Since leaving Aberdeen as an employee, industry analyst Andrew Bartolini has done an excellent -- I might argue better -- job covering the sector than he did while working for his former employer, who constrained the type of coverage and analysis that recent posts such as this one on eSourcing 2.0 showing that he can carry out when given the flexibility to do so. In it, Andrew defines and explains a concept that he believes we should all know about: the importance and need to enable "every negotiation" that leverages an eSourcing solution to "result in an executed contract." Even though I think there are certainly industry exceptions to this argument (e.g., blanket POs in automotive rather than traditional contracts and MSAs tied to specific worker orders or POs), the suggestion is telling. Moreover, it calls attention to an almost endemic sourcing and contracting problem -- the failure to closely integrate the two processes not only to avoid lost savings, but to more quickly achieve results.
Andrew suggests that "the concept of eSourcing 2.0 has an exact parallel in the downstream procurement process: 'No PO, No Pay,' which is crisp, succinct, and universally understood by procurement and AP pros, but also by those in the line of business." The way it could work in sourcing and contracting, Andrew argues, is remarkable similar to P2P: "If you do not use eSourcing (to capture the negotiation), there can be no contract or eSourcing usage must precede a supplier contract," Andrew suggests. I have personally seen many examples of companies failing to closely link contracting and sourcing, due in part to separate platform decisions in each of the areas. But leveraging a single technology platform to more closely tie together the two elements is not essential.
In fact, I'd argue the fundamental issue here is not a failure of technology, or even a failure of technology integration -- but a failure of process and process linkage. In far too many organizations, there's significant time wasted between negotiations and contracting (or in the back and forth of contract negotiation) because of the loosely coupled interactions and structures between procurement, legal and actual spend owners. Much as many companies "fixed" their negotiation processes through defined strategic sourcing steps, sign-offs and stage gates processes in the past decade, I argue we either need to extend this paradigm into contracting and contract management or implement a new one entirely. Kudos to Andrew for writing about and surfacing a topic that requires far more discussion than it typically receives.
- Jason Busch