(Re)-Prioritizing Payment in P2P (Part 1)

In a post from earlier in the month, we commented on some of the ideas shared by IBM consultant, Sohaib Masood, in an EBN article: Transferring Sourcing & Payment to the Cloud. In this piece, Sohaib suggests that cloud-based applications and networks are “transforming the nature of sourcing itself,” but have left us wanting on the payment side of the equation. He’s right in this regard.

And he’s right when he notes that there is significant “potential [for] cloud-based payment solutions.” However, he oversteps, at least in my view, when he suggests that “Ariba, Concur, Coupa, and Rearden Commerce all provide solutions to cater to the problems pertaining to sourcing and payments. Each solution provider specializes in specific areas like spend management, providing a platform for buyers and suppliers to interact and exchange information, as well as payments.”

Concur and Rearden are certainly touching on some aspects of payments. But both are either doing so as an extension of T&E, or, because in Rearden’s case specifically, they’ve linked their future in large part to relationships with big banks, who make oodles of money off of cards. In other words, they’re touching one small component of the broader payment equation.

Ariba and Coupa, in comparison, are touching even less (yes, both have T&E solutions, or have had them in the past, in the case of Ariba). But Ariba and Coupa have largely ignored payment as an area of priority – almost entirely. This is changing (we hope). We were very excited to hear about Ariba’s (and SAP’s) new relationship with Discovery. Yet as a general rule, most eProcurement and e-invoicing specialists – as well as consultants and observers like us – know as much about payment as procurement knows about HR. We’ve almost senselessly detached the mechanisms of payment – including such specialty areas as cross-border transactions and the linkage of discounting programs to specific payment mechanisms that are integral to the process – as much as possible from the P2P equation.

No doubt Oxygen Finance and others hope to change this (as does Ariba/SAP and Discovery). But it’s a topic we should all pay much closer attention to!

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  1. Mike:

    I agree that mechanisms of payment may have been detached from the P2P (or more accurately the P2AP) equation but as you suggest things are changing.

    For instance transactions through the Procserve Commerce Network can now cover order through to settlement – or ‘Req to Cheque’ as we used to call it. After all as you point out – we know “As much about the mechanisms of payment as procurement does about HR” and we don’t believe in re-inventing the wheel. So we have embarked upon partnering with those who do. Also having a lead acquirer on board means that a large number of smaller suppliers who would otherwise not be able to accept payment by Pcard now can.

    This doesn’t mean that there was no compulsion all along to close the payment end but clearly these things don’t happen overnight. It requires close consultation as well as attending to the design and commercial issues.

    The benefits? Quite apart from the obvious end to end process efficiency, this means that by integrating the transaction passing through the Network with the payments engine the buyer can have PO detail on their Pcard statement (Level 3 data as opposed to Level 1 in Pcard language). Because each transaction relies upon a single-use virtual card, it’s much more robust from a risk mitigation angle. And of course it supports prompt payment to suppliers – extending this to many more suppliers, particularly SMEs.

    It’s an exciting area that many software and service providers are only starting to look at, so I look forward to developments.

  2. No More Paper:

    You mistakenly link above to Ariba’s new relationship with “Discovery” when in fact you probably meant their relationship with “Discover Financial Services” around their AribaPay solution. Ariba Discovery, on the other hand, is the Buyer/Supplier matching engine that Ariba provides for buyers in active purchasing cycles such as an RFx or Spot-Buy.

    The AribaPay solution should address your concerns about the other so-called P2P vendors when in reality they are all more or less P2O or P2I (ie stopping at receipt of an invoice).


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