ERP or Best-of-Breed? (Part 5): Agile IT Architectures to Enable Agile Procurement

The discussion of ERP vs. best-of-breed (BoB) and apps vs. suites is important, but it’s still narrow.

What I mean is that the choice of sourcing model for software used by procurement is heavily driven by the broader “service delivery model” of how procurement delivers its supply management services.

Procurement organizations are increasingly needing to be more agile in their service delivery to stay in step with internal service partners (IT, Finance, HR, etc.) and business units — and therefore need to draw creatively from external service providers of all forms.

Obviously this goes much further than just an ERP vs. BoB decision and more towards how build an agile architecture that can more easily “mix and match” not just software applications, but also any form of service that is increasingly supported digitally and deployed over the web.

The notion of an “architecture” isn’t so much a low-level technical one than a business one regarding how to partition various business processes and spend categories to the different internal resources (organizational resources like corporate employees, shared services, local procurement, business units, etc.) and external resources (BPO providers, MSPs, software/service hybrid providers, etc.) implicit in the spectrum of services shown in the figure above.

If procurement (or any business unit) can easily orchestrate B2B processes across 1) processes, 2) categories/segments (e.g., spend categories on the spend taxonomy), and 3) resources (i.e., internal and external labor and/or applications), then the business is well on its way towards meeting the agility imperative.

But, it’s not easy! It requires governance and standardization of the processes and management of the assets. It also gets more challenging as processes get increasingly digitized, componentized, and externalized or outsourced. IT organizations must certainly take a leadership role, but procurement must also be an active player in designing this evolving architecture and operating model that enables such agility.

For example, as procurement organizations migrate from a sourcing-centric operating model to a strategic third-party/supplier management approach, procurement will need to align with shared services groups and vendor management organizations (VMOs) to manage MSP/BPO providers who are not just suppliers, but also resource groups just like other functional departments.

And as those third parties go increasingly digital, the services they offer will become more “micro” or componentized. This again has an effect on technology architecture. If you want to use an MSP model for supporting contingent labor beyond staff augmentation, you’ll need to ensure that your MSP is using a services procurement/management system — usually called a vendor management system (VMS) — that is capable of managing increasingly complex scenarios (e.g., plugging into diverse automated labor pools including freelancer sites of various flavors).

With all this in mind, we’re going to give you some recommendations on how to become future agile solutions assemblers who can handle not only the archaic ERP vs. BoB decision, but also the emerging agility considerations that come along with it. Download the free Spend Matters paper, "ERP vs. Best-of-Breed Decision Guide: 3 Recommendations to Kill the Debate Once and For All."

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