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Defining AP Automation Functional Requirements (Part 2): AP Process, Workflow, Collaboration and Systems (Validations, Approval Processes, Integrations) [PRO]

AP automation capabilities vary dramatically between different software providers, and the capabilities that a finance or procurement organization will require to support the automation of AP processes also vary materially, based not only on company size but a broad range of other factors. These include organizational complexity, invoice capturing requirements (e.g., paper, PDF, electronic, etc.), systems complexity, systems integration, industry, EDI integration/support, payment/financing capabilities, treasury integration/working capital management, geography and compliance requirements — to just name a few.

To understand how different providers stack up against these (and other) categories of requirements, the quarterly Invoice-to-Pay SolutionMap Insider report can provide significant insight. And to create a one-to-one map between business requirements for AP automation and vendor functionality capability, SolutionMap Accelerator can dramatically speed up the vendor shortlisting and selection process, even allowing companies to “skip the RFI” entirely.

This Spend Matters PRO series defines AP automation requirements from a functional perspective to put AP, finance and purchasing professionals in the driver’s seat when they evaluate the market for AP automation to fit their needs — either on a stand-alone basis or as a specific component of broader invoice-to-pay, procure-to-pay or source-to-pay solutions. (Check the links to our SolutionMap ranking of providers in each category.)

Part 1 of this series investigated core invoicing requirements for AP automation and some of the criteria that Global 2000 and middle market organizations should consider when selecting solutions (i.e., invoicing set-up, paper scan/capture support and e-invoicing). Today we turn our attention to an additional set of AP automation functional requirements, including AP process, invoicing validations, workflow, collaboration and integration requirements.

Commercial Value Management (Part 3): Critical Commercial Use Cases to Align Extended CLM with the Enterprise [PRO]

change of control clauses

In our last installment of this CVM series, we highlighted a graphical framework to depict how commercial value management is about extending CLM into a more commercially enabling role in all enterprise areas where contracts (and value promises) are stored.

In this next installment of this series, we’ll highlight these areas and how to unlock some of that value for the benefit of the firm — and procurement.

Let’s briefly look at some of these areas to see how extending contract management to broader CVM approach is a practical way for procurement to get aligned with other areas (and with itself).

Five Scenarios for VMS 2025: Scenario 1 — Status Quo [PRO]

In this multi-part Spend Matters PRO series, we explore the future of VMS, not because we consider ourselves futurists, but because we think — as stated by my colleague Jason Busch in the introduction to the series — it is “critical for procurement organizations as they have the power to define how these technologies serve them rather than the other way around.”

The introduction laid out the thesis for the series — that the future of the VMS (the long-dominant technology solution model for managing contingent workforce) has become uncertain. Second, it pegged what a VMS is (or was) in terms of the Spend Matters SolutionMap categories saying:

As part of Spend Matters SolutionMaps for contingent workforce and services (CW/S) enterprise technology, we think of VMS as the solution for managing temporary staffing suppliers and workers. That is, within the Temp Staffing map — rather than Contract Services/Statement of Work or the Independent Contract Workforce maps.*

* Some providers of VMS solutions have, to some extent, expanded their platforms to address services/SOW and independent workforce. Hence, the major VMS providers’ solutions address more than just temp staffing. And those could be thought of as broader, but still specialized, solutions for sourcing and managing contingent or external workforce.

The introduction also mapped out five potential scenarios for the future of VMS by 2025: * The status quo, a largely independent VMS ecosystem, continues and new technologies, like artificial intelligence, lead to a better overall VMS experience and even “MSP bot-type” services.
* Integrated VMS and procure-to-pay technology suites gain momentum.
* Managed services providers (MSPs) rule the day as offerings evolve and increasingly leverage software as a competitive advantage (a market that could include new entrants as well).
* Talent management and human capital strike back — people are not widgets, and the VMS must operate in an increasingly dual HR-and-procurement universe in which value and outcomes become as important as price and timesheets.
* Temporary staffing (and hence the VMS) loses its influence as the core technology “anchor” that companies “buy first” when tackling services procurement.


