The Procurement Puzzle - Piecing together the perfect system - HICX
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The Procurement Puzzle Piecing together the perfect system
Contents
Companies upgrading procurement systems amid digital disruption
face a strategic choice: single vendor, or build from different suppliers.
This report explores a tough choice that may affect critical business
functions for a decade or more.
Software solutions to the puzzle 3
Suite providers acquire success 7
AutoNation drives an upgrade 9
Build on a solid foundation 11
Myths versus reality 14
2
Software
solutions to the
procurement
puzzle
Solve it and unleash
real transformation.
3
There are now many types of procurement software, from bespoke solutions
to all-in-one suites. Getting the right mix can be complicated, but the rewards
are great.
Over the past decade, Meanwhile, these suites –
companies of all shapes and including SAP Ariba, Coupa,
sizes have shifted to digital Ivalua and Jaggaer – have
business models. Many have had responded to the challenge by
to completely rethink the way incorporating similar features into
they buy goods and services,
which has lifted procurement as
a theme up the organizational
their products or launching best-
of-breed buying sprees to quickly
enhance their capabilities.
68%
hierarchy. It’s no longer seen as
So where does that leave
a backwater for underperforming
procurement leaders who
employees, a place where
are looking to upgrade their
suppliers get squeezed and
technology environment? Should
invoices rubber-stamped and
they opt for an all-in-one suite CPOs who are improving and
little else. Instead, it’s the heart
or build a bespoke system with automating their processes
of a more agile, innovative and
best-of-breed software? And
data-driven organization: the Deloitte global survey, 2019
which technologies are most
key to success in an increasingly
likely to live up to the promises
open, complex world.
made by their vendors?
This is partly due to the
The answers will be partly
vast amount of data that
dictated by the industry
flows through procurement
in question, the current IT
departments. Harnessed
environment, available funds
effectively, it can provide deep
insights into business spending
and supply chains, the ability
to find cost savings that would
and wider business objectives.
Organizations with minimal
legacy technology, for example,
65%
are arguably in a better position
otherwise be missed. But this
to adopt bespoke solutions.
can only be achieved with the
right procurement software – But supply chain consultants
and that’s where things start reckon large organizations
to get complicated. that are heavily invested in
their current IT setup shouldn’t US procurement leaders
Numerous software-as-a- believing out-of-date
discount the best-of-breed
service companies now jostle systems block progress
vendors, either.
for space in a crowded market,
Efficio/Cranfield survey, 2018
each offering to supercharge “You may have a very strong
procurement with their best- ERP [enterprise resource
of-breed solution. Many planning] platform or a very
address a specific element of strong single-suite solution that
the procure-to-pay or source- covers the end-to-end view,”
to-pay (S2P) process; the says Iain Kirwan, a director
relatively low cost of a monthly in Deloitte’s UK supply chain
subscription means they’re consulting practice.
typically cheaper to implement
than an all-in-one suite.
4“However, you might want to At the same time, the big single- if people don’t like using a
accelerate the performance suite providers often claim to tool or module – or worse,
of these solutions by adopting be able to do sourcing, supply can’t use it – then you can bet
some maturing or emerging chain risk, supplier management, that maverick spending will
technologies, or some additional contract management and more. occur. And once your core
bespoke solutions.” On the However, “I think we’ve found procurement workflows and
other hand, if you’ve invested that the maturity of some of the processes are automated, will
very little in your S2P processes single suite providers [in some of your staff be capable of taking
“then you might be looking for these areas] is not at the level it on a more strategic role?
some point solutions [systems needs to be at either”, Mr Kirwan
“I would suggest that strategic
that can improve capability in a explains. The fact that even
procurement functions fail
single, high-importance area] to some of the big established
not because of technology,”
leapfrog where you currently are”. players still only have very
says Roy Anderson, CPO and
immature offerings serves to
Chief procurement officers digital transformation officer
demonstrate the importance
(CPOs) who haven’t got to at Tradeshift and former vice
of proof of concepts.
grips with modernizing their president of global procurement
processes are already falling at MetLife. “They fail because
behind their peers. According Integration issues they haven’t reinvigorated their
to Deloitte’s Global CPO Survey Integration is about data, staff to meet the new levels of
2019, roughly two thirds of creating a bedrock of accurate skill required.”
