Workday acquiring Scout RFP (Part 4: Potential Areas of Solution Integration)

Our final Spend Matters Nexus brief for the week analyzing Workday’s acquisition of Scout RFP focuses on potential product and workflow integration touchpoints between the providers, based on activities that Workday and Scout worked on while “partners only” as well as more strategic considerations. (See the first three installments here, here and here, covering general deal analysis, Scout capabilities + strengths/weaknesses, and competitive sector analysis.)

Today’s analysis begins with a list of generic sourcing integration touchpoints with broader source-to-pay and procurement technology capabilities.

As our Nexus coverage has shown, we tend to look at the acquisition of Scout as a clever, innocuous way for Workday to get into the edges of procurement with a standalone, crowd-pleasing solution. But we also think there’s much more to come from a Workday product roadmap perspective — and that this move is only one of the first acts of a much longer play.

Note: This analysis will be updated next week based on a briefing call with Workday.

 Jason Busch serves as Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs in the procurement and finance solutions marketplace (including contract management, B2B marketplaces/connectivity, indirect procurement, services procurement, direct procurement, commodity management, payment, trade financing, GRC/third-party management and related adjacent sectors).

Sourcing Integration Touch Points: An Introduction

There are a number of logical integration touchpoints between a sourcing application and broader platform environments encompassing the end-to-end source-to-pay process. These include:

• Sourcing and ERP touchpoints (e.g., supplier master integration)
• Sourcing and contract management touchpoints (which can include selected basic CLM components within a sourcing application, but more strategically includes a focus on integration with enterprise class CLM — which is very different from CLM as an extension to sourcing!)
• Sourcing and supplier management touchpoints (including master data management, supplier master integration, supplier compliance, GRC/CSR information, supplier risk management, supplier initiative management, network-based integrations, etc.)
• Sourcing and transactional procurement touchpoint (e.g., shopping and requisitioning tools, to kick off a sourcing event for spend beyond a certain level or as either a strategic or lightweight app when multiple stakeholders must collaborate in a tender)
• Sourcing integration with spend and procurement analytics platforms to drive not only tactical spend analysis (e.g., cleansing, classification, enrichment and reporting) but more advanced use cases involving predictive and prescriptive analytics (e.g., opportunity analysis, fraud detection, etc.) and also a CFO’s view of spend and savings, factoring into account currency prices, commodity prices and working capital
• Sourcing integration with services procurement for MSA/SOW agreements (and tactical execution of these agreements)
• Sourcing and supplier network integration — for search, discovery, etc.

Spend Matters SolutionMap, our free system that evaluates individual solution capabilities and ranks procurement software competitors, covers these integration touchpoints in much more detail, but as a general guide, there are significant opportunities to integrate sourcing with broader procurement technology areas even with the foundational integration points, above.

Workday and Scout: Foundational Considerations

Beyond these general areas, there are also some fundamental architectural questions that Workday and Scout will need to consider in bringing the two product lines together, including what is arguably the most important consideration: the single data model issue. This includes not only how core master data (e.g., supplier master data) is modeled, but also how extended data (e.g., contract data) is modeled.

For Workday, this is not a simple consideration, as the potential competitive advantage it could gain from linking its human capital applications — ultimately inclusive of temporary staffing, contractors, freelancers and other third-party workers and firms — to procurement activities on a tightly coupled basis could be highly material to its success in procurement overall. Such an approach would not be so dissimilar from multi-tier supply chain modeling in a network environment, although the data model complexities are higher.

This is because if suppliers, labor (internal and external), SKUs, spend and all the other data associated with specific outcomes, performance, obligations etc. — including those “little” things such as all the metadata in contracts — become objects in a common data model that one can assemble in just about any manner, the potential to transform procurement from a group that manages and saves money based on provisioning the “world outside” based on demand that is tossed over the wall to a group that sits at the intersection of optimizing cost and value, blending internal and external resources, is massive.

This capability could transition procurement from what remains a savings-driven and tactical function — using tools like Scout — to one that might be described as “commercial value management,” at least academically (we’re not sure what it will really be called just yet).

Again, think of this sort of as a multi-tier supply chain collaboration (and data management) construct but on a much more granular (atomic) basis, certainly one that has never been pulled off at this level of complexity before, even in the direct materials supply chain. And do read our Commercial Value Management PRO series for a primer on the concept!

Hence, in considering this broader opportunity, it is critical to think of not online baseline data model and integration considerations for Workday and Scout, but also the broader Workday product portfolio inclusive of both financials and human capital.

For the rest of this brief, we will turn our attention to baseline integration scenarios (this is “first grade” level stuff, compared to the PhD-level ruminations above). But perhaps the student in this case will learn quickly, leveraging the strong DNA from the rest of its business to do something truly amazing.

Maybe.

Integration Touchpoints: The Basics

Earlier this year, Workday shared its vision for an initial integration Workday / Scout solution.

Our intelligence on this planning comes from a variety of secondary sources that Spend Matters has consulted in our research. (Note: Neither Workday nor Scout provided it to Spend Matters directly, so we cannot with 100% confirm its accuracy.)

On the most foundational level, in an integrated source-to-pay scenario with Workday, Scout will emphasize core sourcing and supplier management (supplier, contract and related data model considerations questions notwithstanding), and Workday will emphasize e-procurement (inclusive of shopping, requisitioning, catalog management) and invoice-to-pay capabilities (including receiving, invoicing, etc.). Ultimately, basic questions and timelines around such areas as supplier portal integration must also be understood (e.g., will a supplier log into a portal via Workday to check on an invoice status or take a discount, or via Scout’s capability).

But in the interim, Workday and Scout appear to be emphasizing at least four specific integration areas based on their existing partnership (prior to the acquisition announcement). These are:

• Project and demand-driven sourcing, which includes capturing information from stakeholders (e.g., those in the business) including questionnaires (through a simplified approach, this has become one of Scout’s signature differentiators) and organizing and structuring sourcing and supplier engagement projects in a manner that is integrated in a workflow and activity context within Workday
• Activity Management — This aspect of integration into Workday includes enabling Scout’s capabilities inside financials for basic project/pipeline management for sourcing and supplier activities. (Note: Scout does this incredibly well from a foundational perspective in a manner that is likely to be sufficient for many procurement organizations, but not so much for advanced ones.) This integration approach includes leveraging dynamic workflows.
• Event-Based Sourcing, which covers all the core elements that Scout is primarily used for today, such as RFI/RFx creation, the creation of scoring criteria (via templates), stakeholder and supplier management in an event context, questionnaires (internal and supplier facing), bid evaluation, etc.
• Analytics — not to be confused with spend analytics (which neither Workday nor Scout currently support via internally developed capability. The initial vision for an integrated set of capabilities includes canned reports (e.g., project tracking, savings tracking, etc.) with a roadmap for bespoke reports, which we anticipate would leverage Workday’s own BI assets.

We’re speaking with the Workday team next week and hope to gain some additional insights from the discussion in terms of the timeline and degree of integration expected for each of these scenarios — as well as broader financials and procure-to-pay integration.

In the meantime, please don’t hesitate to reach out to me with any questions or ideas: jbusch@azulpartners.com