In this part of the series, we look at “Scenario 1 — The Status Quo” in which VMS continues to evolve and flourish as a distinct, specialized enterprise solution (alongside e-procurement and human capital management) for sourcing of temps and, potentially, other forms of contingent workforce and also managing the spend and risk that comes with them.

Note: A scenario is not so much a prediction of a future state as it is the building of one possible future state, carried out with a mix of reasoning and imagination. Ultimately, scenarios are tools that assist planners and executives to think about the future.

Commercial Value Management (Part 2): Using Next-Generation Contract Systems to Integrate Operations, Financials, Risk and Technology [PRO]

Let’s start this piece with a question: How are high-flying SaaS providers measured?

Answer: Growth (hopefully profitable) through repeatable subscription-based revenue.

And what are those subscriptions? Contracts.

The enterprise value of these companies, like others, is based on the promise of future cash flows that are increasingly built upon a portfolio of contracts. Want to maximize enterprise value (like the CEO)? Better get good at managing contracts! This is not in the way that your legal department might think of contracts, but rather in a business sense that maximizes commercial value within those contracts that will add up to enterprise value.

Put another way: If chief procurement officers want to move from “chief spend officers” to “chief value officers,” they’re going to need better strategies and tools to do value management.

“Value management” is the highest level of procurement’s evolution in a framework that I developed in my previous life leading procurement research at The Hackett Group.

The problem is that while there are great tools for spend management, when you start going broader into demand (and multi-tier supply) and deeper into financial value flow beyond single-tier cash disbursements to suppliers, the technology requirements aren’t yet well supported by existing tools and vendors.

In Part 1 of this Spend Matters PRO series on commercial value management (CVM), we highlighted the fact that contract management systems are morphing from legal documents focused on transferring risk onto your trading partners, and toward systems that model all B2B commercial (and even non-commercial) promises with trading partners, regulators and even just internal stakeholders. The financially related “promises” or “commitments” are really obligations/rights that can be viewed as liabilities/assets. And these aren’t just ledger entries to close the books for regulators, but rather living, breathing promises made up and down the supply chain to deliver value to customers — at a lowest total cost of course!

Unfortunately, this chain of value doesn’t exactly flow across the fragmented landscape of systems out there. It’s hard enough to see contracted revenue & cost/spend flows in the direct materials supply chain where only a few advanced firms can stitch together some semblance of integrated business planning that brings in multi-tier supply-aware cost modeling and contracting (e.g., buy-sell arrangements for volatile commodities). Now, consider the services supply chain and an XaaS world where omni-channel value chains need to merge products and services.

For example, think about the mind-numbing complexity of field services operations where customer warranties (contracts) and service levels (contracts) need to be translated to supply fulfillment that can include leased equipment (w/ contracts), outsourced transportation services (and contracts), third-party contractors (directly contracted or via a service provider with its own contract), and even outsourcing providers (with BIG complex contracts) who might run the whole shebang for you. These contracts, sub-contracts, MSAs, SOWs, POs (a contract), etc. all have information in them related to direct committed revenue and costs/spend, but also hints at potential spend and business risk depending on what’s in (or not in) those contracts.

But, if you’re a CFO trying to manage your spending (“Spend” with a big “S” and not just supplier spend with a small “s”) and see both types of spending in terms of: * Tying spend to revenue to understand profitability
* Seeing and shaping spend and resource commitments before they occur
* Cash flow implications of that spend
* Category and supplier views to maximize value from supplier spending
* Spend volatility based on price risk, volume risk, competitive risk and other supply risk factors like geo-political risk (e.g., trade wars) and regulatory risk (e.g. data privacy)
* Projects that drive this spending (e.g., in project-intensive industries)
* Drivers of this spend that are hidden (e.g., IT/telecom contracts of all forms)
* Legal spend (internal and external) to manage all of these contracts!

