E-Sourcing Research: ERP Software Solutions Compared to Specialist Providers

We're excited to announce our latest Compass research series paper: Evaluating the Capabilities of ERP Providers Compared to Independent Vendors: Know Your Size? Before Trying on the Suit. The paper, free to all registrants, provides a cursory scan of the relative capabilities of ERP providers in the e-sourcing sector compared to specialist vendors. It also provides recommendations for how to discern whether ERP vendors can provide the right mix of capabilities either replacing or augmenting existing providers (it's important to remember that a surprising number of the more advanced procurement organizations are using specialist e-sourcing tools alongside Ariba, SAP and Oracle).

At this stage of development, it's our operating belief that sourcing solutions from ERP vendors can do a commendable job – at least when configured properly, used to their fullest and deployed as part of an overall procurement transformation program – under a range of different circumstances and use cases. But for us, the fundamental question around these tools is whether or not the primary purpose will be to focus on driving better sourcing and purchasing outcomes or impacting the business in different ways beyond procurement.

The last thing a Global 2000 company needs is a procurement mid-life crisis over investment in the wrong sourcing tool. That said, how do you know what set of tools are the most appropriate based on your individual operating environment, current (and expected) sourcing skill sets and overall source-to-pay footprint? And what role should ERP and non-ERP sourcing toolsets play in this regard – even potentially alongside each other? These are questions that not enough procurement organizations ask themselves early enough in the evaluation and selection process, and this Compass paper aims to tackle them.

Based on longevity and organizational penetration levels inside typical Global 2000 firms, one would expect that among the individual solution markets within the source-to-pay spectrum that sourcing-focused technologies would have the highest adoption rate. Yet as you peel the onion, such a statement would be misleading. It is correct that many organizations have adopted sourcing solutions in some capacity. But most procurement organizations have only scratched adoption, compliance and the category management surface with their sourcing toolsets.

And for good reason! Many have not only adopted solutions that might not be ideally suited for their requirements. They have also put the sourcing cart before the horse and not looked enough at broader sourcing leadership, process, category expertise, business influence/relationships, knowledge management and related areas to get the most from a strategic sourcing program itself. Within this environment, one could point the finger at SAP, Ariba, and Oracle for being the most predatory vendors, using their reach and suite-driven sales approach to take advantage of procurement organizations that they know full well will never be able to truly use a new sourcing toolbox (without fundamental change first).

Yet this isn't quite fair. Yes, SAP, Ariba, and Oracle deserve their share of the blame, but so do best-of-breed vendors – many of whom are guilty not only of putting a sports car in kid's hands and turning off the traction control, but also providing them with a lot of options that they know they'll rarely or minimally take advantage of. This is what we sometimes describe at Spend Matters as the classic Porsche 911 syndrome. Take a middle-aged man who has always aspired to drive the rear-engine sports car and has previously made do with a minivan or estate car (wagon) and hand over the keys with minimal training while selling him every option in book.

This paper attempts to help users and prospective users of ERP e-sourcing technology avoid this situation in the first place. It provides a high-level overview of current ERP e-sourcing capability, including a quick comparison between Ariba and SAP solutions, excerpted from a Spend Matters PRO analysis. It also includes a scoring matrix to explore how ERP providers generally stack up to specialist counterparts.

If you're curious about understanding the relative merits of ERP e-sourcing tools in relation to specialist providers, we encourage you to download our latest Compass research paper: Evaluating the Capabilities of ERP Providers Compared to Independent Vendors: Know Your Size? Before Trying on the Suit.

- Jason Busch

Voices (6)

  1. ERP Solutions:

    In the automotive industry, as with other industries, the grey market is the third party market in non-genuine parts. This market is growing rapidly, especially within Asia, and is a threat to manufacturers and distributors.

  2. Market Dojo:

    This is a very interesting discussion. Typically large fully integrated systems seem advantageous [if they can deliver the benefits to the end users as well as management] however, it seems that the processes for eSourcing can be counter intuitive to ERP processes. What I mean by this is that ERP processes seem more operational and eSourcing tends to focus on an aggregation of requirements or sourcing against categories. Thus we have found many customers with ERP systems definitely want separate eSourcing systems, even though their ERP systems are quite capable.

  3. Jason Busch:

    Juan, The other papers should be open, too. The PRO research is different than the free research library (which is open to all). If you’re having trouble downloading stuff, let us know and we’ll point you in the right direction. Sorry if there’s an issue on our end. A few papers to consider on the integration front:

    http://www.spendmatterspro.com/pro/research-library/perspectives/sourcing-contract-management-and-supplier-management-cloud/

    http://www.spendmatterspro.com/pro/research-library/perspectives/procurement-systems-integration-in-the-enterprise/

    Thanks!

  4. Juan:

    Jason – thanks for the response. I can’t take a look at the advanced papers because I am not a subscriber but I will add that you need to include factors dealing with integration and the value associated with out of the box integration capabilities. Specialized apps tend to require much more code and testing than larger apps designed for integration, like Oracle and SAP.

  5. Jason Busch:

    Juan,

    This is one of the highest level papers we’ve written (as we call out in the paper’s introduction) although it is based on recent technology evaluations and the teams’ experience building, selling and evaluating e-sourcing tools since the late nineties when this all began (yes we’ve been around in this market for that long and have the receding hair lines to prove it).

    In addition, virtually all of our vendor-specific comparative analysis (provider by provider) is subscription only on Spend Matters PRO. Further, our late Q1 PRO subscriber report on strategic sourcing vendors (subscribers only) is going to be exceptionally in the weeds. Also see Part 1 in our PRO series tackling the future of strategic sourcing published yesterday, Strategic Sourcing’s Evolution: A Roadmap For the Next Decade (Part 1), for an example of this deeper content.

    I also encourage you to download our other papers in the sourcing compass series which we think are actually quite deep and forward looking (if you want to go beyond what the ERPs provide in e-sourcing today):

    http://www.spendmatterspro.com/pro/research-library/compass-research/next-level-sourcing-and-commodity-mgt/

    Thanks for chiming in.

  6. Juan:

    This report is so shortsighted it’s laughable.

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