20 Questions for E-invoicing and Procurement Network and Platform Selection (Part 2)
Editor’s note: This Spend Matters Plus brief is a refresh of our 2013 series on supplier network selection, which originally ran on Spend Matters PRO.
In the first installment of this series, OB10/Tungsten, Ariba/SAP, and GXS: 20 Questions On Supplier Network Selection, we gave some context around the right organizational questions that procurement, accounts payable (A/P), finance and supply chain organizations should ask before getting to a supplier network selection RFP/RFI. We also offered up the first five of our 20-question list, which we’ll complete today.
But before we get started, it’s important to note that this list isn’t just relevant for an initial selection for new connectivity tools and on-ramps, but also for evaluating an ongoing strategy – and selecting the right set of providers to work with in the future. In nearly all cases, it will be multiple network or platform providers rather than a single one.
We begin our list by addressing this question of single/multiple providers directly and how to structure an arrangement with a preferred on-ramp, vendor, or working with multiple providers on the same level:
6. Should companies want a single provider (e.g., a “prime” supplier) to drive connectivity and interoperability globally, or should they seek multiple partners on an equal engagement footing? Answering this question would be analogous to selecting a core EDI provider (e.g., GXS, Sterling) or connectivity adapter (think Liason), which would then sort out broader integration and connectivity challenges directly with suppliers and third-party on-ramps they might already connect to (or standards).
7. Is there a business reason to separate ERP/MRP and business application providers from network, connectivity, and on-ramps? Have we defined the risks and/or benefits (nd what are these elements?) in potentially working with one provider that delivers our back-end, application, and network capability? The “one throat to choke” argument in this regard can be countered by that of “putting too much power in one vendor.” The Chimes incident in the VMS and contingent workforce sector highlighted the danger of tying together both software and managed service in one offering.
8. Will ERP providers accelerate their penetration with more advanced capabilities through acquisition (just as SAP did with Ariba for procurement applications)? And if so, do we want to wait for them to follow this path (see question, above)? Both SAP (including Ariba) and Oracle lack key enabling capabilities on the network side which could be materially accelerated via acquisition. While we believe Oracle is the more likely acquirer – we expect SAP to expand on Ariba and build out natively with limited tuck-in deals, potentially – this remains an important question to ask for companies that are attempting to standardize on as few back-end providers as possible.
9. How important is current vs. planned capability to our decisions that providers do engage in? Should we trust their roadmaps to fulfill our needs, or should we base decisions for selection and engagement primarily on current capabilities? Note: this is a particularly important question for Ariba/SAP customers. Ariba already appears to be making good on its promise to attack direct spend through network connectivity, which is a good sign for those betting on a product roadmap to address their needs rather than just existing capabilities.
10. Have we paid enough attention to our EDI suppliers (GXS, Sterling/IBM, etc.) and their investments in products and network capability for our needs outside of just direct procurement? Do we understand their broader capabilities, applicability and roadmap to our entire supplier/partner connectivity and engagement needs? Talk to IT about your EDI partners if you haven’t already – you might be surprised at the type of connectivity solutions they can provide that are applicable to supplier network connectivity and broader supplier managed integration services.
11. What percentage of our indirect suppliers (IT, office products, MRO, etc.) are fully enabled for eProcurement (including direct connectivity for sharing POs, invoices, updated catalog content, payments, etc.)? Do we know where we stand with this number relative to our peers? Do we care to improve it? Understanding the “you are here” dot will help size up the importance of working with a provider that has a long track record in driving broad eProcurement-based connectivity (e.g., Hubwoo, IBX, Ariba, SciQuest). This is including catalog management versus others focused on different, targeted aspects of supplier network engagement (e.g., OB10).