The problem is that you don’t have a single system to see all this. You have a G/L to close the books and maybe a planning-and-budgeting application rather than the “financial control tower” (go ahead and trademark that — it’s available) that you’d love to have something like an EVA/ROIC-type model that drives all the way down to the atomic contracts and execution systems. And if you’re good, you have a CPO with a single spend database and contract repository.

But, let’s face it, even for those firms with this, the contract is still usually a document artifact to refer to and not a dynamic system with complex pricing modeling and linkages to dozens of execution systems in the field that are REALLY governing the commercial aspects of operations. All you likely have in your contract repository is a field called “contract value.” And even in the simplest case, and even with the most modern S2P application suite, you’re likely matching supplier invoices to POs with payment terms that aren’t likely staying synched with the original contract.

So, contract data and associated CLM systems must transcend their legal artifact role and even move beyond the level of contract clause libraries and associate basic clause metadata. They need to go much deeper into the business realm (and not just the legal department realm) and be able to model and manage commercial data much more deeply. Doing this requires improved systems that manage what we call commercial value management — which is about commercial lifecycle management rather than contract lifecycle management. “Spend Management” is great, but spend is what you pay, and value is what you get. So you need to be really clear on who gets how much of what, under what conditions, and what happens if they don’t!

We spent a fair amount of time in our last PRO series installment that dove into the specific elements of CVM. In this second SpendMatters PRO series installment, we’ll dive primarily into the buy-side aspects of this topic and discuss how procurement organizations — and procurement’s functional peers in finance, IT, legal, GRC, SCM, sales and HR (and any related CoE combinations) — can use contracts as commercial data hubs to better support not just basic buy-side CLM within a source-to-pay context, but also how to use it to better connect procurement with these internal partners to help them manage spend/suppliers in their functions individually and also collectively with each other — and out to external stakeholders.

We’ll also highlight a few areas where CVM support emanating from a next-gen CLM platform can likely disrupt a few existing niche markets within and outside of the procurement realm.

6 Factors that Impact the Cost, Hassle and Heartache of E-Procurement and P2P Deployments [Plus +]

p2p deployment

In this research brief, we explore the specific elements that impact the costs and hassles of P2P implementations and ways of controlling them — or at least managing expectations upfront. What’s perhaps most valuable in our findings is that these six elements don’t just show up during the course of a given implementation — they’re often visible upfront if you know where to look. And they can even prove to be leading indicators of trouble to come before you sign a contract with a vendor. In short, if you know what potential roadblocks to look for upfront, you can minimize or avoid unnecessary costs and hassle down the e-procurement road. Here’s how.

Guided Buying 4.0 — A Framework to Consider (Part 1: Guided Buying in E-Procurement) [PRO]

Many people know the term “Industry 4.0,” which describes the latest industrial revolution that combines big data, cloud computing, the internet of things (IoT), hyper connectivity, human-machine interfaces, robotics and embedded analytics that feature artificial intelligence (AI)/machine learning. It’s revolutionizing manufacturing and supply chains, but what about the most basic processes that deal with B2B buying?

That brings us to the concept of "guided buying." It’s not new, but in the last five years of my experience as an analyst of P2P solutions, I have realized that it is a term used without much precision. I can compare it to terms like “platform,” "best practices," “world class” and others that have been overused so widely that they’ve lost the force of their meaning. Terminology should be defined with a specific scope, intent and substance for it to really be useful. So, I’ve been recently collaborating with my colleagues to provide more specific insights on this concept, and we’ve decided to develop a maturity framework to help do this.

The act of guiding is a deliberate and proactive process that helps the person being guided achieve their objective and reach their destination. This is a concept that we have applied to the purchasing function for several years. In fact, almost 15 years ago, the first analyst who wrote about this concept of "guided buying" was my friend, mentor and Spend Matters colleague, Pierre Mitchell. Here is some of what he wrote back then.