CPOs are getting their house in information that is available
order by implementing modern whenever, however it is “Strategic
S2P applications that automate needed. Although best-of-
core workflows, which can procurement
breed tools are increasingly
free up staff to focus on more able to integrate with existing functions fail…
strategic work. Meanwhile, ERP platforms and other because they
complexity masters – CPOs software tools, pulling them haven’t reinvigorated
who outperform the survey all together into a bespoke
population in terms of making their staff to meet
system can still be complicated.
key technology investment “If you move to best-of-breed the new levels of
decisions – have a 30 per cent solutions to improve your skill required.”
higher adoption of “upstream” efficiency or effectiveness,
technology such as spend then you do have to deal with Roy Anderson, CPO and
analytics, sourcing, supplier increased complexity,” Mr digital transformation
relationship management Kirwan says. “They are more officer, Tradeshift
(SRM), contract management, fragmented applications, you’ve
and supply risk management. got more vendors to manage.
Interestingly, however, a large That potentially increases the
percentage of companies that complexity – and therefore the
have fully implemented these cost – of integrating them.”
technologies aren’t satisfied
with the results. CPOs looking to invest in
new technology also need to
This is because best-of-breed be sure that their staff and
solutions have a mixed level of suppliers will embrace the
maturity, Mr Kirwan says, which tools they have in mind.
means some of the newer
solutions “probably aren’t at For instance, it’s vitally
the level that they need to be”. important to consider the
day-to-day user experience;
5CPOs must also consider when SAP customers allow It’s often said that one of the
whether the best-of-breed third-party applications to benefits of all-in-one solutions
vendor they’re eyeing has communicate with SAP system is the fact that data on areas like
sufficient funding to keep data. The issue came to a head business spend or supplier risk
pace with larger competitors. in February 2017, when a UK is collated, stored and accessed
court ruled in favor of SAP in in a single place, as opposed to
And they must also of course
the case of SAP vs Diageo. The ending up fragmented across
ensure that the solution they
latter had allowed customers several best-of-breed solutions.
are considering genuinely fits
and members of its customer A more direct approach is to
with the requirements of
support team access to SAP seek out a specialist supplier
the business.
data via third-party systems – a whose entire business is
Nic Walden, a senior advisor licensing breach that ended up focused on data quality and
in The Hackett Group’s costing it £54 million. Naturally, deploy their system to provide
procurement advisory other SAP customers were this all-important bedrock.
program, says that whatever worried that they too might be So is that the best way to
solution they choose “people at risk of litigation – concerns address the data quality issue?
say ‘we probably relied too that SAP has sought to address
(API) functionality, which
much on what the salespeople with a new document-based
allow users to customize
told us. We didn’t do enough pricing model.
and enhance their solutions
due diligence and actually
according to industry, region
test our own use cases, the The data dilemma or simply personal ways.
way that we run our business
processes, against what’s Deloitte’s Global CPO Survey Mr Anderson of Tradeshift
actually in the solution’.” 2019 found that 57 per cent suggests that the idea that
of CPOs see quality of data as a tool can meet the needs
Indirect access has posed one of the main barriers to the of every user - from the
challenges for SAP’s ERP effective application of digital engineering team to the sales
platform. This is essentially a technology in procurement. office in China - is ridiculous.
licence violation that occurs
“People say ‘we probably relied too much on
what the salespeople told us. We didn’t do
enough due diligence and actually test our
own use cases’.”
Nic Walden, Senior advisor, The Hackett Group
6Suite providers seek to acquire success
In recent years, the big suite providers have acquired numerous best-of-breed
vendors – a trend that looks likely to continue as the market consolidates.
Jaggaer, for instance, claims that However, mergers and Customers of the acquired
it became the world’s largest acquisitions carry a risk company might also be wary of
spend management solutions of cultural, commercial or the merger. Indeed, Synertrade,
company when it bought architectural incompatibility. a provider of solutions for
BravoSolution in late 2017. In the past, some suites have optimizing purchasing and
This followed its acquisition of struggled to properly fold finance processes, offers a
Pool4Tool – a European direct their acquisitions into their “safe passage” program, a
materials procurement specialist existing solution. discount aimed at companies
– earlier the same year. who have seen a much-
“If you decide to loved vendor acquired and
Such deals underline just
go for an integrated want to migrate because
how quickly the procurement
the technology is being
software market is evolving. solution because
damaged or important human
To take another example, of the benefits relationships disrupted.
