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The 3 most common ‘surprises’ in post-merger technology integration — and how to avoid them [PRO]

integration surprise

In the enterprise technology space, no acquisition comes without challenges. The key question for technology and product leaders is whether they know about those challenges before closing a deal.

In a shocking number of cases, however, vendors elect not to engage outside experts to conduct deep technology diligence. Or even if they do, the diligence is frequently surface level, performed merely as a “check the box” activity on the way to a speedy deal. As a result, multiple “unpleasant surprises” can arise over the course of post-merger integration projects. The number and severity of these surprises can lead to, at minimum, delays in expected roadmap delivery or, at worst, customer attrition due to lagging innovation, strained support levels and unkept promises.

In this Spend Matters PRO series, we’re outlining the most common potholes and hidden sinkholes that technology providers encounter in post-acquisition technology integration. Because without foreknowledge, acquisition dreams quickly morph into maintenance nightmares from which vendors may never wake up. And we want you to have a chance of getting it right.

For vendors getting up to speed on post-merger integration strategy, consider reviewing our earlier briefs, where we defined five specific stages of post-merger technology integration, as well as our follow-on brief about perhaps the most important upfront integration planning question (to maintain or not to maintain?). See:

Making sense of the world of B2B payments and procurement technology: AP automation components (Landscape Overview) [PRO]

AP automation payments

From an industry analyst perspective, AP automation is a fascinating market. It’s not like other areas of enterprise technology (e-procurement, sourcing, contract management, vendor management systems, customer relationship management, etc.) that typically debut in the Fortune 500 or Global 2000 before making their way into the middle market and smaller businesses. No, the rise of AP automation has largely been a bottoms-up journey. It is one that started with the middle market and small business users and vendors specializing in selling into these markets.

Today, AP automation technologies differ materially based on the breadth and depth of use cases (e.g., invoicing processing requirements — basic vs. advanced), company size, industry and technology systems environment, among other variables. It is challenging to compare head-to-head AvidXChange to Basware to Medius to Tipalti, for example, as we might with e-procurement providers for a particular software selection requirement — they all specialize in specific use cases and have carved out different niches that make them great (or not-so-great) depending on customer priorities!

This Spend Matters PRO series began with a look at the legacy world of B2B payments and how the incumbent/new universes have interplay with each other. Now we can turn our attention to segmenting and defining the modern non-bank world of B2B payments as it relates to procurement and finance technologies.

For the series, we’ll look at this sector’s four categories of providers:

  • Accounts payable automation providers
  • Procure-to-pay (and source-to-pay) providers address AP automation use cases along with deeper support for e-invoicing, ordering functionality and varying degrees of payment capability.
  • Dedicated payment solutions combine technology and services to automate or digitize B2B payments and/or deploy payment infrastructure.
  • Working capital solutions leverage data and bank relationships to enable early payments and optimize working capital.

This PRO landscape overview begins by providing a succinct introduction to AP automation (overall) and highlights our Fall 2020 SolutionMap vendor ranking/scoring (including providing an example of how Basware and Medius perform in our subscriber-only SolutionMap Insider ratings). Finally, it provides insight into the B2B payment capabilities offered by AP automation providers.

A post-merger technology integration handbook: To maintain or not to maintain? [PRO]

After an M&A event, technology integration provides a significant opportunity to create the proverbial 1+1=3 product and solution synergies that the transactions are often founded on. Yet all too often, integration planning (and execution) comes up short. Part of the problem is that while vendors may sometimes say solutions are truly integrated to customers and prospects after a period of time, there are no standard definitions as to what integration actually means.

In a previous Spend Matters PRO series covering this topic, we attempted to remedy this by defining five specific stages of post-merger technology integration, especially from a technology-buyer perspective, given the relative ease with which a buyer could be confused or accidentally misled.

See:

Today, we continue our analysis with a research brief of particular note for technology vendors — especially technology and product leaders — who are going through or considering bringing different technology stacks together, especially where there is product overlap. We explore the different options available for bringing disparate technologies together, and the importance of making often-challenging decisions as quickly as possible.

Let’s begin.

Five scenarios for VMS 2025: Scenario 3 — Extended workforce rising [PRO]

Extended workforce platform

This is Scenario 3 of the Spend Matters PRO series in which we consider different scenarios for VMS in 2025. These scenarios represent exploratory thinking (not predictions) on our part. And they are not necessarily meant to be mutually exclusive. In any case, they are intended to be tools to assist contingent workforce and services procurement managers in their thinking about the future.

The first scenario, named “The Status Quo,” explored a world in which VMS continues to evolve and flourish (alongside other enterprise software solutions, such as human capital management, or HCM) as a distinct, specialized enterprise solution for sourcing of temps and, potentially, other forms of contingent workforce.