“Think about an end user who, rather than going to a clumsy Intranet site to find a few local e-catalogs and supplier ‘punchout’ sites, gets instead a corporate Google-like interface and types in whatever they’re looking for. Then, the user gets automatically guided to preferred supply sources/channels (e.g., an e-procurement catalog, a supplier website, an internal inventory location or a requisition that’s electronically escalated to the proper commodity manager) based on commodity taxonomies, supply strategies/policies, preferred supplier listings, commodity manager skills, local inventories, specialized knowledge rules and supplier website content (or that of specialized content providers). In other words, users are guided to preferred supply sources before a maverick spend ever occurs.”

Today, what's interesting is that we already have the IT tools and solutions that we did not have 15 years ago. Today, companies can apply the concept of "guided" in all areas of the organization, including in contracting and sourcing. However, the focus for this part of this series is in the transactional purchasing area within procure-to-pay.

Let’s take a look at this problem, our framework, and some strategies and solutions.

The Artful Design of Procurement (Part 2) [PRO]

Spend Matters 50/50 2016

As noted in our last post, as I was writing up some notes from the Ivalua NOW 2019 conference, which it gave the theme “The Art of Procurement,” and which probably seemed more artistic when it was held at Le Carrousel Du Louvre, and not the Renaissance Chicago (but you’ll have to ask my colleagues Michael Lamoureux and Peter Smith, who attended the Paris event and posted their notes here, there and everywhere). But at the end of the day, since the better theme is not so much just about art (even though there is a definite craft/“art” to doing procurement transformation — and using digital as part of that transformation), but about the proper design of procurement and the procurement process, I decided to pen these pieces.

In Part 1 of this provocative PRO analysis, after setting the stage, I tried to really define what art vs. design was in a procurement context. Today, I’m going to try and build on that to describe:

* Design-centered procurement and platform design rather than just product design
* Platform enablement of the “participative art” of procurement
* A counter-intuitive palette: low code software platforms
* The procurement practitioner as artist

And I hope to inspire you to be a better artist, who paints a more impressive picture in your daily professional life.

The Artful Design of Procurement (Part 1) [PRO]

In a previous post, I was writing up some notes from the Ivalua NOW 2019 conference, which it themed “The Art of Procurement.” That theme is fun, and although it tempts me to bring in Zen analogies in archery, martial arts or even motorcycle maintenance, I think the better theme is not so much just about art (even though there is a definite craft/“art” to doing procurement transformation — and using digital as part of that transformation), but also about design.

In this multi-part Spend Matters PRO series, I’ll cover the following topics:

* Art vs. design within a procurement context
* Design-centered procurement and platform design rather than just product design
* Platform enablement of the “participative art” of procurement
* A counter-intuitive palette: low code software platforms
* The procurement practitioner as artist

I won’t be laying out a paint-by-numbers prescription for procurement excellence, but art does hold some lessons: not so much as art as expressing an aesthetic, but more as a practice and expression of mastery.

Some have applied Sun Tzu’s “Art of War” to business, and of course to trading partner negotiations, but Picasso is perhaps a better example. He was hugely prolific and cut his teeth mastering all the traditional artforms before creating his unique cubist style. Procurement practitioners similarly must have a baseline mastery of basic commercial knowledge (legal, finance, negotiations, etc.), change management, etc., but also be adept at picking up new techniques and tools and applying them to the task at hand. For example, many progressive procurement practitioners haven’t just learned Lean/6Sigma, but also Design Thinking and Agile software development principles that can be applied to collaboration beyond just software development — including procurement.

What to Expect from a P2P Implementation — Benefits and Costs [Plus +]

P2P implementation

While the benefits of adopting a purchase-to-pay (P2P) solution seem clear on paper, just about everyone who has been around the market on either the procurement, consultant or vendor side has heard horror stories of implementations gone wrong — or horribly wrong, in certain cases. Of course the culprit is usually staring the organization in the mirror. But more importantly, this line between success and failure, as measured by hard dollars, led us to ask a two-part question: What really is the price and when is it worth paying that price to implement a P2P solution?

