on process first, because the technologies are great. But, you can’t
think, "We'll just buy the software and that will solve all of our problems," because it won’t. The
softwares are malleable and they're flexible. They can do a lot of different things. The question
is, what do you want that software to do? And if you have a bad process and you apply
technology to it, then you are just accelerating the wrong process.
The first software anybody should buy is Visio, and figure out exactly how they want orders and
invoices to flow through their organizations.
Impose clarity
Another area is to make sure that you're telling your business clearly what you want out of
purchase orders, what do you want to go on purchase orders, what do you want to go on a P-Card
or credit card. Anywhere where you can impose clarity, it will help you be more successful.
Also, you can’t ignore the internal change management dynamics, because that’s often the more
challenging thing. Traditionally, outside of manufacturing environments, where it probably rides
higher than the saddle, procurement is not the sexiest, most respected group in any organization.
Gardner: Yeah, but try to get along without it.
Nolen: Well, we did for 117 years, but I don’t think we would have lasted another 117 years
without some form of centralized standardized procurement.

6. Gardner: Very good. We've been talking with First American Financial Corporation about doing
business better through collaborative cloud commerce. I want to thank our guest, Jeff Nolen,
Procurement Solutions Manager at First American. Thank you.
Nolen: Thanks for having me.
Gardner: This is Dana Gardner, Principal Analyst at Interarbor Solutions. You've been listening
to a sponsored BriefingsDirect podcast. Thanks for listening, and come back next time.
Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Sponsor:
Ariba
Transcript of a BriefingsDirect podcast on how moving to collaborative commerce solutions can
reap financial rewards for businesses. Copyright Interarbor Solutions, LLC, 2005-2011. All
rights reserved.
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