In part 1 of this series, we introduced and framed the familiar topic of suites vs. specialists in the procurement solutions space. And last week in part 2, we looked at the benefits of selecting the broader suite approach. This brings us to part 3 as we look at the opposite side — the benefits of selecting a collection of specialist solutions.
It’s worth noting that all solution providers start out as specialists before some go broader and take the suite road while others go deeper and remain specialists. Most providers, however, will expand coverage one way or another to increase their addressable market and/or because it is required to keep customers satisfied.
However, newer entrants into the market must focus their efforts on niche areas not supported by the bigger existing players to differentiate and win business.
Specialists are Special
By definition, specialists are … wait for it … more specialized than suites. By narrowing their scope to one or two specific areas, they can focus their resources on making these specific solutions as capable as possible. While the bigger suite providers might have greater resources in total, they also have more areas/modules to cover, making it unlikely that the suite provider and its customers will have the same priorities as you. Unfortunately, this means there are suite modules that go years without any significant attention or development. While a suite provider might do more product development in total, a specialist is, for obvious reasons, more focused. Selecting a specialist improves the odds that its product development will directly benefit you.
For example, specialization has allowed a solution provider like Keelvar to continue investing in its eSourcing solution to drive deeper functionality and develop easier-to-use sourcing optimization capabilities, and invest in automation for the creation and management of the sourcing process. SpendHQ and Sievo are other examples of specialists that continuously invest in their focus area (procurement analytics) and expand their analytics capabilities into related areas like procurement performance management and CO2 tracking.
In the procurement space, the specialists are almost always smaller than the suite providers (Docusign comes to mind as a possible exception, but it remains debatable whether it is a true specialist). This means that specialists tend to be more responsive and willing to truly partner with individual customers. As a customer, you are likely to have a bigger impact on product roadmaps, customer success processes, and so on.
(Speed of) Innovation as a Differentiator
To succeed as a specialist in today’s procurement technology market, you must be an innovator (and you must be fast). But innovation doesn’t always have to be about adding new functionality or finding a new niche. For example, ScoutRFP (now part of Workday) became successful by focusing relentlessly on ease of use, not new features or technology, in the eSourcing domain — which had become somewhat of a feature arms race. Improving the user experience in an already established market is its own type of innovation.
Most new solution providers entering the market address niches beyond the suites’ focus or apply new technologies to “old problems.” One example of this is the emerging “intake” market, which provides a centralized portal for end users to collaborate on requisitions before the PO or sourcing event is initiated. Sample vendors here include Zip and Oro Labs., to name two. Another example of a gap being addressed by specialists is tail spend management where, for example, FairMarkit has been quite successful.
In terms of finding new ways of tackling old problems, Pactum has come up with an innovative way of addressing frequent and repetitive sourcing opportunities. By leveraging AI capabilities and chatbots, these requests can be automatically addressed without directly involving sourcing professionals.
This is not to say that suite providers are not innovating, the point is that if you need truly innovative and differentiating capabilities, you are more likely to find them with specialist providers. Suite providers tend to focus on improving their existing (and much broader) capabilities.
Spread Your Bets
By selecting a single suite, procurement departments put all their eggs in one basket and become dependent on a single solution provider for their entire procurement operation. This is a particularly big issue during implementation. A full S2P implementation can significant time to complete. And, it’s not uncommon that some modules are deployed in phases over a longer term. This means that procurement organizations could select a solution (and in some cases, pay for it) years before deployment and actual usage.
Selecting a specialist solution helps avoid this issue. CPOs can evaluate and select the solution and immediately begin deploying it. And if a solution doesn’t live up to its stated claims or internal requirements, it can be replaced relatively quickly. The solution can also be traded out more easily if another provider develops a more preferable solution. Theoretically, CPOs can replace a full suite, but doing so is usually a much more complicated decision that can have a significant impact on many more stakeholders as well as the original business case for the suite.
By selecting a collection of specialist providers, procurement teams are also less exposed if there is an ownership change at a specialist provider. When there is a change in ownership of a technology company, the new owners typically attempt to keep the current product roadmap and strategy intact, at least in the short term. But, anytime the economy (and valuations) shift, change is more likely than at companies with longer-term owners. Also, the risk (or likelihood, depending on your perspective) of a specialist provider being acquired is higher than a larger suite provider. That said, if it’s only one of your many specialist providers, the total impact will be smaller.
Lower Prices
My colleague, Andrew, would say that in general the price paid for the software (no matter the number) is far less costly than the investment of time, resources, and political capital. A successful deployment, no matter the price, will deliver an ROI, while a failed deployment is far too damaging and costly.
The good news for those using specialists is that a specialist provider is often less expensive than suite providers (must be validated on a case-by-case basis). Larger, more established suite providers tend to charge for their brand name and might not be interested in single-module deals (unless you represent a large buying organization). But, as mentioned in last week’s article, suite providers are often willing to provide discounts for individual modules with an investment in the larger suite.
So, there you have it, the benefits of selecting a specialist provider! Tune in next week when we discuss a framework for how to find the right balance between the two.
RELATED RESEARCH
Magnus Mondays: The Proliferation of Procurement Solutions
Magnus Mondays: Procurement Tech — Suites vs. Specialists Part One (Framing the Decision)
Magnus Mondays: Procurement Tech — Suites vs. Specialists Part Two (Home Suite Home)