Procurement Information Architecture and B2B Connectivity: Intel takes RosettaNet into the Future (Part 2) [Plus +]

Editor's note: This is a refresh of our 2014 series on RosettaNet and B2B connectivity, which originally ran on Spend Matters PRO. Read Part 1 here

One of the more curious aspects of the Intel Israel Nipendo implementation (tied into Intel’s RosettaNet standard deployment) for supplier connectivity is that the system realizes a greater percentage of “straight-through processing” (i.e., no human intervention from the PO creation through to supplier payment) than a traditional RosettaNet implementation. The platform provides an innovative and automated pre-validation service that uses a self-service “training” capability, allowing the trading partners themselves to establish the business validation rules and other key system behavior that ensures smooth downstream processing. Read on for discussion of local requirements and a list of key takeaways.

Commercial Value Management: Making Contracts the Commercial Core of Enterprise Value (Part 1) [PRO]

contract

Contract management can seem like a boring topic in business — corporate attorneys taking far too long to create long documents of “legalese” designed around transferring risk to your trading partner in a deal. Managing these contracts in contract lifecycle management (CLM) is a step in the right direction by cross-functionally managing them throughout various business processes: order-to-cash, source-to-pay, hire-to-retire, record-to-report, etc.

Some organizations will even take contract management a little further and use the nomenclature of commercial management to help shift the focus away from the contractual artifact and more toward commercial business relationships. The focus becomes writing and managing better contracts to incentivize trading partners to more easily comply, collaborate and create a larger pie of value to share.

However, there is a subtle shift happening within the scope of contract and commercial management (CCM), and a not-so-subtle shift that is also happening within the digital realm (e.g., namely artificial intelligence, low-code platforms, open source, “XaaS”). What’s happening is that as contracts get digitized and more deeply modeled, they are becoming the single most important piece of master data within the enterprise that touches virtually every single stakeholder within these core processes and also within corporate functions such as R&D, risk management, strategic planning, treasury, audit, sustainability, digital/innovation and others.

The cornerstone to this transformation (in the private sector at least) is the notion of maximizing value created in commercial activities. Commerce is about exchanging value. Good commerce strives to maximize value for individual parties (i.e., large slice of the pie) and excellent commerce focuses on maximizing value to expand the total economic pie within a value chain. On the sell side, you want to deliver differentiated value to customers in order to retain them and make more money off them over the long term. On the buy side you want to maximize value (i.e., the most “bang for the buck”) by maximizing “bang” (what suppliers commit to deliver to you) and minimize the bucks (spend/costs) flowing out the door. These commitments of expected value to be delivered can take many forms, and using next-generation contract modeling (way beyond tagging and analyzing clause text) and process integration is turning out to be a very practical way to maximize value from the C-suite down to various functional process participants.

In this Spend Matters PRO series, we’ll cover some of the ways in which next-generation contract management (and underlying digital platforms) will model and manage commercial value much more deeply in a way that will support enterprise processes in areas such as GRC (governance, risk and compliance), Treasury, FP&A, IT service management, project/program portfolio management, commodity management, supply chain execution and many other areas.

Procurement Information Architecture and B2B Connectivity: Intel takes RosettaNet into the Future (Part 1) [Plus +]

Editor's note: This is a refresh of our 2014 series on RosettaNet and B2B connectivity, which originally ran on Spend Matters PRO.

Intel is one of the oldest advocates (and active users, in terms of volume) of RosettaNet as a replacement for traditional EDI connectivity. RosettaNet, a set of process and information connectivity standards based on XML (Extensible Markup Language) originally founded in the late ‘90s, was originally spearheaded by a number of large corporations in the high-tech manufacturing sector. Like EDI, RosettaNet has historically only made sense for larger direct material (e.g., manufactured parts, components, or materials) suppliers or customers. Yet, RosettaNet’s implementations, like those in traditional EDI deployments, have focused primarily on connecting large buyers and/or suppliers for purchase orders, invoices, advanced ship notifications, and other typical high-volume commercial documents. Intel suggests on its own website that the typical criteria for suppliers is that the vendor “should have an interest and the resources necessary to automate their business processes."