Friday Rant: How Will the Spend Management Technology Landscape Look in 2013 (Part 1)

Predicting the future is a relatively low-risk exercise. It's a bit like forecasting the weather. If you're a professional who does it for a living, you better be at least somewhat accurate. But even over a near-term timeframe, it's okay to be wrong sometimes, especially if you're really right other times (and your insight causes people to take preemptive action). But over a long-term forecast -- think the 7-10 day equivalent for meteorologists -- no one really ever remembers what you had to say when you came out with your initial prognostication. And they'll usually forgive you, even if you're entirely wrong. For this reason, I feel safe making a two-year forecast for how the Spend Management technology landscape will appear when we're all a bit older and wiser. Just don't hold me to it if I'm off.

In my view, the most useful way to do a predictive forecast is by sector rather than vendor, given how we all generally orient ourselves towards buying solutions -- product suites, in some cases -- rather than vendor brands (and if you're buying a brand, I suspect you won't be at your same company in two years to call me out for being wrong). Today we'll start with the purchase-to-pay (P2P) application market, and we'll follow up by looking at sourcing/commodity management, supplier management, spend analysis and supplier networks (if there's another sector you're especially keen to have us pull our spend crystal ball out on, drop a line).

Within the P2P sector, I personally see a significant evolution coming. I don't see spending on solutions slowing down, but I do see a shifting of priorities and emphasis to capabilities outside of just core eProcurement applications. For one, I think electronic invoicing, working capital management and discounting solutions are about to get much more attention. Companies may very well separate out these decisions in certain cases from each other (as will procurement, treasury and A/P organizations which aren't well aligned, which is usually still the rule, rather the exception, unfortunately).

But more important than this, I think we'll see some major shifts on the vendor landscape. While Ariba is likely to very much remain one of the stronger providers in the market from a customer count perspective -- and will be in an even better position if they can enhance their current platform or role out a new one to enable more rapid deployments, drive more flexible systems integration (like IQNavigator in services procurement) and streamline the the user interface -- I see them fighting for ground against upstarts in the market on the SaaS front, while slowly losing a portion of their older installed CD base and continuing to get flanked in specialized markets (e.g., life sciences, higher education and public sector) where SciQuest and others are building critical mass.

Coupa, especially, has been coming on strong in recent quarters, beating Ariba in competitive situations despite a product with a lesser footprint today. Moreover, Coupa appears to be adding customers at a rate much more quickly than Ariba relative to the number of reps in the field, which is no doubt increasing. Add in the growth of other upstarts and established boutiques with more of an eProcurement orientation like B-Pack, Ivalua, Proactis, ePlus, Perfect, Verian and the Rearden/Ketera wildcard and the landscape may very well indeed look quite fragmented in 2011 unless Ariba or another consolidator steps in and takes charge. I suspect that in the end, we will see Ariba serve as a consolidator in this market, regardless of any internal platform decisions it makes or where the stock price heads. This makes it important that if you go with a smaller SaaS P2P vendor today, to make sure your contracting agreements protect you in the event of a takeover and forced, eventual migration (just as Ariba ultimately required of customers on Procuri and CMSI SaaS sourcing and contract management tools).

Those approaching the P2P market with more of an invoice management orientation are likely to complicate the landscape further (as are those with an asset management angle, like ePlus and Verian, which can bring another strong value proposition to the table). Still, suite wise, Basware is perhaps the biggest wildcard in this market. Should they opt to focus more on building out their eProcurement capabilities (which currently lag behind Ariba, but are catching up) while continuing to invest in their connectivity services/network and invoice automation capabilities, they could become the leader in installed software growth in the space. Regardless, they will be very, very interesting to watch and I suspect that by 2013, Basware will be a name that's much better known in the US and globally across the P2P spectrum. That is, unless SAP or Oracle takes them over (which is always a possibility given the lower valuation of companies listed on European exchanges -- not to mention Basware's technical leadership in key areas).

On the subject of SAP and Oracle, I personally believe we'll see a much more flexible orientation in the next two years, as both providers encourage more piecemeal expansion rather than requiring forklift back-end upgrades. Regardless, don't worry too much about their stability and investment in the area. Aside from legacy Ariba Buyer customers slowly migrating to ERP procurement solutions -- at least on the transactional back-end, potentially not on the front, but hold that thought for a moment -- I believe the entrenched SI ecosystem is too great and too self motivated around large projects to not push installed upgrades and migrations in the ERP direction even when a SaaS-based solution (including ERP SaaS solutions like Hubwoo, IBX, etc.) might be a better choice. This, unfortunately, is not the best outcome for customers.

At the same time, I also think we'll see a "surround" strategy by other vendors going up against the ERPs. I'll put my money on the table and bet that upstarts like Vinimaya, jCatalog, Taulia, Pollenware, Transcepta and Simplifying IT realize strong adoption as they work to enhance the ERP P2P experience in a variety of ways, sometimes in partnership with ERPs, sometimes not. It's likely that at least a few of these names will be acquired by the ERPs or the Aribas of the sector as well, if the internal procurement product teams can convince the corporate development types to make an exception to the rule of not buying smaller providers. Regardless, we will see some of these vendors provide entirely new front-end experiences to ERP procurement, from replacing existing UIs to providing better search, analytics, content management and related capabilities.

While I can't promise you where things will head -- and whether this forecast holds -- it should be a fascinating couple of years to watch and continually handicap the P2P technology sector front the sidelines! In the meantime, what do you think?

- Jason Busch

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