This second scenario, named “Procurement Rules,” explored a world in which procure-to-pay (P2P) — or even source-to-pay (S2P) — technology suites integrate or subsume the capabilities of VMS (or vice-versa?). A trendline to this scenario has already emerged. SAP Ariba and Coupa each have embarked on such a path through acquisition, and other procurement solutions could follow, whether by acquisition/integration or as extensions of their own platform.

This post on Scenario 3, “Extended workforce platform rising,” explores a world in which the established VMS procurement-oriented solution model* gives way to an extended workforce solution model. That extended workforce model, among other things, addresses an organization’s needs to manage its extended workforce (all forms of non-employee workforce engaged indirectly under contract through suppliers/providers of services or directly as individual contractors).

* By solution model, we mean a kind of “solution architecture” based on the problems (needs) that organizations/people have now. Solution models, which are therefore generally accepted as “what is needed” in the market and increasingly intertwined with industry assumptions and practices, are also persistent, though gradually evolving over what may be many years. An example of two solution models could be flip phones vs. smartphones.

Defining and digitizing direct procurement (Part 1) — Direct materials sourcing [PRO]

direct materials sourcing

The introduction to this Spend Matters PRO series focused on digitizing direct materials procurement and broke the overall landscape down into four main areas. This follow-up installment focuses primarily on eight key digital capabilities for direct materials sourcing.

Although the “upstream” portion of the S2P transcends sourcing and includes supplier relationship management, the focus of this series is highlighting additional digital capabilities beyond those found in more generic S2P solutions.

What the Jason Alexander hoodie ad teaches us about the past and future of spend analytics capabilities [PRO]

jason alexander

One of our favorite Super Bowl advertisements this year was the Jason Alexander “hoodie” — a totally hilarious plug for Tide. Any true “Seinfeld” fan knows that you’re usually laughing at George Costanza, not with him, but somehow you feel sorry for the guy, at least part of the time, which is precisely why this commercial is so effective. While you want to see George get what he deserves most of the time, it just feels wrong to dishonor the short man or beat him up after a certain point, which is why the Super Bowl ad is such a work of genius — it doesn’t stop.

George is a bit like spend analytics in the broader source-to-pay world, at least some of the time. It’s a bit of a sideshow, even if it shouldn’t be. And sometimes, at least in the worst of cases, we have to laugh at it, not with it — like when it tells us we’re buying mice, not furry lab mice! But just like the hoodie, if we can laugh at it or at least acknowledge its flaws in terms of where analytics’ value generation typically comes up short, we will end up respecting the potential for it even more in the end.

Now, we’re not saying that a typical procurement organization cannot get value out of a spend analytics solution. Many provide material value to their clients, at least power users, and have for some time. Most users, in fact, do extract value for their investment in these tools. But like a Jason Alexander hoodie, until you just come to accept the technology for what it is, you might find yourself disrespecting what you’ve actually bought.

Said more directly, you’re likely to not get (nearly) as much value out of your analytics solution as you should, and not getting this value will cost you more than you realize — maybe even multiples of what you are paying for a solution that is supposed to identify, and help you prevent, overspending.

Here’s why.

Defining and digitizing direct procurement — Introduction and framework [PRO]

digitize direct procurement

The term “direct procurement,” like the term “procurement” itself, means different things to different organizations. Some view “direct” only as direct materials while others include any supply chain-related spending (e.g., energy, tooling and any allocable spend that will flow to cost of goods sold, or COGS) and services such as contract manufacturing or third-party logistics.

In terms of process, there are many “extended source-to-pay” processes that direct procurement organizations must handle related to raw material inventory management, supply chain risk, supply planning/commitment, and the inbound logistics required to coordinate fulfillment between PO issuance and a receipt.

Many source-to-pay systems (S2P) nibble at the edges, but they’re not supporting the deeper supply management use cases that enable direct spend management because their data models are incomplete related to the supply network, product structures and supply chain plans.

In this Spend Matters PRO series, we’ll help direct procurement technology buyers and solution providers by:

  • Integrating the direct S2P process with broader supply chain process models and frameworks to help connect the dots process-wise between procurement and supply chain
  • Presenting a four-part framework, with nearly 30 underlying requirement areas, including many with substantial gaps not supported well by current technology providers
  • Identifying the three major areas where traditional S2P technology provider systems/platforms fall short in terms of data models, integrations and partnerships
  • Providing selected direct procurement insights from our SolutionMap benchmark database
  • Highlighting proven providers that DO support these extended supply management scenarios

The 5 Levels of M&A Technology Integration: Stage 3 [PRO]

Data model integration

For many on the M&A integration front lines who are tasked with getting product synergies from combined assets of different firms, data model integration often appears high on the post-merger/acquisition grail quest. The same sentiment would likely echo from customers, at least those who have gone through a vendor consolidation in the past. But, in fact, data model integration is only Stage 3 (out of 5 stages) of post-acquisition technology integration — it’s the mid-point! And with apologies, to the Monty Python crew, that’s no ordinary rabbit!