Coupa recently acquired Exari, around productivity,
The company notes:
a leader in Contract Lifecycle automation, master “Thankfully many sourcing
Management (CLM). The
data and so on, professionals put a change of
acquisition added advanced
what happens when control clause in their contracts
CLM capabilities to the Coupa
with their providers and are
Contract Management solution, they go out and buy
now executing them when their
including functionality for all these different provider is being acquired.”
contract creation, collaboration
companies?”
and discovery. The deal meant
that Coupa went almost
Mr Walden asks. “They
overnight from “having an
talk about having a unified
average solution to having
application environment on a
one of the best”, says Nic
single code line, and they might
Walden, a senior advisor in
have started out like that. But
The Hackett Group’s procurement
as soon as you add in all these
advisory program.
extra companies you end up in
Such deals are generally a world where you lose some
good news for the acquirer’s of those benefits.”
customers, who gain access
to a market-proven solution.
7Welcome to the The daunting language of APIs There’s still some way to go,
app store in procurement software is of course. But for procurement
being replaced with phrases professionals navigating an
The future of procurement such as “app store” which increasingly complex software
software may therefore look a lot signifies not only simplicity market, that future may come
more like business-to-consumer but empowerment. It signals as a welcome relief.
(B2C) software: an Android-like that mixing vendors is not an
environment that allows users to option restricted to firms with
install and delete thousands of a big IT department or unusual
different applications, all running requirements, but is a normal
on the same underlying master and straightforward choice for
data, with zero disruption to firms who just want to get the
business processes. job done well.
Sector of primary operations
According to procurement leaders in the US, UK, and Germany, what are the most important barriers
to harnessing digital technology?
40% 87%
Internal politics Lack of talent
50% 66%
Incorrect/inaccurate Lack of vendor
expectations support
52% 64%
Procurement policies New tech not supported by
too restrictive processes and skills
8AutoNation and
HICX see data
dividends
Case study
9AutoNation faced complex data challenges, but a partnership with HICX
is bringing savings and presenting new opportunities.
Ask anyone in procurement to “It’s not until you’re in the midst of it that you
name their biggest challenge,
realize the importance of not underestimating
and the answer is usually the
same: data. the data”
This was certainly true at The first step in addressing the More strategically, the
AutoNation, the giant auto problem was creating a supplier integration – coupled with
retailer that in 2018 sold data strategy, understanding master data governance –
Americans more than $16 the gap between current means Auto-Nation now has
billion worth of vehicles. systems and the needs of the a single source of truth on
future. Details were important: suppliers that feeds all ERP
AutoNation is a complex
for example, verifying tax systems through an automated
business. For new vehicles
IDs was the first priority for process, ensuring consistency
alone it sells 33 brands, while
AutoNation, enabling it to in the data. Furthermore,
it has around 240 stores across
identify unique suppliers. HICX allowed for the seamless
the nation. It also runs 85
management of mismatches
branded Collision Centers and AutoNation chose HICX
within the supplier record
offers a wide range of finance Solutions as its partner. First,
stemming from the two
and maintenance services. new suppliers to the auto-
different types of ERP systems.
retailing giant on-boarded
A single system was
themselves via a self-service AutoNation has also realized
not capable of handling
portal, before existing suppliers substantial benefits through
AutoNation’s procurement
were gradually led through the automating workflows and
volumes; it therefore had 14
same process. standardizing processes.
systems deployed on a more
Through comprehensive
or less regional basis. This This self-service model was a
reporting, AutoNation scaled
meant that each time the big plus for HICX’s solution. The
the ability to tap into real-time
supplier relationship was support desk had been handling
information, equipping the
extended to a new region, the some 4,000 supplier inquiries
company with the information
data had to be duplicated into a month, mostly from suppliers
needed to manage and better
a new system. This created struggling to reconcile payments
negotiate with suppliers: for
huge data redundancies and received from AutoNation’s 14
example, through gaining
inefficient processes, while accounts payable systems with
access to the insurance
a lack of insights about its multiple outstanding invoices.
documents that vendors
suppliers meant the company Moving suppliers to a self-
can upload into the portal.
