Developing a Point of View (POV): Networks, Platforms and Applications (Part 1)

This analysis is excerpted from the Spend Matters Perspective: The Great Debate: Will Supplier Networks Thrive, Implode, or Evolve? (free, registration required). Authored by Jason Busch, Managing Director, Spend Matters, it explores the importance of understanding and developing an organizational point of view around procurement networks, forms and applications.

It’s time for users to get smart. Very smart.

If they don’t, they’ll be overwhelmed by jargon from countless vendors foisting their network, platform, application, app, e-invoicing, B2B connectivity, B2Bi, and related wares on them – not to mention a range of often different and divergent business models that make apples-to-apples comparisons between providers increasingly difficult.

At minimum, everyone in a procurement and A/P leadership position in a company of the size to consider an eProucrement, e-invoicing or related solution should to develop a perspective on the following topics:

  • Where are network fees going versus where they are today?
  • Who will make network decisions for companies in the future (A/P, procurement, or both)?
  • How can platforms solve supplier management (and compliance) headaches?

Will interoperability work in this space? Will networks be open to this? What shape are platforms going to take?

In exploring these areas, the fee question should be front and center because SAP/Ariba, among others, rely on supplier-paid fees that can obfuscate the true costs of connectivity.

Moreover, supplier fees can be complicated. Some are based on basic connectivity. Others are based on true value-added areas. And in some cases, buyers can assume the costs of the fees – if there are fees at all (some network, platform and application providers do not charge a dime for connectivity beyond licensing or subscription fees).

Additional key areas for basic investigation (and POV development) include the ease of supplier integration and the approach providers take for capturing all suppliers – not just those that come out on top of in a classic “80/20” Pareto analysis. Further areas of questioning and exploration should include a full exploration of supplier (A/R) centric vs. buyer (A/P) centric models as well as how networks and platforms can serve suppliers in more ways than just automating invoice transactions and visibility to payment (discounting, early payment, benchmarking, sales opportunities, additional “apps,” etc.)

Of course the elephant in the network room is whether basic network connectivity and portals (e.g., the Ariba supplier network) vs. broader platforms that third parties can build capabilities on top of and that are truly open is right for them. Exploring this area is critical because emerging platforms can offer a range of advantages over legacy network approaches and business models, including:

  • True interoperability and roaming
  • Development of self-sustaining platform ecosystems
  • Analytics and insight
    • One-to-one
    • Benchmark/metadata
    • Predicative
    • Sensing/recommending
  • Category/industry centric focus and capabilities
  • Trade/customs/transfer price/tax/tariff/network optimization (savings black box)
  • Supplier management and risk embedded at the core

Once you’ve developed a perspective – and hopefully an informed POV!!! – on the network and platform basics, it will ultimately come time to make decisions for your organization. I recommend to clients that they always vote with the knowledge that their decisions impacts suppliers in many ways, beyond just fees. For example, are you signing suppliers up to a process that is onerous? Will network and portal shortcomings reflect poorly on your procurement and A/P organization?

Download the Spend Matters Perspective on which this essay is based: The Great Debate: Will Supplier Networks Thrive, Implode, or Evolve? (free download, registration required).

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