12. How engaged are we (really) with different stakeholders in the business around collaboration in this area? Are procurement, IT, A/P, treasury, manufacturing/operations, logistics, supply chain, and other functional groups on the same page? Do we understand what each group values from supplier and partner connectivity and engagement? Alignment is the foundation of building broader supplier engagement capabilities that end up being adopted and embraced by other stakeholders. Working with all of these organizations is key to building alignment and excitement for a network implementation to expand beyond basic indirect procurement connectivity for passing invoices and POs back and forth (and doing basic compliance matching).
13. Do we feel comfortable authoring a single RFP for supplier connectivity and services today based on the overall needs of the business (including the stakeholders listed in the above question)? Note: if the answer is “no”, this is fine, but it is important to know this and to hit the pause button on an overall strategy and instead focus on using connectivity and engagement to drive one-off programs and needs. This question will address the “big bang” approach to integration once and for all for many companies versus taking individual steps to achieve targeted outcomes.
14. Are our external advisors (management consultants, systems integrators, business process outsourcers, etc.) that advise on systems and process the right group to provide guidance in the area of supplier networks and on-ramps as well? Are they sufficiently versed and experienced in connectivity? In addition, are there providers that we already work with (e.g., BPOs) with existing partners and network ecosystems we can plug into and take advantage of without negating a broader or longer-term strategy?
15. When will physical and financial supply chains mesh in our industry? Do we understand the benefits of such collaboration? Do procurement and finance groups currently align efforts in card management, dynamic discounting, static discounting, reverse factoring, bank payable management systems (e.g., electronic invoice presentment payment, or EIPP, purchase orders (POs), letters of credit, LC, etc.)? Is there awareness about how the role of different intermediaries can simplify or enhance our capabilities in this collaboration and alignment? The financial and banking side of the equation is often secondary in network and B2B managed services focus. It shouldn’t necessarily be. In addition, it’s important to understand relative and comparative maturity, by industry, in distinct areas such as adoption of early payment discounting programs, supply risk management, etc.
16. Can we truly have one global strategy for our company? Are our regional (e.g., Latin America, China) needs sufficiently different – both in-country and for cross-border connectivity and transactions – to warrant more localized approaches? It is likely for global organizations the answer to this question will be “yes” so survey global users and stakeholders to understand their requirements – rather than just the countries involved in a particular systems (e.g., eProcurement) roll-out.
17. Have we considered the role of services suppliers in our connectivity strategy? Are we comfortable with the visibility and connectivity needs of vendors in this area as well as internal stakeholders on a comparative basis to our “goods” supply chain? It is our observation that the great majority of companies have not yet given sufficient thought to services procurement integration (e.g., contingent workforce, legal, consultancy, facilities, marketing, etc.) in supplier connectivity – including category specific requirements.
18. What is our comfort level in piloting smaller providers in supplier connectivity/ on-ramps and new solutions from existing providers? Or is the area too strategic to warrant anything but conservative choices? Is our organization comfortable being an “early adopter” – and do we have a track record of being one in other IT areas?
19. What should the role of “social” be in working with suppliers? Do we have a social supply chain strategy in both the demand/supply areas? Are they linked?
20. Have we fully considered our data security and privacy requirements we expect from network partners? What is optional? Not optional? For example, in the case of manufacturing, do we feel comfortable transmitting our mission critical supply chain data in the cloud? Do we know whether the network provider will use the data for “value added services” either directly or in the aggregate? Similarly, does the provider offer data-level encryption between buyer and seller? Will it support ITAR (aerospace and defense), PIDX (oil and gas), and other industry data security requirements? If the intended provider doesn’t support these requirements today (e.g., Ariba/SAP), what are our options, and how can we construct a multi-network solution (see items 6, 7, 10, 13, 14 and 16 in our list)?
This list is of course just a start in understanding internal requirements and the overall state of connectivity inside your organization before engaging with supplier network and platform suppliers. Regardless of which questions you adopt from it, please consider the importance of getting on the same page internally before moving to an RFP/RFI and engaging external providers.
As always, we welcome your feedback and questions, especially as the needs for network and platform services increase!