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Procurement Strategy

Procurement Technology and Solutions M&A Outlook: 10 Predictions for 2019 (Part 4) [PRO]

Today, I’ll share a critical 10th prediction (arguably the most important of all) of our M&A predictions series. Please allow me to indulge my last prediction in a folksy, CliffsNotes way to get both the seasoned experts on sector deals — of which we can count on just a few fingers — and everyone else on the same page as to what’s really happening.

In the third installment, I shared three additional predictions exploring how the procurement technology landscape is shifting as we enter 2019. The most recent prognostications centered on the rising intersection of procurement technology with payment and financing as a consolidation driver, more sellers engaging in proactive processes and unorthodox groups of strategic buyers emerging from left field on some deals.

These predictions build on the second installment of our M&A predictions for 2019, during which I explored an expanding focus on services procurement (assets), the increasing interest in strategic procurement technologies (SPT) and the scarcity of e-procurement and procure-to-pay targets left in the market.

And in the first installment in the series, I analyzed the deals that have happened already in 2018, as well as our first three of 10 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."

Happy holidays everyone and happy deal hunting in 2019! Let’s get into the final prediction.

Procurement Technology and Solutions M&A Outlook: 10 Predictions for 2019 (Part 3) [PRO]

In the second installment of our M&A predictions for 2019, I explored an expanding focus on services procurement (assets), the increasing acquisition interest in strategic procurement technologies among buyers, and the scarcity of e-procurement and procure-to-pay targets left in the market. This builds on the first installment in the series, in which I explored the deals that have happened already in 2018, as well as our first three of 10 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.

Today we turn our attention to three additional predictions. Everyone who knows me in this space knows that my greatest weakness is to wax on — not usually eloquently. So I’ll try to go straight to the point with the next predictions in the 2019 procurement technology and solutions M&A lineup.

So You Want to Build a B2B Marketplace: 8 Business Scenarios & Case Examples (Part 1) [PRO]

global trade

Just what is a B2B marketplace?

Ask someone like the “gray hairs” on the Spend Matters team who were advisers to first generation industry-based exchanges during the .com era (1999-2001) and they’d likely tell you it was a great theoretical concept to bring buyers and suppliers together in support of procurement and supply chain processes and/or transactional document exchange — albeit one that failed in execution just about every time. But ask someone who is younger and they might point to Amazon Business as an archetype of a B2B marketplace model today. Both would be right, of course.

But what is important for our purposes is that B2B marketplaces are back.

At its fall 2018 analyst day, the technology provider Tradeshift noted that 30% of its 2018 (revenue) bookings have come from “private marketplace” deals (i.e., not selling applications such as invoice-to-pay or e-procurement alone but buy-side and sell-side marketplace enablement).

But just what is a marketplace today — beyond pointing to Amazon Business as one example — and why do they matter? And most important, why would you, as a procurement organization or distribution/business intermediary, want to build one?

This Spend Matters PRO series provides insight into these and other questions. Part 1 of this series begins by segmenting the market into (and defining) eight business scenarios that the groups can enable to go beyond standard procure-to-pay or storefront/e-commerce enablement, which include both “private” and “public” marketplace models. These include Digital Trading Company (“buy/sell” models), Extended Bill of Material Orchestration, Group Purchasing Organization (GPO) and Distributor “Value Add.”

For each of the eight areas, we provide a summary description of the marketplace concept, technologies (off-the-shelf) that can enable it, selected vendor shortlists, best-fit industries that it can support and best-fit spend categories (if applicable).

Later installments in the series will provider deeper insight into the following issues: what you’ll need to build one, technology vendors to consider capable of providing marketplace technology/infrastructure (based on Spend Matters’ SolutionMap benchmark data), and whether a marketplace, for procurement organizations, is a substitute for traditional cloud-based source-to-pay applications.

Spend Matters is involved in technology strategy and RFI projects for organizations building — or evaluating building — marketplaces using “off-the-shelf” technologies. Contact us to learn more.

An Introduction to Sourcing Business Intelligence (Part 1): Definition and Driving Forces [PRO]

The problem with the term “sourcing business intelligence” is that it can have vastly different interpretations. Yet sourcing BI is a concept that we’re increasingly hearing mention of with our procurement practitioner and consulting firm clients, albeit with different names attached to it.

