The Procurement Strategy & Planning Category

Procurement Technology and Solutions M&A Outlook: 10 Predictions for 2019 (Part 2) [PRO]

In the first installment of our M&A predictions for 2019, I explored the deals that have happened already in 2018, as well as our first three of ten prognostications for next year. First, private equity firms will play an increased role in the sector. Second, valuations will be all over the map. And third, peripheral players will respond to the “Amazon” effect.

Our next three predictions have a common theme: modules and areas within the procurement technology spectrum that are heating up. (Incidentally, general situational awareness is more important than ever as more and more buyers — including strategic and financial, not to mention a new type: financial backing strategic — think about putting dry powder to work and sellers evaluate their options.) So, let’s dive right in.

Supplier Management: Dozens of Markets in One (Market Introduction) [PRO]

supplier management

The supplier management technology and services market is one of the broadest, most complex and mysterious to those who try to make sense of it — and take advantage of the many solutions that it offers. Spend Matters tracks well over 100 providers in this market, and they fall into more than a dozen individual areas. Some vendors and services firms offer solutions that address multiple components, but not a single provider comes close to offering a comprehensive solution.

This Spend Matters PRO Research brief explains and segments the supplier management market into five solution categories: core supplier process and data enablement; supplier and supply chain risk; community/network; supplier and worker/contractor; and disruptive enablement.

Procurement Technology and Solutions M&A Outlook: 10 Predictions for 2019 (Part 1) [PRO]

It’s that time of year. And no, I’m not referring to eggnog (even the vegan sort, of which I’m partial to) and good holiday cheer alone. Nor am I referring to tech providers complaining about their latest SolutionMap scores (a byproduct of the fact that the real world is not “up and to the right”). Rather, the object of this statement is my old stomping ground — the original reason I got into this sector as junior corporate development runt at Freemarkets 20 years ago — and where I still spend too much time today: M&A.

Just as I’m about to take off and look forward to a few days in a warmer climate than Chicago with the family, sector M&A interest is heating up again from all sides and threatening the seasonal vacation. This seems to happen most Decembers as firms and companies begin to look at what’s on the potential table for the new calendar year (and realize just how fast that year is approaching).

But this year is different — there is more interest than ever from a demand perspective, and it’s coming from all angles at often very different sectors and targets. Despite this perhaps rational exuberance, I’m not letting it ruin my vacation. I’m getting too old for that stuff. So rather than go “one-to-one” in advice with my clients, in the spirit of the rise of many-to-many marketplaces again — remember the “fat butterfly” model from the original B2B.com implosion, anyone? — I thought I’d author an M&A outlook for 2019.

So read on. Today, I’ll start by providing a list of the M&A deals that occurred in 2018 and sharing our full Spend Matters coverage to date. And then I’ll tackle our first three of 10 M&A predictions for 2019 (with the remainder to follow in the coming week).

Coupa and Hiperos: Customer Recommendations [PRO]

This Spend Matters PRO research brief provides analysis in support of Hiperos and Coupa customers following this week’s news that Coupa is acquiring Hiperos.

We’ve examined the implications of the deal on the supplier management landscape and done a head-to-head comparison of the providers.

Now this brief includes recommendations for immediate steps and longer-term considerations that are generic to procurement technology M&A transactions in general — such as change of control clause implications — and specific to this acquisition.

We encourage Spend Matters PRO practitioner clients who are using or considering Hiperos to contact us for more information on how the acquisition could affect them.

Now read on to get the customer/prospect recommendations for Hiperos and Coupa.

Understand the Risk Big Picture — A Webinar Looking at 2019 Risks

supply risk

Spend Matters UK/Europe’s final webinar of 2018 will be held Thursday with an eye toward risks for 2019. The event, “Understand the Risk Big Picture,” also is the final webinar for Peter Smith as the site’s managing director. Folks in North America can join at 8 a.m. Central, which is 2 p.m. in the UK.

It is being run with riskmethods — which provides a cloud-based supply chain risk management platform/solution, and founder Heiko Schwarz will be participating in the webinar with Smith. They’ll focus on different types of risk: cyber, reputational, political, natural and supplier financial risks.

Join them Thursday as they look at what procurement can do to improve risk planning and management. Please register here for the webinar — and even if you can’t make that time, registering will mean you get immediate access after the event to listen at your leisure.

