Spend Management Versus E-Procurement: Is There a Philosophical Difference?

Editor’s note: This is part of the Ask Spend Matters series, where readers send in their burning questions about procurement and supply chain.

What is the difference — philosophically — between spend management software and e-procurement software?

One of our readers recently posed the above question, noting the amount of noise out there over spend management and the general sense of confusion as to what constitutes spend management and what constitutes e-procurement.

We’re always fond of these fun philosophical questions, so we asked our own Spend Matters analysts and editors for their opinions on this one.

For Xavier Olivera, lead P2P analyst and editor of Spend Matters Mexico y América Latina, spend management software is an umbrella solution that encompasses e-procurement, among other tools.

“It’s philosophical indeed,” he says. “My understanding is that e-procurement software is a tool that helps organizations to perform their tactical purchasing, supporting the business’ spend management strategies.”

Olivera continues: “So spend management could be more of a business strategy or initiative and e-procurement a tool that supports part of the spend management strategy. You would still need other sets of solutions like sourcing, contracting, SIM, SPM, e-invoicing and payments to really comply with the full spend management initiative.”

Peter Smith, editor of Spend Matters UK/Europe, argues that it is all just terminology.

“I suppose spend management might encompass aspects of budgeting, [including] travel management, whereas e-procurement tends to be doing the core procurement activity — the sourcing and/or the transactional part,” Smith says. “Although I have found parts of the public sector where all they meant by e-procurement was ‘advertising the contract on our website!’”

Jason Busch, founder of Spend Matters, reflected on something similar in a recent SolutionMap article comparing Coupa and SAP Ariba’s e-procurement capabilities:

“Coupa has also adopted SAP Ariba’s old 'spend management’ messaging of late, claiming 'business spend management’ for its own use — and defining the term as it wants to. This hits home for me personally. In 2004, before I started Spend Matters, I wrote a white paper for Ariba, as it was known at the time, called 'The Spend Management Mandate,' which essentially defined spend management in procurement terms.

“I remember sitting behind glass watching procurement focus groups — I had recently left FreeMarkets and was just launching my own firm, Azul Partners, which would become the parent company of Spend Matters — where participants would opine on their challenges and opportunities, leading Ariba to flesh out the spend management concept and encapsulate it in the overly simplistic phrase 'find it, get it, keep it.’”

Looking back on this time and thinking about e-procurement today, Busch says: “I still see spend management more as a rallying cry or philosophy, whereas e-procurement is one of the tools — a critical one — to enable it. But yes, it’s possible to have either one without the other!”

Now, we flip this question to the rest of our readers. What is your opinion on the differences between e-procurement and spend management software? Is there one? Or is it all a matter of preferred terminology?

Let us know in the comments below, and don’t forget to submit your questions to Ask Spend Matters!

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Voices (2)

  1. Akshya Rath:

    I agree with Olivera, Spend management is a business strategy to control spend and optimise value of each pie spend in an enterprise. e procurement is the best tool available so far to achieve desired outputs to comply spend management business objectives. Again e procurement modules re comprising of spend analysis, RFx , E sourcing, PO/LOi, Contract roll out, Goods receipt & inspection, e delivery challan, e payment etc.

  2. Pierre Mitchell:

    Since I missed my deadline to chime in (sorry Sydney!), I’ll do so here…
    First, you have to separate what SM means. Process? Tech vendor market? Concept? It’s a bit of a Rorschach test. If I had to summarize the general understanding of practitioners, it’d be a closed loop process of analyzing spend (with a bias towards indirect), finding savings, and ensuring ongoing savings compliance to prevent value leakage.
    For ePro, some look at it as digitizing all of procurement, but most folks, including us, view it as automating transactional purchasing processes – namely req-to-receipt.

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