Procurement Technology - Premium Content

Procurement Technology, Consulting Pricing Trends and Negotiation Strategies – The Times They Are a-Changin’ (Part 1) [Plus +]

Editor's note: This is a refresh of our 2012 series on solution provider pricing trends and negotiation strategies, which originally ran on Spend Matters PRO.

This 4-part series will provide a look at software provider and management consulting pricing trends and negotiation strategies within the procurement and operations area. It provides insight to buying organizations that may be helpful in negotiating with vendors such as Ariba, SAP, Oracle, Emptoris, Zycus and others, as well as recommendations for how best to engage with consultancies for price and value in the current environment.

E-Procurement Tech Selection and the Configurator Persona: Analysis & Commentary [PRO]

The e-procurement solutions market has been growing for the last seven years. Because of this rapid growth, the market is also fragmented, with numerous vendors competing for procurement organizations’ attention. Yet no one vendor is an ideal fit for all companies, due to the unique requirements of different organizations’ sizes, industry/vertical and prior technology investments (or lack thereof).

So how can companies with different needs evaluate procurement solutions amid an array of vendors with different capabilities?

Spend Matters’ vendor rankings in SolutionMap account for these differences using a persona-based approach. Each SolutionMap persona is calibrated to weight evaluation requirements so that it reflects the profile of certain kinds of buyers. For example, the “Nimble” persona reflects small and medium-size businesses that prioritize fast time-to-value and ease of use in the selections; the “CIO Friendly” persona emphasizes technical foundation and interoperability with other enterprise systems to make for a straightforward implementation.

So what do SolutionMap personas look at for e-procurement, and how can they help your organization make better technology decisions?

In a series of PRO articles, we’ll analyze the market according to the different SolutionMap E-Procurement personas: Nimble, Deep, Turn-Key, Configurator and CIO Friendly. (See persona definitions* below.)

This review is organized just like the RFI for SolutionMap, according to these topics: platform capabilities, features & functionalities, and customer value.

Let’s look at the e-procurement features and vendors as viewed by the Configurator persona.

Not all ‘digital’ transformation is the same: 6 degrees of difficulty [PRO]

Buzzwords abound out there, and a lot of common words are used by folks without necessarily having a common understanding of the meaning. For example, take the phrase “digital procurement transformation.” Even the individual words themselves alone can have different interpretations:

* Digital — Does this mean digitization of procurement processes through workflow automation, or is it something broader?
* Procurement — Is this all of source-to-pay or just procure-to-pay? Or just everything that a procurement department does, including broader supply chain efforts?
* Transformation — Can this just be incremental, continuous improvement, or does it have to be a more discontinuous transformation program?

The problem for practitioners is how to cut through the clutter of this terminology and more easily learn from others surrounding adoption of “digital” in different ways. For example, there is certainly a lot to learn just in terms of better implementation of systems for automating good old-fashioned sourcing, requisitioning, ordering, receiving and paying.

But, there are also higher order digital capabilities that go beyond just automating the proverbial cow path. For example, advanced analytics such as bid optimization can enable new sets of sourcing processes that were not really feasible before. Similarly, techniques such as community-based procurement that use technology across firms can create new value beyond automating within a single firm.

There is actually a spectrum of digital related competencies from basic source-to-pay workflow automation all the way through to procurement-enabled disruptive value chain initiatives. So, if you have mastered some of these basic capabilities for digital transformation and procurement, it is time to raise the “degree of difficulty” and see how others are faring in terms of picking the higher hanging fruit.

In this Spend Matters PRO analysis, we will outline six levels of digital procurement sophistication, and also see how more than 400 organizations stack up based on the latest research.

So You Want to Build a P2P Marketplace? An Introduction to Unique B2B Technology, Platform and Application Requirements [PRO]

Procure-to-pay (P2P) solutions do not just have to take the form of “vanilla” cloud/SaaS applications. Increasingly, organizations are becoming aware of the power of B2B marketplace models and platform-as-a-service (PaaS) models, which can enable greater flexibility to configure P2P capabilities for a combination of internal and third-party users — and in certain cases, to leverage the buying, distribution, payment / financing (in the case of banks), and supply chain assets of the marketplace sponsor to create entirely new business models through the use of technology.

In many ways, this is the realization of the vision of the original B2B marketplaces from two decades ago (e.g., Commerce One MarketSite, i2 TradeMatrix, Ariba/Tradex, Atlas Commerce, etc.), but with technology that can support the complex requirements involved in many-to-many and multi-tier collaboration models, as well as integration approaches that go beyond standard API calls.

This is B2B nirvana for procurement and supply chain geeks like us who have lived through multiple cycles of marketplace enthusiasm (madness?). The fact that a number of vendors exist today that can service these models effectively is testament to just how far technology has come in recent years. This includes not only the usual P2P best-of-breed subjects supporting these models (e.g., Basware, Coupa, Ivalua, SAP, Tradeshift, etc.) but also names you might not be familiar with as well.

This Spend Matters PRO brief provides an introduction to the types of platform and functional capabilities necessary for organizations considering building a marketplace model or leveraging an existing PaaS application ecosystem to go outside the box of standard P2P process models and operating models for internal use only.

Leveraging Spend Matters’ experience in managing the technology selection processes for marketplace initiatives and our SolutionMap vendor RFI requirements, our analysis introduces a range of platform and application requirements that companies should consider when evaluating solutions that can power the requirements of marketplace models for B2B relationships beyond the standard requirements expected of P2P solutions.

These include core platform components, data schema, data management, workflow, personalization, supplier portal, supplier information management, analytics, globalization and related requirements.

20 Questions for E-invoicing and Procurement Network and Platform Selection (Part 2) [Plus +]

supplier network

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:

Defining AP Automation Functional Requirements (Part 5: Payment Options and Early Payment Financing) [PRO]

BuyerQuest

In the last installment of this five-part Spend Matters PRO series on accounts payable automation, we’ll list the functional requirements for payment options, like P-cards and financing programs.

AP automation capabilities vary dramatically between different software providers, and the capabilities 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 name just 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 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 available supply market for AP automation to fit their needs (either on a standalone basis or as a specific component of broader invoice-to-pay, procure-to-pay or source-to-pay solutions). Click to see our SolutionMap rankings of vendors 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).

In Part 2, we turned our attention to an additional set of AP automation functional requirements, including AP process, invoicing validations, workflow, collaboration and integration requirements.

In Part 3, we looked at the final set of AP automation topics: invoicing mobility, invoicing compliance and invoicing analytics.

In Part 4, we examined AP automation functions related to payment systems and methods, payment partnerships, payment processing and payment analytics.

Now, let’s look at payment options and early payment financing.

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.