Banks retake their procurement turf

Banks are beginning to do what they can to provide online procurement services for their clients. The way they see it, e-procurement vendors have been the ones muscling in on their turf.

Electronic procurement software vendors like Ariba and Commerce One might think Randy Ford is trying to muscle in on their turf. But the way Ford, director of e-purchasing solutions at Bank of Montreal, sees it, the e-procurement vendors are the ones doing the invading.

For years, banks have enjoyed a profitable little business, providing corporations with purchasing cards, so employees can shop for necessary office supplies, maintenance or cleaning supplies, and have the bill charged directly to the company. But with the advent of Internet-based electronic purchasing systems, like those offered by Ariba, Commerce One, and Enterprise Resource Planning vendors like Oracle, the banks' purchasing card business is getting squeezed.

The Bank of Montreal - along with its U.S. subsidiary Harris Bankcorp- is one of several financial institutions fighting back, launching its own Web-based procurement system called Procure2Pay. It was joined last week by Prudential Securities, which announced the formation of a new operating unit called SouthStreet Software, which will offer a hosted Web-based procurement system to its customers.

Are bankers over-stepping their turf?YES

The Prudential system, called proWave 2010, is currently being used by 60,000 Prudential employees to purchase $250 million worth of goods annually.

"We own the market now, so it's ours to lose," Ford said. "The model we've come up with fits right into the investments companies have already made into their purchasing card systems. We're able to work with our clients to gently nudge them onto the Web-based system."

Deluxe Laboratories of Hollywood, Calif., is one of the first companies to test Bank of Montreal's hosted system. Stuart Eustace, vice president of finance, said the company felt it would be easier and less risky to work with the bank rather than install a completely new system from a vendor like Ariba.

"Once you've established a track record with a vendor, it's always easier to use them again. It's not as big a risk because you've already established a level of trust," he said. Deluxe has about 1,000 employees, and supplies and processes film for the entertainment industry, as well as manufacturing and distributing DVDs and videocassettes.