In this Spend Matters PRO series, we are defining, introducing and exploring the five levels of M&A technology integration that vendors must go through when bringing together different modules and platforms. We should note, however, that bringing together different applications and technology stacks is not a requirement of any acquisition. But anytime a technology provider wants to market and achieve customer synergies through a transaction outside of “cross-sell/up-sell” the degree of integration planned, its timing and ultimate realization should be a priority for investors and customers alike.

Today, we explore the third level of integration that occurs in a post-merger situation or when vendors replatform old technology onto a new stack while still having to maintain existing solution capability on the legacy platform. From a vendor perspective, we define how to do it and provide examples of this type of integration. And from a user perspective, we suggest tips and tricks for technology buyers to discern this level of integration compared with others.

If you’re new to this series and want to learn the five levels of integration, start with this introduction., which fully explains the partially obscured chart below.



In the previous installments, we covered Stage 1 and Stage 2 integration levels in detail.

Addressing the ‘first mile’ of the spend management process [PRO]

budget to pay

In a previous post, I introduced the concept of “plan to pay,” an extension of the traditional source-to-pay process (S2P). But plan-to-pay workflows are generally implemented via supply planning for direct materials in the supply chain, but aren’t well-implemented for indirect spend management. In fact, it starts even more upstream from the typical “upstream” sourcing intake process. To extend the bad metaphor, it’s sort of like the originating spend pools high up on “stakeholder mountain” that feed the S2P value stream. It starts with the business planning process and the financial planning process (e.g., budgeting within finance-led FP&A processes) and then linking that into supplier spend planning via category planning, project planning, etc.

But this isn’t easy to implement! In the previous article, I gave the simple example of trying to take a spend cube (i.e., line items of PO/invoice spend history by cost center, category and supplier) and project it forward. If you have decent PO management and contract modeling, you might have some forward-looking visibility into future spend (like contract renewals and blanket PO’s), but for the rest, the best you will likely do is a budget reflected in your cost centers that are checked in the P2P process.

The trick here is to predict and plan the diverse mix of spend that will unfold within those budgets, and the extent that procurement can help the business drive more value from that spend upfront in the process. This is where real spend influence lies to help stakeholders support their business outcomes with limited budgets.

If procurement doesn’t manage this process formally with finance in the business, all sorts of dysfunctional behaviors and misalignments will result:

  • Budgeting is disconnected from supplier spend planning in category management, commercial/contract management, and supplier management.
  • The budgeting process is disconnected from P2P and creates unhappiness with the business when procurement inserts itself into the process (when the stakeholders thought that having available budget is good enough). These spend thresholds for procurement involvement are also usually very high because procurement doesn’t want to hold up the process when the requirement comes in so late in the game (which is why earlier involvement in spend planning is critical to touch more spend and to better effect).
  • Procurement gets relegated to a discussion of price rather than discussing spend and business outcomes.
  • Savings tracking becomes an after-the-fact exercise rather than being planned for upfront (including procurement’s own target-setting process for savings and other value improvements).
  • A dysfunctional use-it-or-lose-it budgeting process. Solving this with a zero-based budgeting (ZBB) process is one way to solve it, but it’s highly inefficient.

Doing spend management properly means starting it off right and basically treating it like the mirror image of the sales funnel. This “spend funnel” starts proactively during business planning and then flows through category planning, budget setting (with savings pre-baked into the budgets), sourcing/contracting, and then P2P for execution.

Unfortunately, the data in this funnel is fragmented across numerous systems, and we’ve been hoping that an S2P suite provider (or possibly an analytics-centric solution from a services provider or an FP&A-centric tech provider) might be able to help procurement proverbially swim upstream and perform this “spend planning.” In fact, back in 2014, we hoped for this:

A system that could “translate between the G/L views of pro forma financial planning over to both planned supplier spending (e.g., an upcoming contract renewal) and to the operational planning processes that the budget owners will have to execute against (e.g., project planning-vs-execution, supply planning-vs-execution, etc.). It requires strong analytics to not only map between the GL taxonomy, the category taxonomy and the contract portfolio, but now also tying into planning data (e.g., versioned scenario plans and rolling budget revisions). This modeling is nontrivial, and you will need to integrate your previous historic spent data snapshots into a forward-looking, time-phased, planning data model that exists within FP&A applications.”

