Building a Business Case for e-Procurement

 By Murali, Ideas2IT

E-procurement Market Trends for 2014

By definition, e-procurement is the purchase of goods and services over the internet. The market is geographically fragmented with rapidly evolving solutions. An increase in competition and supplier management will not help reap increased savings; software should keep procurement in its pace in order to achieve maximum savings through e-procurement.

Today, procurement software is still transforming how procurement is done at enterprises and government organizations. Advanced software offers deep insights into companies’ supply base so they can classify them by their potential or unacceptable levels of risk. For instance, global semiconductor AMD uses Zycus software in this manner and also to improve the efficiency of procurement with just skeletal staff. Automated procurement also helps in driving better collaboration with suppliers. IBM Emptoris has been employed by design engineering firm ZF Friedrichshafen to assist with the deep dives required to reduce supplier risk. Online travel agency Orbitz brings savings on travel itineraries by using Coupa software. SciQuest software is featured at apparel retailer Primark to improve global transportation procurement. Cox Enterprises relies on Ariba to consolidate all its information systems on to one platform to monitor indirect spending.

Before getting into the nitty-gritty details of the market leaders and what they’re doing to stay ahead of the game, we’ll go over some trends in the e-procurement landscape and how these will impact the shaping of the industry in general.

 Competition Heats Up, Leads to Consolidation

The acquisition of big procurement brands (Emptoris by IBM in Dec 2011 and Ariba by SAP May 2012) demonstrates the heavy competitiveness of the industry and the consolidation into existing platforms for the purpose building the grand vision of a global commerce platform. Between Ariba (SAP), SciQuest, Coupa, Oracle and many others vying for contracts, the underlying technology has matured, finally delivering on the promises of savings curbing unauthorized buying, concentrating spend to preferred suppliers and emphasizing the importance of strategic sourcing programs. It’s a given, e-procurement is set to grow bigger than ever.

 Big Data and the Supplier Analytics Opportunity

 Big data ensures that real time information is tied in to correlate and contextualize information, thus rendering the entire system better able to recognize cost reduction. Learning from its capabilities, the BI platform can go as far as to avoid unnecessary costs and manage risk.

These BI platforms can accommodate third party data, thus mashing and melding supplier, category and market data into a dynamic procurement mesh. By integrating information on to one business intelligence platform, procurement teams can stand to gain from the information powerhouse generated by recognized third party providers such as information pulled from market indices, credit rating agencies and even social media. By painting a holistic picture of procurement, it is able to identify and anticipate patterns and trends like a living, breathing machine. This year, the impact of BI platforms in sourcing and procurement is on the upward trend and something companies like Iasta are focusing on.

The Hype around Integrated Source to Pay (S2P)

Platform providers such as Coupa and Ivalua are championing the cause of S2P, alleging an increased reach with S2P solutions when managing the procurement enterprise. While some other practitioners tout seamless flow of information, better visibility, higher savings, reduced cycle times and enhanced data security, research from Gartner counters this solution: a full S2P suite will take at least five years to fully implement during which adoption can remain insignificantly low.

When choosing a platform, there is no one miracle cure. If you’re looking for value and ROI, choose a solution that focuses on the needs of upstream procurement that allows for a custom approach by presenting more options. However, for 2014, there are upstream as well as downstream providers jumping on the S2P bandwagon looking for a one-size-fits-all solution.

 Outsourcing and Managed Complexity

E-procurement is no stranger when it comes to seeking low cost destinations for sourcing tools and other requirements. In 2014, the globalization of supply chains will garner greater traction and this is likely to intensify the complexity of supply chains and therefore the procurement function.

While this complexity can manifest in different forms, how can companies respond? A diverse set of options, packaging designs, and logistics arrangements for starters. Customers increasingly want customized solutions and specific logistics delivery requirements. This can be dealt with only by having more facilities in more countries, enlisting more suppliers and offering greater diversity in products and packaging needs.

Low cost destinations come layered with urbanization challenges, economic volatility and political unrest. Procurement heads will have their hands full in 2014 focusing on these issues and identifying ways to reduce the supply complexity.


 

 Market Landscape and Leaderboard Quadrant

The vision for procurement’s future includes integrated, predictive, synthesized, and globally-scoped business intelligence. The procurement technology pros are featured high on the leaderboard quadrant for providing a strong, all-encompassing procurement value chain offering for transactional as well as strategic processes. While offering strategic support communities for procurement professionals, these solution providers can align to many vertical industries that necessitate unique sourcing expertise. These top providers have often gone over and beyond others by offering consultative procurement capabilities such as helping enterprises redefine and transform their procurement organizations by incorporating global compliance standardization. In a nutshell, they service customers as strategic procurement partners rather than mere outsourcing solution providers.

eproc vendor

Coupa, the rising star, which has taken the SaaS route to penetrate the SMB segment, deserves a spot for organizations wanting to drive broader procurement compliance as quickly as possible. Coupa is often described as “opinionated software”—due to its extremely rapid deployment times, ease of use, ability to capture greater amounts of spends than just indirect/catalog purchasing and cloud native architecture. The end-to-end procurement solution gives deep insights and visibility into the payment process.

In essence, Vinimaya isn’t an e-procurement solution at all. It doesn’t define workflows or issue POs. It is a cloud solution that connects to the existing e-procurement solution giving it a user interface termed Smart Market Place Technology to deliver a consumer like shopping experience for business buyers. Vinimaya’s SaaS delivered, patent-pending SmartSearch Catalog(TM) solves the most challenging issues facing the e-procurement market today: user and supplier adoption. It’s the only solution in the market that gives users the ability to search and shop multiple supply sources concurrently: web sites, industry marketplaces, supplier networks and catalog databases, from a single user interface.

Ivalua, a ten year old French software solutions company is clearly on the move, with its broad e-Sourcinf and e-Procurement solution. Several organizations are switching to and standardizing on Ivalua after having tried different providers for different areas.

The most interesting of the lot seems to be Zycus whose spend management solutions are seemingly adopted by the largest of global brands. Starting off with a powerful spend analysis classification engine, Zycus has slowly morphed its way to the top of the charts into a spend analysis platform including optional analytics.

Conclusion

The procurement function has witnessed major changes in productivity, effectiveness and impact during the past years, mostly due to the new capabilities and technological advances that procurement systems deliver. The business transformation journey has only just begun as these new capabilities will allow procurement to make considerable contributions to organizational performance.

— Guest post by Murali, Founder at Ideas2IT