Manufacturing Skills Shortage Creates Challenges, Opportunities for Digital Transformation

Toyota supply chain

Manufacturing has a shortage of skilled workers, and year by year it is expected to grow to about 2.2 million unfilled jobs over the next decade, according to a study that has been tracking the gap for almost two decades. The shortfall in workers who can handle the technical nature of manufacturing and its digital transformation could cost the U.S. economy $2.5 trillion over the next 10 years, says the 2018 study by Deloitte and the Manufacturing Institute. As one manufacturing executive said in the study, “With the positive turn in the economy, we don’t have enough job candidates with the right skills and work ethic to fill our openings, and this is making it difficult for us to accept the orders our vendors are asking us to complete.” Find out how companies are trying to bridge the gap.

Coupa vs. Hiperos: Supplier Management Head-to-Head Comparison

With news this week that Coupa is buying Hiperos, it’s time for a head-to-head comparison. The providers could not be more different in the pragmatic application of their supplier management technology to solving different procurement challenges. But on paper, both providers offer broad-based supplier management capability. And both deliver functional capability that (usually) meets or exceeds the functional benchmark for each of the areas that make up Spend Matters’ Q4 2018 Supplier Relationship Management and Risk SoultionMap. Join us in this unfiltered SolutionMap results analysis from our Q4 2018 dataset, along with the commentary of the Spend Matters analyst team. These head-to-head columns share the insights of each quarterly SolutionMap report for SolutionMap Insider Subscribers, providing unique comparative cuts of SolutionMap benchmark data along with the trademark quips that Spend Matters was better known for in its early years. So buckle your seat belt, prepare for some real data and expect a few sparks to fly as we pit Coupa and Hiperos against each other in the supplier management evaluation ring to understand where each provider is the most appropriate fit.

Not yet an Insider member? Here’s a preview: In a majority of supplier management categories which include master data management (MDM), supplier information management (SIM), supplier portal, supplier initiative management, technology, configurability and services — Coupa convincingly comes out on top. But Hiperos shines in specific areas that make it an ideal fit to enable specific supplier and third-party compliance and risk management scenarios.

Overall, the results suggest that the right solution will vary based on different organizational requirements. You’ll get no argument from us that supplier management selection processes will reward procurement organizations that tailor provider selection to their specific needs. But despite this (needed) debate, the Spend Matters team sees how combining these two solutions offers the potential for the proverbial — yet often elusive — “1+1 = 3” in M&A by enabling procurement, IT, finance and other teams to work together to manage their collective supply base while reducing overall risk. As we’ve noted before, “Using a holistic approach to managing suppliers and spend can shine a proactive light on vulnerabilities, while reducing risk and protecting brand reputation.”

But how will each product enable this? Let’s dig in and put Coupa and Hiperos supplier management capabilities head-to-head.

Beyond Supplier Risk Management: How Procurement Can Take a Leadership Role in Enterprise Risk Management [PRO]

risk

There is no shortage of news about supply risk in today’s volatile operating market:

 

  • The 12-month LIBOR rate has gone from 2% to over 3% in 2018, and suppliers are beginning to feel a capital squeeze as buyers further stretch their DPO to hoard cash (beyond stock buybacks of course).
  • Brexit continues to loom as a bugbear regarding UK/EU trade. More broadly, geopolitical risk continues to escalate in the Middle East, Eastern Europe, Central America and the South China Sea.
  • S. trade policy still swings wildly at the press of a POTUS tweet, and so do commodity prices and volatility in general. The VIX index has spiked up 65% in the last 60 days alone.
  • Natural disasters driven by climate change are becoming commonplace and calamitous.
  • Competitive risks are sprouting up as digital disruption is creeping into almost every industry sector — and as monopolies “becomes features rather than bugs” with ongoing market consolidation. In response, compliance regimes like GDPR continue to crop up although enforcement is highly variable by region and country.
  • Cyber risk continues to be the most omnipresent risk that organizations are experiencing cross-industry while everyone is flocking to the cloud in record numbers.


So, enterprise risk management should be alive and well. And, logically, supply chain and procurement executives need to be increasingly prepared to work with their internal business partners to reduce this risk and defend the proverbial gates to keep the risks at bay.

Unfortunately, the castle walls are often not well-guarded because the sentries are not getting paid to do so. Procurement organizations in particular suffer from a misalignment between missing incentives for reducing supply risk and zealous Finance-driven incentives for increasing supply reward in the form of narrow purchase cost savings. Regarding the latter, nearly all groups get measured on purchase cost reductions, but only 41% get formal credit for saving money during the sourcing process when there is no initial cost baseline. However, only 8% of procurement organizations get such "hard credit" for reducing supply risk.

