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