Not to be confused with spend analytics, the concept of Sourcing BI could prove as important to the digital procurement organization of the future as category management did in the past decade — or perhaps even more invaluable. This Spend Matters PRO analysis provides an introduction to the concept of sourcing BI, starting first with a definition and an overview of the trends that are driving it.

Six Best Practices for Procuring Marketing Services [Plus +]

marketing spend

Editor's note: This Spend Matters Plus brief is a refresh of our 2013 series on category management, which originally ran on Spend Matters PRO. 

My personal involvement with procurement functions trying to get to grips with the marketing spend category goes back some 25 years, and I had some successes and failures in my time as a CPO in several large organisations. It’s a category where procurement has been slow to increase influence, but according to figures from the World Federation of Advertisers, we have gradually reached a position where the procurement function is estimated to have between 50%–80% spend coverage in the category (depending on the geographic maturity, with firms in Europe at the top of the scale and South America at the bottom).

This is starting to feel like a coming of age for marketing services procurement, with some very impressive people in senior category roles speaking and a general air that clear best practice is emerging. There are still tensions between procurement and marketing staff in some organisations, but relationships seem to be improving and a sense of where and how procurement can contribute is certainly developing.

In this Spend Matters Plus article, we’ve pulled together some key learnings to come up with six best practice suggestions for CPOs or marketing services procurement leads to consider. We’ll have three around strategic category and sourcing issues today, and three focusing more on engagement strategy and people in Part 2.

Tail Spend Management in the Trenches: Lessons Learned and Questions Answered [PRO]

purchasing

Spend Matters recently hosted a webcast exploring how Owens & Minor revamped its tail spend management strategy using Simfoni, a procurement solutions provider with specialized capabilities in this area. This Spend Matters PRO brief shares the detailed learnings — including segmentation approach, KPIs and ROI elements — and Q&A conducted during the session to aid procurement organizations in their own efforts to tame the tail.

(For those who want a full download of the webcast, which features Owens & Minor-specific data and screenshots of Simfoni’s tail spend system, check out the on-demand replay.)

Premier: Healthcare GPO Provider Summary — Introduction, Summary Analysis, SWOT and Customer Engagement Tips [PRO]

healthcare

Through a combination of organic growth industry consolidation, three group purchasing organization (GPO) providers have come to dominate the healthcare market. These providers — Vizient, Premier and HealthTrust — control nearly 75% of spend in the healthcare GPO market.

Despite this level of consolidation, the three competitors have, in certain cases, targeted different markets and introduced unique offerings. This Spend Matters PRO research brief provides an overview of Premier, including a general introduction, key points analysis, SWOT framework and customer tips for getting the most out of engagement.

For background on the GPO market, check out our two earlier briefs, An Introduction to Group Purchasing Organizations (GPOs) and Group Purchasing Organizations: Supplier Perspectives and the Evolving GPO Landscape. For general context, perspective and analysis of the healthcare GPO market in particular, see our recent three-part series: Part 1 (Background, History and Introduction), Part 2 (GPO criticisms and market consolidation/bifurcation) and Part 3 (Key Takeaways, Emerging Paradigm Shifts and Customer Recommendations).

The Healthcare Group Purchasing Organization Landscape (Part 2): Market Critiques and Effects of Consolidation [PRO]

This Spend Matters PRO series provides an introduction to the healthcare GPO market. Today in Part 2, we summarize healthcare GPO criticisms and survey the effects of consolidation in two GPO contexts (member consolidation and GPO M&A). We also discuss how models are bifurcating.

For background on the GPO market, review our two earlier briefs, An Introduction to Group Purchasing Organizations (GPOs) and Group Purchasing Organizations: Supplier Perspectives and the Evolving GPO Landscape. Then explore the first installment in this series, which provides a background, history and introduction to the healthcare GPO market.

Services Procurement History: Staffing Firm Dominance Faces a Challenge [Plus +]

In this Spend Matters Plus research brief, Jason Busch, founder and managing director, introduces the reasons why staffing firms will begin to increasingly share overall contingent market share with alternative models including the direct hire of freelancers/independent contractors, talent marketplaces, individual “out-tasking,” alumni and shared interest pools and related models. We also provide a readiness checklist for procurement organizations increasingly tasked with managing services spend that will offer a quick, honest assessment to show if they are ready (or not) for new models.

