About a year ago, I wrote a series of articles on the topic of suites vs. specialists (click here to read). In today’s article, I return to that topic and discuss an overarching trend and some of the more recent developments in this area.
Pendulum Swings
There is a clear trend of technology preferences swinging from suites to specialists that repeats itself over time. This is not only true in procurement technology but also in other enterprise application areas, but we will focus on procurement here.
It tends to follow the same pattern: a period of innovation where new solutions enter the market with either significantly better capabilities or entirely new ones, followed by a period of consolidation when innovation slows down.
There are multiple factors contributing to these swings. A key one is the fact that many organizations, especially internal business functions, are attracted to new innovative solutions that solve their specific business problems easier and in better ways. And, since the introduction of SaaS software, solution providers are increasingly selling subscriptions to the line of business (in our case the CPO). But, at the same time, there are several problems with this. Bypassing IT completely is not a good idea as it can lead to IT security issues, integration challenges, and an unmanageable number of solutions.
So, after some time, the pendulum starts swinging back. Consolidation begins and innovation slows down, driven by at least two factors. On the customer side, the realization that too many point solutions cause all sorts of problems as mentioned above, including higher costs, leads them to want more with fewer solutions. And on the solution provider side, specialists are being pushed by customers that want more functionality coupled with the desire to seek larger addressable markets to expand (and sometimes to justify the company’s market valuation). So, we start seeing both native expansions as well as acquisitions to form broader solutions and eventually suites.
The ProcureTech Pendulum
In the procurement technology space, we have seen this play out at least twice. The first time was in the late 1990s when marketplaces and eSourcing were introduced. Specialist solutions offered new capabilities and solutions that the ERP providers lacked. In the mid-2000s, the market slowly started to consolidate, first into strategic sourcing and procure-to-pay suites, and finally into full S2P suites. Some of the ERP providers fought back by either building their own S2P capabilities or through acquisition (and sometimes both). In the latter half of the 2010s, we started to see an increase in innovation again, driven primarily by the introduction of AI capabilities. New solutions and solution types entered the market, such as autonomous sourcing solutions, contract analytics, and intake management and procurement process orchestration (IM&PPO). And there are now more solution providers than ever before for procurement organizations to choose from.
But the pendulum swing hasn’t gone as far this time because larger incumbent S2P providers have been more successful in fighting back and keeping up (or at least catching up quickly enough) with the specialists. There are, however, a significant number of procurement organizations that have focused more on a specialist, or best-of-breed (BoB), strategy. This approach has been made easier to pursue thanks to IM&PPO solutions (see our IM&PPO coverage here) that can help orchestrate process and data across multiple specialist solutions. But even so, are we now seeing the pendulum starting to swing back again?
The I2P Convergence
There are many benefits of IM&PPO, most notably they augment and supplement other solutions by providing a single user interface for end-users and orchestrating data across the various solutions needed. IM&PPO providers like ORO, Tonkean, and ConvergentIS can help solve one of the main problems with the BoB strategy — the integration issue. While this reinforces the pendulum swing towards specialists and a BoB approach, we can already see signs of consolidation.
Some IM&PPO providers, like Zip, are building out capabilities across S2P. Zip’s customers have appreciated the modern and flexible user experience, but are asking them to build out-of-the box support for more procurement processes based on existing workflow capabilities but also add process-specific capabilities — creating a new version of S2P called intake-to-pay, or I2P. At this point in time, these types of I2P suites do not have the depth of functionality in the S2P areas as the S2P providers. But, at the same time, the orchestration capabilities allow organizations to add more specialized solutions as needed, acting more as a platform than as a suite.
At the same time, the S2P suite providers are not sitting still. Solution providers like GEP, Ivalua, SAP, and Zycus are adding their own IM&PPO capabilities, creating a slightly different version of I2P from a different starting point. The IM&PPO functionality is less proven (and in some cases only available in beta versions or pilots at this point) but, for obvious reasons, the support for S2P is deeper and more complete.
So, is the pendulum starting to swing back towards suites or will the specialists, enabled by IM&PPO specialists, be able to hold their ground? Time will tell, but if history tells us anything, there will be consolidation.
As always, if you want to know more or have any specific questions, don’t hesitate to contact us at Ardent Partners.
