IBM Procurement Solutions – an Update From the South Bank

We recently caught up with Justin Sadler-Smith, previously with Emptoris and now running Europe for the IBM Procurement Solutions business. Along with him was Sarah Fardon and Nathalie Fekete - more on her role later.

In recent months, internal changes within IBM’s structure have, in Sadler-Smith's view, strengthened the position of the procurement business line. The "Smarter Commerce" tagline has been replaced by "Commerce" as a Division, and the different pillars of the procurement offering (software, outsourced services, consulting) have been brought together. So Procurement now forms a defined segment, one of six under the “Commerce” heading (along with Marketing, Payments, etc.) This all sounds a little esoteric to outsiders, but apparently it is good news as the procurement solutions area is being given more focus and attention within the firm.

The other development has brought the internal IBM procurement function closer to the team marketing procurement solutions to third parties. So Fekete previously worked in the IBM internal procurement team for John Paterson - the previous CPO, who retired last year. But her role now is to act as a bridge between the "procurement solutions" team and the internal organisation. She is the subject matter expert for procurement transformation, and retains a dotted reporting line to Bob Murphy, who took over as CPO last year. (We hope to meet Murphy soon - another Scotsman like Paterson, interestingly).

Why is that link important? It is clear that IBM are aiming to leverage their own considerable internal capability in procurement into selling solutions to third parties; a sensible strategy, given it is one that few of their competitors can mimic easily. It does however depend on the firm convincing the market that IBM procurement continues to be genuinely top class. "People need help with broad procurement transformation programmes - we've learnt that getting our own procurement people involved can really help the client" says Sadler-Smith.

Another interesting differentiation from IBM Procurement Solutions is the extension of their Contract Management capability. The "Enterprise Contract Management" offering is now a key focus, not only helping Procurement to manage Buy-Side contracts, but enabling organisations to realise value through using the solution to manage all commercial contracts (including sell-side) across the enterprise.

What about Coupa? You remember that Coupa and IBM announced a few months ago that they were partnering to offer a strong end to end source to pay (and beyond) offering to the market. Coupa brings their strength in transactional spend management whilst IBM has strength in analytics, sourcing and contract management. But, we asked, is there not a danger that as Coupa develop more of their own capability in those areas, IBM will get squeezed out?

Sadler -Smith seems unconcerned by that possibility. "We are already seeing the benefits of the partnership, as customers recognise the strengths both parties bring to bear on an enterprise Source to Pay Proposition."

Indeed, the Royal Bank of Canada is already one of the first clients to be served by the partnership. It appears that real technical integration work is going on between the two firms, which points to this being more than a one-night stand in relationship terms! This is obviously one to watch, and could go a number of ways of course, including an eventual IBM purchase of Coupa, although we wouldn't put too much money on that just yet.

Coming onto the product itself, almost all customers have been migrated to V10 now. There has been "a lot of focus on the stability of the product". A programme management capability has been introduced , and the acquisition of global cloud infrastructure provider SoftLayer means "we own our own hosting" thereby providing customers confidence in the operations and security of their applications.

There is also a "massive push on the UI" (user interface), with a few strategic beta customers currently testing a whole new user experience. And we have mentioned before the interesting opportunities that the Watson Predictive and Cognitive Analytics opens up in the procurement field (and elsewhere of course). That makes IBM real leaders in the field of using artificial intelligence and other leading-edge technologies to make sense of big data and turn it into actionable intelligence. The US Department of Defence is probably the best "use case" at the moment for IBM, but more are likely to follow.

So what conclusions can we draw? It does feel like the Emptoris acquisition has taken some time to settle within IBM. But the new structure sounds like it is bringing more focus back onto the procurement offering - the procurement group feels, we suspect, more like "masters of their own destiny". There are still questions about the development path for the procurement "suite" that we did not get into during this discussion, and of course the Coupa partnership might influence that too. But we will keep an eye on progress and particularly how this link with the internal procurement function plays out. Could that be a real business-winner for the firm?

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