Ariba helps O2 save millions in procurement costs

O2 is claiming to have saved around £4.5m in procurement costs since spring this year after implementing sourcing software from Ariba.

The mobile operator says it is happy with the savings it has made - one of its first e-auctions in March, for cabling connecting mobile masts, netted a 42 per cent reduction in cost - but that one of the main reasons for choosing Ariba is accountability.

Paul Greenshaw, major project manager for procurement at O2, said: "The software takes [procurement] processes and gives us an auditable, consistent approach. All the records are retrievable from one place and we benefit from accumulated learning."

An audit about two years ago pointed to the need for better processes within O2 and now Ariba says it is happy to hold up that customer as a leading company for procurement, if not a big source of revenue. The precise value of the deal to Ariba hasn't been disclosed.

O2 is using hosted software over the web, specifically Ariba Contracts, including Ariba Contract Workbench and Ariba Category Management.

Greenshaw explained the software handles a sophisticated six-step procurement process and is used as much for high-end, direct goods and services - such as network equipment worth hundreds of millions of pounds - as much as indirect purchases, such as office supplies and hotel bookings. That makes the vendor as important to the operator as a Nokia or Motorola, he said.

While there has been a stigma since the height of e-procurement mania in the late 1990s against using e-auctions only to drive down prices, O2 maintains it can handle complex, relationship-based decisions using software.

"You can systematise a lot of that stuff," added Greenshaw. "You can't just have an aggregate degree of warm feeling about one supplier versus an aggregate degree of warm feeling about another."

However, although in the early e-auction carried out in March five instead of two companies were invited to bid, the contract ended up going to the existing supplier.

Related story: Read silicon.com's leader on the changing role of e-procurement.