More on procurement and finance from the Ariba Summit

We gave some general views of the Ariba Commerce event last week here. Today and later this week we’ll pick up on a couple of the key areas of discussion in a little more detail.

Nigel Rayner (research VP in the financial systems area for Gartner) presented on “collaborating across the financial value chain”.

He started by admitting that collaborative commerce hadn’t taken off as quickly as Gartner expected going back some ten years or so.  But it is now gathering momentum in his view - helped by the focus on cash management during the recession, which has given collaboration and supply chain finance issues a real boost.

Rayner then explained very clearly the downsides to ‘big ERP’ – while it can do the central accounting, it isn’t as strong in peripheral but critical areas such as CRM, collection management, e-Billling, Treasury, eProcurement, etc.  ERP is hard to standardise across large organisations while specialist vendors can work with any ERP (see our comment on Basware doing just this here); and ERP systems can be unfriendly to casual users (yes, my experience would support that!)

He focused on the benefits of invoice automation, in terms of working capital management; dynamic discounting, and new methods of financing.  It is very easy to get a good return; too many procurement and finance functions are still pushing bits of paper around.  And, “PDFs and scanning paper invoices does not count as invoice automation”!  Organisations have implemented electronic invoicing to cover 40-50% by volume of their invoices within a year, with an immediate in–year return on investment.

He also touched on the competitive landscape, with firms such as Ariba and Basware offering the full P2P solution with a procurement /  invoicing network, ERP providers trying to push out into this area, and meanwhile P2P becoming more segmented by spend category, with specialist firms and products getting more prevalent (and pretty successful) e.g. contingent labour, travel, as well as manufacturing and general indirects.  Consolidation in the market is very likely – as per the Ariba / Quadrem deal.

Conceptually, Rayner, described a move from the 'city state' view of the organisation (we build a wall around ourselves and tell suppliers what to do if they want to trade with us), to an ‘outside in’ approach.  Access is open, with collaboration across boundaries, and many-to-many trading.

It is hard to disagree with any of that – and I don’t.  One aspect that does interest me though is this.  I can see how, as a strategic procurement professional, faced with all these networks and clever technology, I can deliver very effective and transactionally efficient procurement.  But, once I’ve implemented that, how will I deliver ongoing competitive advantage to my organisation? Because that’s what my job is all about.  If I use the same suppliers as everyone else, through the same networks, with prices converging through greater transparency… does my organisation need me at all?  How do I justify my existence?

That’s not in any sense an argument against what Ariba and other providers are doing, which is all good stuff.  But perhaps it does lead to a fundamental question that procurement leaders need to be asking themselves - before someone else does the asking for them.

First Voice

  1. bitter and twisted:

    Heres why you’ll still be needed
    – what really is “effective and efficient” will keep evolving
    – yes – there are forces towards transparency and price convergence…but, do you think those strategic sales professionals are going to surrender without a hell of a fight?

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