Source-to-Pay: Selecting More Than One E-Sourcing Tool

- December 10, 2012 12:12 AM
Categories: E-Sourcing, Jason Busch, Learning / Research |

Later this week, Spend Matters will publish our latest Compass research brief covering the source-to-pay technology market: Next Level Sourcing and Commodity Management: Evaluating the Capabilities of ERP Providers Compared to Independent Vendors. This paper isn’t an in-depth research analysis and comparative ranking effort based on a large-scale data collection, demonstration/review and customer validation effort (that will be coming later in Q1 for Spend Matters PRO subscribers). Instead, it’s a relatively quick-hit effort to explain how ERP e-sourcing tools (including SAP, Ariba and Oracle) can fit next to best-of-breed vendors.

While we will feature several important takeaways for e-sourcing users and buyers, the most important one is that one size does NOT fit all. In fact, there are dozens (yes, dozens) of companies using a combination of what we consider to be best-of-breed e-sourcing tools that sit alongside e-sourcing solutions from SAP, Oracle and Ariba. And these organizations almost always cluster among the more advanced set of companies based on overall procurement, supply chain and IT sophistication based on our internal rankings.

Given this, there are a number of important conclusions we can draw. First, just because a company has a sourcing tool from SAP, Ariba, Oracle or PeopleSoft does not negate needing the capabilities that a best-of-breed provider can deliver (e.g., Trade Extensions, CombineNet, BravoSolution, IBM Emptoris or Iasta for optimization; Siemens, Co-Exprise, MFG.com, Pool4Tool or FullStep for collaborative direct materials environments).

Second, regardless of how ERP providers position their solutions, we do not believe their capabilities are best of breed in all aspects or characteristics. Yes, there are things we like about them. For example, on the SAP side, we think the integration into ECC and tight linkages with supplier management and contract management can be valuable. And for Ariba, we like the integrated Discovery capabilities. But SAP and Ariba do not stack up to best of breed providers in specific areas that some members of an organizations may require (which explains the material overlap of best-of-breed sourcing tools in the SAP and Ariba sourcing base).

Third, and perhaps most important, it’s clear that even within a single company/user, one size does NOT fit all. That’s why many leading procurement organizations and supply chain/design/manufacturing teams are often selecting more than one toolset for e-sourcing and best-of-breed capabilities are used just as much if not more than those from the ERP providers. And they’re often using these additional tools across multiple spend areas – not just logistics, packaging or related “complex bids” anymore.

Check back later this week as we publish our latest Compass Research analysis. In the meantime, we invite you to download other papers in our sourcing and commodity management research series:

A Foundational Look at the Evolution of Sourcing Technology and Platforms
Advanced Sourcing Technologies and Platforms to Broaden a Portfolio
Making Sourcing Savings Stick: New (and Not-so-New) Strategies to Drive Savings Implementation
Minimizing Commodity Volatility Through Advanced Commodity Management and Hedging Approaches

And finally, here’s a sneak preview at two (of the many we list) of the organizational demographics that we think signal when procurement should look beyond ERP e-sourcing tools alone:

  • A procurement structure that favors (or follows) moving to a cross-organizational center of excellence model
  • Organizations where sourcing has engaged key internal stakeholders in collaborative exercises (or intends to) involving suppliers; this could include design/engineering, supply chain/operations, etc.

Stay tuned!

- Jason Busch

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Comments

  • e-Sourcing:

    "In fact, there are dozens (yes, dozens) of companies using a combination of what we consider to be best-of-breed e-sourcing tools that sit alongside e-sourcing solutions from SAP, Oracle and Ariba"

    Dozens! That is a considerable understatement. We have dozens of companies just within our own customer base who use our best-of-breed e-Sourcing platform in combination with their ERP system, typically Oracle or SAP.

    The problem they face (and that we solve for them) is adoption, both from a buyer and supplier perspective. Registering on an ERP system involves complex sign-up forms as long as your arm. Registering with us involves 5 snippets of company info. Navigating an ERP module from the user-perspective is as easy as hunting for that proverbial needle in the haystack.

    If best-of-breed can solve the usability and some niche functionality, then in the medium-to-long run, it pays huge dividends, as employees will actually use the tool and the process; in fact, they will want to use it!

  • Emily Rakowski:

    Hi Jason
    I’d like to dispel the notion that solutions from SAP or Ariba are not "best of breed". These sourcing solutions were built from the ground up by sourcing experts (note: SAP bought Frictionless Commerce in 2006). Pitting the solutions as "ERP vs. Niche" is not an accurate paradigm here, since neither SAP nor Ariba’s solutions were borne out of ERP based products or code. Further the Spend Matters team has not seen an in depth demonstration of either SAP nor Ariba’s sourcing solutions in many years and therefore any assessment of the capabilities is based on hearsay or assumption, not fact. Hopefully this erroneous report can be written off after further in depth analysis by the Spend Matters team in 2013.

  • Jason Busch:

    Emily,

    We look forward to looking at the latest version of the solutions as part of our evaluation in 2013. However, to respond to your note, we have seen the latest version of SAP’s solutions in mid-2012 and have seen the Ariba solution from multiple vantage points of late as well, including that of being a supplier on the system (and in the context of client evaluations, rather than formal demonstrations/briefings). We have also been a "customer" of Ariba Discovery.

    Having said this, our mind is completely open and I think we would personally agree that the label of "best of breed" for any solution is not ideal. Rather, this is why we are pursuing a multiple shortlist approach based on different buying demographics and characteristics for our formal 2013 study. We look forward to SAP’s and Ariba’s participation in creating a piece of living research that sets the standard for helping companies of all types make better e-sourcing platform decisions. One size — or chart/quadrant — will never fit all!

    Last, thanks for chiming in and surfacing the best of breed terminology question. Perhaps we should completely banish this from our language as dead and useless jargon. The problem is that it has come to mean something to people. But perhaps we should not perpetuate the definition.

  • Bruce Culver:

    Our experience in the last two years is that we find few corporate customers that are satisfied with the the sourcing results of their traditional ERP sourcing tools. Like Spend Matters states, it is hard to be best of breed across the module suite. The corporations that are innovative are adopting SaaS tools to supplement their ERP module capabilities. With that…we find many of those customers getting 2-3x the results from sourcing speed and savings.

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