Just as on-demand technology has changed the way viewers watch movies at home, on-demand software is transforming the way many companies do business. By the most basic definition, on-demand, ASP, software as a service (SaaS)—whatever you choose to call it—means letting someone else worry about the IT while focusing precious internal resources on managing spend or supply chain functions. With this freedom also comes flexibility in pricing: pay-as-you-go subscription models versus software license renewals. Supporters say all of this means faster ROI and added power in the hands of the procurement or supply chain executive. If true, it's no wonder that many companies are already on board with on-demand.

No matter the level of enthusiasm for moving to an on-demand management solution, if such a change is on the horizon for your organization, it is not an overnight process—and it's not necessarily abrupt, either. “It's a change management process,” says Mike Rager, director of enterprise spend management at Diebold in Canton, Ohio. Instead of trying to transition users to a new system all at once, Rager recommends taking a few high-end users off your internal, installed application (“flag-wavers”) and have them use the on-demand technology first. If they feel it helps them do a better job, they become key internal proponents of on-demand and can help sell the benefits of the technology to other users.

It's important to stay grounded, however, when talking about on-demand technology—it's not all roses. As the software is hosted and maintained by the provider, don't expect to fully customize it to fit your business model, says David Schneider, director of logistics at automotive service chain Pep Boys in Philadelphia. Rager agrees that the lighter input on software changes, as well as concerns about personnel training, were concerns for him when considering on-demand. “How do I get my people trained and how do I continue to train people—because there's a cost associated with that,” says Rager.

Adapting Diebold's spend management process to its on-demand solution (Ariba's spend management package) took between three and four months. “You have to measure the growth—'metricize' two or three different items to make sure you're getting the benefit of the on-demand solution,” says Rager. “With that in hand, you can drive performance and change.”

Media company Cox Enterprises in Atlanta, also used an initial pilot program to get the ball rolling with on-demand, says Strategic Sourcing Manager Cheryl Hobgood. “We were looking for an automated sourcing solution to replace our current manual process,” says Hobgood. Cox went with on-demand tools and services from Procuri, and was up and running in about three months, saving $2 million in a $10 million spend category on their very first on-demand sourcing event, a reverse auction. Going from a manual process to on-demand was a huge jump for Cox, “but it enabled us to quickly create the online competition that you can't create with a manual process.”

That echoes the experience of Dian Trosclair, purchasing vice president with ServiceMaster in Downers Grove, Ill. The on-demand software ServiceMaster uses from Ketera was up and running in under four months. ServiceMaster, which has over 900 branches, recently centralized its sourcing and decentralized its transactional-based purchasing. But it needed to improve the efficiency of its requisition and approval workflows.

“Our ongoing spend management and off-contract activities had to be brought under control,” she says. “We knew we couldn't do it through our in-house systems, each business unit had its own system.”

In fact, says Trosclair, there were three different in-house systems, and none offered a clear data reporting system or branch-specific catalog tool. When it came time to move to on-demand, adoption was relatively painless because end-users saw the benefits clearly, she says. “We have a 99% compliance rate without fighting, because [on-demand] is so easy for our branches to use. Users like the approval flow, knowing where exactly the approval process is held up.”

It's not just the great ROI and ease of implementation that's making some purchasing and supply chain executives rave about on-demand, it's also the minimal IT involvement, says Schneider of Pep Boys. The Philadelphia-based company gets its on-demand transportation management system (TMS) from Transplace and its shipments are on schedule, while an internally run yard management project is getting bogged down by internal snags.

“The less IT involvement there is, the less grief there is. The less grief there is, the faster I get to my ROI,” says Schneider. “[With on-demand] I don't have to go through the internal bureaucracy in the IT department to figure out what size hardware they need and how to fit this in.”

On-demand providers have heard the message loud and clear, says Ariba's chief marketing officer Lou Unkeless. He says the pressure was on software providers like Ariba to speed up ROI to months instead of years, and eliminate millions of dollars in upfront software and hardware costs. “That really became clear to us two and a half years ago and signaled a need for fundamental change in how we develop our solutions and take them to market,” Unkeless says.

Though on-demand technology is now available for a number of applications, one point of advice is universal for on-demand in general: Know what you need.

“We designed the flow process as if from scratch, and asked ourselves how we would want that system to work [before selecting a tool or provider],” says Pep Boys' Schneider. “We used that as a template to compare against each one of these different software applications.” That kind of specificity and clarity is absolutely crucial for ease of implementation and highest possible ROI.

Unclear goals for software make it harder to discern what kind of on-demand tool or service package makes the most sense, says Unkeless. “Most users are best acquainted with on-demand software, but there's much more to solving a business problem than software,” he says. “Users need to ensure the solution they commit to can provide the needed benefits.”

Roy Cashman, CTO of Transplace, recommends: “Understand what you want, clearly define your requirements, and pick a vendor that has a clear roadmap.”