The Future of Procure-to-Pay – eProcurement (Part 1)

September was another fantastic month for traffic growth at CPO Rising. Our best yet and we thank you. Increasing traffic, however, is not the primary goal of CPO Rising, (writing articles of interest that inform, educate, challenge and entertain supply management leaders like you is the primary goal), but it is one indicator of how we’re doing. So while we’ll stay focused on the quality of our articles, we‘ll also be doing some small outreach in Q4 that we believe could quickly double today’s traffic. That’s where you come in — if you are finding value in our articles, please share them with your professional and social networks, forward them to your teams and colleagues, and yes, even read them to your kids 🙂  — As always, we thank you for your continued readership and support.

The Future of Procure-to-Pay

With Geoffrey Moore as our inspiration, we’re continuing a series, that began here and here, on the future of supply management solutions, which we believe in Moore-speak are systems of engagement: enterprise technologies that are generally focused on communication and collaboration. Today we’ll look at the future of the P2P market and where we’d think consumer IT functionality take hold. Ardent Partners takes the view that the source-to-settle process should be managed as a holistic one (even if it cuts across departments and utilizes different technologies). From an application standpoint, the procure-to-pay process would include eProcurement and ePayables solutions which manage the business process of requisition to PO generation to invoice to payment and settlement.

The P2P world has been heating up over the past few quarters (as has the entire supply management sector) and shows real signs of promise. This is best evidenced by last week’s big IPO from SciQuest, a longtime P2P player with a dominant market position in higher education and an additional focus on healthcare, the public sector, and life sciences. The fact that a mid-sized provider of “on-demand strategic procurement and supplier enablement” solutions can wow the capital markets with its solution, packaging, and ‘growth market’ story validates what we have been saying for years (these solutions deliver value and the market opportunity is compelling). Other big players in the P2P space are also seeing strong growth and compelling future opportunities, with Basware and its 83+% growth in H1 2010 year-over-year earnings per share growth being but one strong example.

Yet, despite a strong upswing for the P2P companies themselves, many of the users of P2P solutions continue to tread water. Project misfires, technology and integration gaps, supplier enablement challenges and the change issues associated with large technology deployments when taken together or alone are holding many procurement departments back. Certainly there are some organizations that have driven (and will continue to drive) extraordinary value from their eProcurement initiatives by driving the vast majority of spend through their systems in an efficient and effective manner. When done well, eProcurement programs can deliver a powerful ROI and help procurement departments shift resources into more strategic activities. We’ve written so much on ePayables in recent times that we won’t re-cover that ground; however, this article summarizes many key points. Let’s start by looking at the big problem areas in eProcurement and then discuss emerging innovations and forward-looking ideas that will help enterprises overcome them.

eProcurement’s Big Problems

The primary hurdles facing a new eProcurement deployment today are no different than those that were faced by the early adopters of eProcurement 10, 12, or 14 years ago: (1) Poor Supplier Enablement which is when the system does not have (a) enough suppliers enabled on the system to perform transactions and/or (b) enough supplier content in the system for users to find and requisition what they need; and (2) Poor User Adoption which is when (a) the number of targeted users in the enterprise is lower than it could or should be; and (b) the users of the system use it less frequently than they could or should. P2P in teh future develop capabilities that improve and ultimately solve these two issues.

Supplier Enablement for eProcurement Today – Content is King! If an eProcurement system doesn’t have the right content and/or trading partners, its value is greatly diminished. This has not gone unnoticed by companies like Vinimaya and Ketera that have each made a business from enabling suppliers onto their networks and into other eProcurement systems. Nor has it gone unnoticed by the supplier network providers like Ariba who has the largest supplier network by significant margin or Hubwoo who has one of the fastest-growing networks who all leverage content and connections across many trading partners. Vertical “killers” like SciQuest, Enporion, and Quadrem deliver great value across their one-to-many networks which are focused on one or a small band of industries. Other solution providers and outsourcing service providers are also delivering value by making supplier enablement easier for buyers and suppliers. And, let’s not forget about the ability to “punch-out” of the system and on to the web to order from a Dell or Staples – that was and is a great idea. Coupa, the industry upstart, thinks so highly of the concept that it’s expanded its system capabilities to punch out to almost any retail website and capture what is actually a B2C purchase within its system wrapper. It’s on the right track and creating some real waves. And yet, as far as we’ve come collectively and as successful as many companies have been with eProcurement, it’s not enough – this is not opinion; the industry average percentages of category/catalog/supplier coverage tell us this.

The Future of Supplier Enablement – To start, the future of supplier enablement will consider the entire source-to-settle process and begin with a supplier registration process that occurs in a single application (possibly a Supplier Information Management system) and propagates this information as appropriate into other applications like eSourcing if for example, a supplier supplies categories that are being sourced and eProcurement and ePayables. Standardization (of content and information, but also file formats and integrations) will be the true key to resolving the larger supplier enablement problem. This means open networks, but it really means open standards so much so that comprehensive supplier registration information can be standardized so each supplier only has one set of information that is encoded and simply uploaded via a supplier portal with a single click into any eProcurement system, analogous to the way an ExxonMobil Speedpass contactless system works where proprietary but standardized information is stored and can be shared quickly. Traditional non-PO-based suppliers will have system-defaulted profiles that can pull in a few manually inputted fields. Catalogs will also standardize on a common platform with standard content attributes much in the way that Amazon now largely defines how B2C eCommerce content is presented. While other web-based retailers may utilize different wrappers and add-in information, more and more are falling in line with the Amazon approach. One key benefit from ‘front-end’ catalog standardization will be the huge synergies that are created in their back-end management. If a majority of B2B catalogs and transactions begin to take the same shape, innovation will ensue from both the “network effect” and from the growing opportunities that are created for companies to deliver innovation to a huge, standardized market.

Is this future of supplier enablement “pie in the sky” or something just around the corner? What do you think?

More next week including user adoption, more on content, and usability.

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