Happy New Year!!
A once staid industry, the procurement technology market has experienced a rousing level of innovation over the past few years, with many new technologies hitting the market designed to enhance or expand the capabilities of the standard source-to-settle solution. Frankly, the level of investment and innovation is impressive, and it makes the overall market much more interesting and exciting to cover. Today’s technologies in focus epitomize this sentiment.
Intake Management (IM) and Procurement Process Orchestration (PPO)
In 2023, the interest in procurement intake and orchestration solutions caught fire, and we expect continued growth and momentum in the months ahead. Solution providers like Zip and Levelpath are receiving a lot of interest from procurement organizations and investors alike. Some in the industry call this “intake-to-pay,” while others call it “smart procurement workflows,” others still talk about these technologies as smart (or next-gen) procurement platforms. As we advance into 2024, the team at Ardent may make some suggestions on new naming conventions, but for now, we’ll use IM and PPO. No matter what you call them, these solutions are designed to address the same fundamental problem — the need to improve the end-user’s (or requisitioner’s) experience in the overall procurement process. As all procurement staffers know, if the stakeholders in the organization have a poor experience working with the procurement team and/or its solutions, they are much less likely to return. Instead, they become at risk of bypassing procurement and increasing the ever-dreaded maverick spend.
While modern eProcurement solutions are supposed to guide end-users through the process in a user-friendly and intuitive way, most of the solutions are built to support part of an organization’s overall spend, primarily the pre-negotiated categories that can be placed into catalogs. And yes, the use of eProcurement solutions can be far more expansive than simply managing basic indirect MRO categories, but each also has certain limits when it comes to complex categories of spend, particularly services.
eProcurement solutions do many things very well and the general improvements in usability — as well as catalog and supplier management (and integration to ePayables solutions) — enabled greater coverage of spend and much wider adoption and usage of the solutions. At the same time, these solutions have and will continue to struggle with managing items that are not easily placed into a catalog. For example, managing services procurement (especially when the cost of the service is not fixed or when it is a more complex service) has been and continues to be a serious challenge for many procurement organizations. While some have developed elegant and sophisticated approaches that enhance their core eProcurement solution with either customizations or third-party solutions, many more have been unable to fully solve the large services procurement problem.
Another challenging area is when there is a new category that does not have a previously approved or incumbent supplier that can supply the need at an earlier negotiated price. eProcurement solutions support the process of requesting a new supplier, but in many cases, the collaboration capabilities to make this a smooth experience for the requester are lacking.
The problem is that procurement teams set an expectation that all occasional users will know what system to use (could it be the eProcurement system or a VMS system or another interface to request supplier onboarding and the initiation of contract negotiations) and how to navigate the process, providing fully what is needed to generate the order. These new solutions are designed to simplify the process for all requisitioners by offering a standard, single entry point for all new requests and an intuitive and collaborative platform to drive the process to completion.
As mentioned at the start of this article, there are plenty of different terms being thrown around for these types of solutions. For now, we will use the terms intake management (IM) and procurement process orchestration (PPO) which should not be confused with a purchase order (PO). Let’s look at each.
Intake Management (IM): IM solutions provide a single-entry point for end-users so they do not need to keep track of the unique procurement systems and processes that are used for different types of requisitions. IM solutions guide end-users through different workflows that are designed to capture the relevant information and requirements needed to generate a requisition. The solutions then route the requisition to the relevant solution or approver(s) needed to generate the request. This means that end-users only work in a single platform and, as a result, don’t need to know much or anything about the underlying procurement processes or technology that is driving the transaction. After capturing the correct information, IM solutions can then automatically drive the req-to-PO process, ensuring that the proper policies and procedures are followed.
Procurement Process Orchestration (PPO): PPO solutions, on the other hand, are focused on executing the request that has been created during the intake process. PPO solutions coordinate and transfer the necessary information between the different systems needed. PPO solutions must be integrated with the necessary applications to execute the proper process. So, if there is a temp labor request, the information is routed to the solution that handles that category (most likely a VMS solution). If this is something that hasn’t been contracted before and there is no incumbent supplier, the requisition could be routed to the sourcing team (and their sourcing solution) to launch a new RFP.
In all the examples we’ve shared, the end-user is only interacting with a single solution (the intake management platform) which should create a much cleaner user experience than those organizations with several procurement applications and data sources. While this sounds straightforward, it never quite is … This is because many advanced users (who use solutions more frequently and in more advanced ways) prefer working directly in the underlying applications. For these users, adding another layer of software is not a big value-add. And, for larger organizations with multiple procurement applications and data sources, the orchestration quickly becomes complex, requiring significant sophistication on the part of the PPO.
That said, the combination of these two solutions (IM and PPO) has the potential to dramatically improve the end-user experience, help drive adoption, and increase spend under management. Of course, using the combination does not answer the specialist vs. suite question because several underlying applications are still needed to execute the actual processes. Basic purchase orders, low-value sourcing events, and simple contracts might be executed by the workflow capabilities of an IM solution, but beyond that (at least for now), more purpose-built capabilities are needed to do more. Thus, some teams who are struggling with end-user adoption of their live eProcurement solution, may want or need to enhance their solution (or suite) with an IM front-end. To be fair, many procurement teams do not have an end-user usage/adoption issue.
How will this market grow and evolve? We see two scenarios. In the first, the IM and PPO solutions remain specialist solutions that serve as highly usable front-end enhancements that connect a number of underlying specialist or suite solutions. In the second, we see these specialists invest in expanding their capabilities and attempt to replicate the full P2P or S2P suite functionality. Expect to see both scenarios.
In the short term, we will increase our coverage of core IM and PPO pioneers like Zip, who recently announced native sourcing capabilities.
The solution providers in the space enter the year with the wind at their backs, aided, in no small part, by their sizable (and for most) recent funding. As we advance into 2024, the overall industry prospects are very promising. With strong execution by the leading players, 2024 could very well be the “Year of IM & PPO.”
Our research in this area will ultimately go much deeper, including an examination of the key providers and new entrants that are helping to define a new technology category. Stay tuned!
