I’m writing this from the airport lounge at Heathrow, flying back to Chicago (for the Chicago Marathon this weekend) after a great few days on the road with my UK business partner and colleague Peter Smith. In my travels on this side of the pond, I’ve always found London to be a truly great city to connect with people in any profession because, unlike any cities in North America (except perhaps Toronto or Mexico City), it’s a true hub. People will always converge on one of its many train stations to meet someone, attend an event or head into a central office. Like Rome over 2,000 years ago, it is a central metropolis like no other.
I find many encounters in London in various meetings and events are unexpected and unscripted – unlikely so many activities in the US, which tend to be coordinated long in advance. Many of my best learnings – or at least when my thinking begins to crystalize around a topic – in this professions come from talking to people I’ve not met before at these various happenings.
One such occurred this week when I spoke with an executive skilled in the procurement solutions area from a large ERP company. I was curious to ask this gentleman what the major adoption trends were in the UK – at least in terms of sales and implementations from the vendor perspective – and whether they mapped to what we’re seeing with similar activities in the US. Expecting to get an answer along the lines of “supplier management, XYZ upgrade or fill-in-the-blank is getting lots of attention,” he suggested rather the most important procurement technology trend was “about ERP”.
Hold that train of thought for a moment – just about every best-of-breed (Ariba, Coupa, Ivalua, Basware, b-pack, Verian – the list goes on) P2P implementation to date has occurred precisely because ERP has historically not been sufficient in the procurement technology area, at least not until recently. In fact, in recent years, the trend has been to “surround ERP” with enabling P2P capability, even leveraging the underlying ERP building blocks (e.g., SAP ECC). This is precisely what others, such as IBX Capgemini, Hubwoo, Wallmedien, jCatalog, Simeno and Enrich (in addition to the above list) have done.
So why, then, did a procurement expert at a big ERP company say essentially procurement technology trending was all about the back end?
It’s actually quite simple – as more companies evaluate alternative upgrade paths (e.g., scrapping half a dozen back-end systems for a single cloud instance of Workday, NetSuite, Fusion, etc.) the procurement technology decision changes as organizations move to a cloud-first strategy for both financials and business applications. Integrating these various clouds becomes paramount – rather than simply looking to “freeze” the back end and surround it. Some suites (e.g., Oracle Fusion/cloud) bring both ERP and procurement technology together. Others (e.g., NetSuite) are comparable very weak in procurement.
Beyond this, ERP still matters more than we think, because to leverage the latest capabilities resident in recent procurement technology releases (and enhancements, like Oracle Endeca Extensions), you need to be on recent versions of the back end. Without it, the surround (or best-of-breed) strategy, still matters.
Of course one could dismiss ERP as a distant element when it comes to making P2P work in practice – and it certainly is distant from a business model perspective if you think about the leveraged play in network-based revenue generated from document exchange between buyers and suppliers and, ultimately, the rise of trade financing (receivables financing and payables financing including invoice discounting). This is precisely the reason, in fact, that Ariba is so worried about losing existing installation and hosted clients to Coupa, especially (although they should really be more worried about next generation eProcurement vendors like BuyerQuest and Vroozi, but we’ll save that thought for another day).
Yet the truth is ERP is still a huge factor in procurement technology decisions at the end of the day (and which path an organization moves down). I personally believe Oracle acknowledges this more than SAP today, which is trying to continually distance procurement decision from the back end with the purchase of great cloud-based technology assets (Fieldglass, Ariba, etc.) by mortgaging future upgrade and maintenance revenue streams from ERP to pay a significant market premium today, in the case of Concur, at least, through debt financing.
Perhaps this will work. Perhaps it won’t. But to ignore the fundamental linkage between ERP investment and procurement technology is to deny something as fundamental as all roads converging on a single city.
Mille viae ducunt homines per saecula Romam (loosely translated: All roads lead to Rome).
Or for procurement, would that be: All roads lead to ERP?