Making Sense of the Spend Management Technology Landscape
Along with my colleague Brian Sommer, I'm giving a chat later today at the Best Practices Exchange in downtown Chicago (actually, it's taking place at US Cellular Field, home of the recent World Champion White Sox). I am trying out some new material which I'm hoping does a better job than I -- along with all of my analyst and consultant colleagues -- have done in the past at simplify the Spend Management technology landscape. In the discussion, I'll share a simple segmentation that essentially creates only four "buckets" of technology enablement within Spend Management. These are: Sourcing and Decision Support, Procure-to-Pay, Visibility and Contract Management, and Risk and Performance Management.
The first two categories are probably less controversial than the final ones, but in five years time, I believe that you won't be able to separate out spend visibility from contract management (or at least the compliance side of CM). And along the same lines, I believe that risk and performance management will also go hand-in-hand (and will be elevated by leading procurement and operations organizations in technology investment priority).
I'll share more findings that I detail in the deck next week, but one that jumps out as I look at and prepare my material is that virtually no providers have solutions which cover the entire landscape -- at least with any depth. As an example, Ariba, which probably one of the widest and deepest footprint of all of the providers, is lacking supply risk management technology (and has limited offerings in the supply performance and quality areas). In addition, I was struck by the very incomplete the offerings of ERP providers, despite significant progress (for example, SAP has come a long way from an operational procurement prospective in its forthcoming my SAP SRM 6.0 release, but there are still major holes in its spend visibility and analytics capabilities, not to mention risk management and other areas).
So if you take away anything from this new analysis, remember this: the Spend Management technology market is far from won. In fact, no vendors have complete coverage, and there are still huge advantages that the best of breed providers have, whether its enabling stand alone capability that drives competitive advantage or enhancing back-end ERP or operational procurement to improve real-world results.
- Jason Busch
The first two categories are probably less controversial than the final ones, but in five years time, I believe that you won't be able to separate out spend visibility from contract management (or at least the compliance side of CM). And along the same lines, I believe that risk and performance management will also go hand-in-hand (and will be elevated by leading procurement and operations organizations in technology investment priority).
I'll share more findings that I detail in the deck next week, but one that jumps out as I look at and prepare my material is that virtually no providers have solutions which cover the entire landscape -- at least with any depth. As an example, Ariba, which probably one of the widest and deepest footprint of all of the providers, is lacking supply risk management technology (and has limited offerings in the supply performance and quality areas). In addition, I was struck by the very incomplete the offerings of ERP providers, despite significant progress (for example, SAP has come a long way from an operational procurement prospective in its forthcoming my SAP SRM 6.0 release, but there are still major holes in its spend visibility and analytics capabilities, not to mention risk management and other areas).
So if you take away anything from this new analysis, remember this: the Spend Management technology market is far from won. In fact, no vendors have complete coverage, and there are still huge advantages that the best of breed providers have, whether its enabling stand alone capability that drives competitive advantage or enhancing back-end ERP or operational procurement to improve real-world results.
- Jason Busch
Compliance I: Am I buying from approved vendors?
Compliance II: Am I buying from vendors with whom I have a contract?
Compliance III: Is what I'm buying from a vendor with whom I have a contract in fact purchased under that contract?
Compliance IV: Is the price I paid within the parameters of the contract?
Compliance V: Can I demonstrate that the price I paid, although within the parameters of the invoice, is valid given the specifications of my actual order?
Compliance VI: Can I prove that the "soft" parameters of the contract were met, for example "best market price + x?"
Most organizations are still struggling with Compliance I. Suite vendors are just starting to offer Compliance II. There is some activity in the marketplace on the consulting side around more advanced compliance; but it will be a very long time before this work is done automatically, i.e. with software alone. For example, if there is a closed-form compliance solution, it will require systemization of "soft" contract terms so that they become amenable to automated analysis – a significant challenge indeed – plus, all invoices must be automated (how much paper do you still process? I thought so!).
Why does Supplier Enablement continue to be pushed to the back of the room?
You can have the best spend visibility, the best prices, the best suppliers, the best contract, etc., etc., etc., but if you don't have an easy and efficient way place orders off the contract (catalog, eform, EDI, inventory, release, etc.), or costs $30, $40, $100+ to fulfill order, what did I actually save? I need my suppliers's plugged into my procurement process and system to ACTUALLY achieve the maximum savings...that's supplier enablement (I also might wonder how accurate my spend analysis is, seeing the data probably came from payables versus an actual purchasing system)!
When I was at GE, I managed an auction event for Integrated Curcuits that saved the company $60M over the previous contract. When we presented it to that guy named Jack who used to run the place, he told us we actually didn't save the company anything unless 100% of the orders we're executed via the contract...and then he asked us how we were going to guarantee that happened!