Part of the challenge here is that from an enterprise risk management (ERM) standpoint, there is a broader disconnect between evaluating enterprise risk overall versus extending those risk factors in a cohesive manner out to the supply chain and also out to the supply base (via spend categories and then to individual suppliers) where contracts are signed that hopefully help mitigate most supplier risks. There are four “translations” here where alignment gets lost, and to make matters worse, the risk types being managed are highly fragmented, if addressed at all — especially when various stakeholders are in the same boat as procurement regarding not getting credit (and commensurate resources/investment) regarding supply risk. Risk management gets viewed as a glorified insurance policy and set of “check the box” regulatory compliance mandates rather than a sound approach to bringing risk into the value equation (i.e., protecting the value streams of importance through the value chain).

So, the question becomes how can procurement help solve this when so much seems outside its control? And why even pursue it when there are other things to focus on like hitting savings targets?

The answer lies in deftly “connecting the dots” between enterprise risk and supply risk so that various stakeholders like GRC, internal audit, external auditors, divisional presidents, etc. can not only extend their reach into the extended supply chain, but can also be tapped to help bring some corporate power (and resources) to bear and help drive some changes internally and with your suppliers.

In this installment of Spend Matters PRO, we’ll dive into some best practices for gaining this multi-pronged alignment and also how to align supply risk management within various points of the source-to-pay (S2P) process itself. And, of course, if you want to see how various providers handle supply risk, whether S2P suite providers, or more specialized supplier management providers, then definitely check out our SolutionMaps in these respective areas here and here.

Procurement and Insider Trading: What You Need to Know [Plus+]

Procurement has increasing access to multiple levels of insider information. And just as we have seen enforcement impacting procurement and supply chain activities centered on FCPA compliance, it is likely an increasing set of activities tied to potential information leaks in the capital markets area will come under increased scrutiny as well. In the first installment of this Spend Matters Plus research brief examining the potential for insider trading based on procurement information, we covered lessons from other areas of the business as well as introducing the types of insider information that could be acted on by those inside the company or shared with external hedge funds or other parties. In this installment, we explore what you need to know about the potential for procurement and insider trading based on increasing data availability within procurement and supply chain organizations and key action steps you can take to prevent breaches.

Efficio Panel Debate: Good Banter, Robot Jokes and 3 Points About the Future of Procurement

Last week in London I participated in one of the livelier and more spirited panel debates on the future of procurement (skills, technology and more) in recent memory. The event, held at Efficio’s offices Thursday to mark the release of its latest report, “Procurement 2025: Is Digital Transformation Driving More Effective Procurement,” included not only a handful of esteemed panelists and facilitators from the procurement/CPO, consulting and academic ranks, but also a robot — which led to many robotic process automation jokes throughout the discourse. If Efficio does something like this again, ask them for an invitation — you won’t be disappointed!

Here are three points that stuck in my mind from the different panel discussions and chats that I had.

Interview with Malcolm Harrison, CIPS New CEO (Part 3 — Will artificial intelligence wipe out procurement?)

CIPS’ leader Malcolm Harrison says the professional organization is concerned for the future of procurement workers as “more work is ‘outsourced’ to technology.” Harrison, speaking in an interview with Spend Matters UK’s veteran procurement expert Peter Smith, was asked if artificial intelligence (AI) will wipe out procurement. “My view is there will always be events that happen that haven’t happened before — we will still need people to make those judgements based on new facts and situations,” Harrison says in this third and final installment. “But one of my concerns is this: How do we ensure we develop judgement skills in the profession?”

Join the Coupa Webinar Tomorrow to Learn About Community Intelligence

Spend Matters UK’s procurement veteran Peter Smith on Tuesday will join Coupa’s John Callan for a webinar in the UK about developments in community intelligence, the idea of driving benefits through a community of organizations that are each buying separately but look to collaborate in some way.

Leading procurement/spend management firm Coupa is hosting tomorrow’s event, “Community Intelligence — A Procurement Revolution.” The time of the webinar was changed to accommodate the North American audience, so sign up here and join the 45-minute session at 9 a.m. Central time (3 p.m. UK time), and bring your questions about community intelligence.

“Advances in technology, driven by firms like Coupa, are increasing the potential for benefits from it, making it a significant tool for procurement and one which we believe procurement leaders need to understand,” Smith says in a preview of the event.