The Impending Slow Death of “Empty Apps” in Procurement (Part 1)

The cloud computing inflection point has arrived for business applications. Of course, there have been other inflection points, from mainframes to PCs to clients/servers. But, multi-tenant cloud applications now allow for scalable solutions delivered via flexible deployment models across multiple devices.

So, is this the last major inflection point other than some machine learning capabilities embedded into the products? Will success now simply hinge upon functionality, adoption and customer counts using increasingly commoditized application products? For procurement apps, is it now the battle of cloud-based Source to Pay (S2P) suites?

Answer: Not so much.

Let me explain. Think of business application suites as software versions of a machine-tool. Contract manufacturers can use those tools to sell the manufacturing from those tools as a service, but the tool is still basically the same. For procurement applications, this is a problem. First of all, the massively diverse requirements for various spend categories are simply not well supported in the data models of existing procurement applications. There simply is no single procurement application on the market today that meets the needs of all spending such as direct materials, contingent labor, complex assets and complex services.

Now add in the multi-tier supply chain requirements (see here for more on this) and industry-specific requirements, and it gets even worse. Now consider the fact that even basic master data modeling is inadequate. For example, it is folly to think that a single spend taxonomy hierarchy will meet the needs of modern category management (i.e., categories are highly multidimensional, a topic you can read more about here). So, it becomes clear that we’re still pretty early in the “supply tech” market. (I think procurement needs a cool moniker like “Fin Tech” or “Reg Tech” — what do you think?)

Yet, this is not the main subject of this discussion. The main point that I want to make is that when you buy applications, you are buying empty apps. In other words, you are buying a data model and some application logic, but you’re not really buying a solution that more holistically helps procurement organizations deliver outcomes. You know the old adage: “Technology is just an enabler — it’s just a tool!” But in the age of digital and “cognitive,” can’t we expect more?

The answer is yes, but it requires some new approaches and mindsets from both buyers and technology providers. Let me give some examples, and I’ll mention firms such as SAP Ariba, Coupa, Salesforce, Tradeshift, Dell Boomi and Rapid Ratings.

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