Group Purchasing Organizations: Supplier Perspectives and the Evolving GPO Landscape [PRO]

Joining a GPO is like getting a Costco membership. You know you’re not going to get ripped off, so you probably won’t put much thought into joining. But therein lies the rub for GPO members. Like Costco, a GPO is a one-size-fits-all marketplace where you may overbuy when you get there or underbuy by not getting there at all.

In an increasingly Amazon-dominated world, however, this model is not the only available option.Today, the assortment and pricing of items available to consumers are tuned to the user and monetized most efficiently by intermediaries that can source better and optimize for lowest total landed costs better than individual buyers. Procurement organizations are now looking to bring this experience to the complex world of B2B purchasing. And where GPOs fit into this more sophisticated equation is not a simple answer (many are still trying to figure it out themselves). 

But that doesn’t mean GPOs will go the way of the 1980s big box retailer. Instead, GPOs will have to take on a role beyond the race to the lowest price. This multipart Spend Matters PRO series explains what motivates GPOs and helps procurement organizations best decide when and how to engage them. In this second installment (see our initial GPO introduction), we explore GPOs from a supplier perspective and offer recommendations for vendors working through GPOs to make these relationships more successful. We also explore how GPO options and capabilities are evolving and segment the GPO market by model and type and provide case example looks at different GPO business models. These include vertical/industry independent, member-owned, horizontal, affinity, category-specific and procurement technology led GPO models. 

An Introduction to Group Purchasing Organizations (GPOs) [PRO]

purchasing

Group purchasing organizations (GPOs) are not a new idea. Agricultural cooperatives aggregated the buying power of farmers hundreds of years ago. That said, GPOs have evolved quite a bit, and the infusion of new digital capabilities is taking that evolution to an even higher level. This evolution also means that procurement organizations must go in “eyes wide open” to best utilize this important tool in the procurement tool belt.

Not all GPOs (or GPO models) are the same. Understanding the differences will make you a more educated, and thus likely more successful, buyer. Therefore, we’ve decided to delve a little deeper into this obscure sector of the procurement provider market and shed some light on how to best extract value from it.

This multipart Spend Matters PRO brief is designed to demystify GPOs and put procurement organizations on the same information playing field as the GPOs attempting to sign them up, expand their utilization of contracts and sell additional services. Within this series, we will explore GPOs by type, as there are several business models in play, and by industry segment, as GPOs are heavily embedded in certain markets and are little more than a supply option in others.

This first installment in our GPO coverage:

  • Defines what GPOs are (and are not)
  • Explains how GPOs operate
  • Explores GPO “spend coverage and fit”
  • Analyze the GPO market segments and how to engage them
  • Offers tips and tricks for engaging GPOs based on their own constraints/models
  • Provides both basic and advanced takeaways for procurement organizations that are thinking through GPOs as an alternative supply option
  • Offers a checklist of activities to consider when sourcing GPOs

All We Are “Saved” — Give Purchasing Consortia (Including GPOs) a Chance [Plus +]

Purchasing consortia and group purchasing organization (GPO) models have been accused of being fads in the past. But there are reasons they could more than go mainstream as a common procurement lever across industries, working outside of just healthcare environments, where they have thrived in the past. Spend Matters research suggests that there certainly are a number of underlying factors that make the consortia and GPO models more attractive than before (even if some suppliers, such as the airlines, will never play ball in working with these intermediaries). Indeed, several GPO and consortia providers not focused on one particular industry have a lot to offer to procurement organizations looking to better manage cost and quality for certain categories of spend.

In this Spend Matters Plus analysis, we will explore the reason behind the current and rising interest in these models and the benefits they can bring to procurement in such categories as IT spend (e.g., hardware, software, etc.), human resources (e.g., contingent staffing and MSP programs), office supplies, employee benefits (e.g., retirement/pension, pharmacy benefits, etc.), facilities and other professional and services categories (e.g., operations consulting, energy management, etc.), not to mention some areas of direct spend as well (e.g., metals). First up: exploring the different GPO benefits for both less mature and more mature procurement organizations.