And then we waited … and waited. And finally, a few months ago, we heard from GEP on a solution that they’ve been working on that addresses this exact area. GEP calls it a “Budget to Pay” solution, and it is, in essence, an extension of its core S2P suite that addresses most of what I’ve discussed in this broader plan-to-pay area.

We participated in multiple demonstrations and discussed some of the findings from GEP’s initial customer implementations. We’re waiting to get more feedback directly from its early customers, but the results so far seem impressive. GEP plans to formally release this solution in the near future, but in this Spend Matters PRO analysis, we’ll share some of our insights on the detailed problem statements and how the solution adds value (which is more than just technology).

The 5 Levels of M&A Technology Integration: Stage 2 [PRO]

In this Spend Matters PRO series, we define, introduce and explore the five levels of M&A technology integration that vendors must go through when bringing together different modules and platforms. We should note, however, that bringing together different applications and technology stacks is not a requirement of any acquisition. But anytime a technology provider wants to market and achieve customer synergies through a transaction outside of “cross-sell/up-sell” the degree of integration planned, its timing and ultimate realization should be a priority for investors and customers alike.

Today, we explore the second level of integration that occurs in a post-merger situation or when vendors replatform old technology onto a new stack while still having to maintain existing solution capability on the legacy platform. From a vendor perspective, we define how to do it and provide examples of this type of integration. And from a user perspective, we suggest tips and tricks for technology buyers to discern this level of integration compared with others.

If you’re new to this series and want to learn the five levels of integration, start with this introduction. In the previous installment, we cover Stage 1 integration in detail.

The 5 Levels of M&A Technology Integration: Stage 1 [PRO]

integration

In this Spend Matters PRO series, we will define, introduce and explore the five levels of M&A technology integration that vendors must go through when bringing together different modules and platforms.

Today, we explore the first level of integration that occurs in a post-merger situation or when vendors replatform old technology onto a new stack while still having to maintain existing solution capability on the legacy platform.

From a vendor perspective, we define how to do it and provide examples of this type of integration. And from a user perspective, we suggest tips and tricks for technology buyers to discern this level of integration compared with others.

If you’re new to this series and want to learn the five levels of integration, start here with our Introduction post.

Beyond Spend Influence: Enabling Procurement’s Emerging Roles in Business Transformation [PRO]

procurement

Anyone familiar with YouTube “influencers” knows that they’re not trying to engage you for your benefit, but for their own. They intend to monetize that influence for themselves and their corporate backers.

Speaking of the corporate realm, the ability to influence others isn’t exactly a new concept. In fact, you can go back 85 years to read Dale Carnegie’s book “How to Win Friends and Influence People.” There, you will learn more about “Fundamental techniques and handling people,” “six ways to make people like you,” “12 ways to win people to your way of thinking” and “how to change people without giving offense or arousing resentment.” In short, you can learn how to manipulate people to sell them something and get what you want.

Let’s now translate this to procurement organizations that are looking to influence stakeholders in order to influence their spend.

The procurement mission can indeed be noble in terms of helping the organization spend less wastefully to free up cash to invest in the enterprise mission. However, from the stakeholder view, what they often hear is “Hi, I’m from corporate procurement and I’m here to help you reduce your spend so that I can claim savings to justify my existence … and then have your budget reduced by corporate finance.”

Do you think the stakeholders like being influenced like this? They end up viewing procurement something like this Dilbert cartoon.

Although the situation is obviously not as bad as a dinosaur leading procurement, it does highlight the disconnect and misalignment that can lead to stakeholders not inviting procurement to the proverbial table. Of course, procurement can get mandated into the process via policy, but those policies are usually fairly toothless, and when procurement does get involved, it is often at the tail end of the process when most negotiating leverage is long gone. This is why the metric of spend under management (SUM) is more about the quantity of late-stage involvement than the quality of early and deep involvement/influence (for more on this topic see our PRO article Procurement KPIs Series (Part 4) — Deep Diving into ‘Spend Under Management’).

This earlier involvement does lead to higher savings in the short term, but you can’t “save yourself to zero,” and procurement’s influence in more strategic business settings where key decisions are made is a work in progress — based on 450 CPOs surveyed last year ...



Improving the situation requires more than sitting at the end of a sourcing process with a catcher's mitt waiting for the stakeholders to come, and having a value proposition that’s more than just transient cost/spend reductions, but something more transformational.

It requires transformative leadership, and that leadership has many elements to it: mission/vision, strategy, empathy, affinity, inclusion, empowerment, enablement, brand, respect, competence (to deliver value), trust, guidance, transformation, collaboration, clarity, coordination/orchestration, protection, agility, intelligence and even inspiration.

These are some of the contexts and the levers of real influence.

In this multi-part Spend Matters PRO series, we’ll explore these elements, how technology can enable them and a case study of a procurement organization that’s pulling these levers likely better than any other organization on the planet.