was unable to leverage its service portal has brought
This helped drive effective
size and consolidate spend considerable savings and
governance and better control.
between business units to benefits for both sides.
get a better deal. “Data doesn’t generally excite
HICX’s solution allows for both
people – it’s very foundational,”
“It’s not until you’re in the corporate oversight and local
said one AutoNation executive.
midst of it that you realize flexibility. The central team
“But the opportunities that
the importance of not manages around 40 spending
come from the consolidation
underestimating the data,” categories, but local stores and
and enhancement of data can
according to a senior Auto- business units can also make
have a healthy impact on the
Nation executive. decisions locally about the
bottom line.”
suppliers that do the job best
for them.
10Build your system
on a solid foundation
of data
“The challenge for procurement
is data management.”
11The challenge for procurement is not picking the best vendor, it is solving the
problem of data management. Without this, any solution will disappoint.
What’s your procurement It has been the dominant force Maybe they are finding that
problem? Is it colleagues who in procurement for some time, systems bought from one
refuse to use technology and but plenty of organizations are vendor are still proving difficult
say it is “too difficult”? Is it wrestling with the fall out (ask to tie up because the vendor
overseas subsidiaries that do global drinks company Diageo, has grown by buying other
not link to corporate systems? which two years ago had to software companies.
Is it zero visibility and the pay nearly £60 million to SAP, a
It is time to stop, step back,
impossibility of tying purchase leading ERP software provider,
and think about what you want.
orders with invoices? after using third-party systems
Is traditional procurement still
to access data associated with
No matter what the issues are, the best way for the future?
SAP software).
the chances are someone has No company is static; high
offered you a one-stop solution. Companies that had previously growth companies will need
Someone has recommended bought into the supposed different solutions, sometimes
or tried to sell you a suite that magic of a sole provider are at a dizzying pace. Is one
promises control, efficiency, now discovering drawbacks. vendor always going to be the
visibility, and ease of use, all Maybe there is a hot new best provider? Nobody can
from a single vendor. software service but they can’t be good at everything, while
use it because they are locked businesses are so diverse that
It is an enticingly easy way
into a licensing agreement. the best solution for one is far
out of the procurement puzzle
Maybe they have outgrown the from the best for another; the
that has led to an explosion in
solution that worked five years procurement needs of a Middle
procurement software.
ago, but it would cost too much Eastern retailer with revenues
The problem is the single to ditch it. of £1 billion are very different
platform solution does not to a multinational conglomerate
always work. with £100 billion of turnover.
1260%
Let’s face it; procurement Instead of focusing on
departments are wrestling outsourced software, many
with a moving target. Not only companies would do better to
is each company changing all focus on what is demanded
the time, but there is constant of their data. Data by its very
technology innovation. nature gets corrupted over
Flexibility and agility are critical time; developing a process
to cope with corporate change, of data governance and
and a series of plug-and-play continuous curation to ensure CPOs citing poor master data
apps that will move, flex, and information is the bedrock of and governance as a barrier to
grow with your organization your ProcureTech could be the mastering digital complexity
and its requirements may well best investment you ever make. Deloitte global survey, 2019
be the best solution. It could lead you into a future
outside the four walls of your
But it is worth remembering
54%
company, to suppliers, partners,
that there is no best solution
and customers interacting with
in technology, only the best
common systems across the
solution for today. What
value chain. This is critical if
remains constant, however, is
there is to be a move towards
the foundation stone of data.
“lights out” procurement,
Without good data, all the
where automation replaces the
software patches in the world
fallible human. A plug-and-play
won’t improve the procurement
model will allow solutions to be
function. Without good
adapted to best suit the needs Firms using manual processes
data, you can spend without
of those using them. to move data between
achieving any of the promised
procurement systems
efficiencies. Without good data, Solving the procurement
software integration is always Jaggaer/EdgeVerve global survey, 2019
puzzle requires good systems
going to fail in its outcome. for specific tasks, seamlessly
integrated. But whether those
Too many procurement
systems are bought from one or
functions jump at a solution,
many vendors matters less than
before envisioning the
the management of the raw data
end result. But technology
on which those systems feed.
is a distraction if it takes
attention away from the real
problem, that for many firms
there is no single “source of
truth.” So the challenge for
procurement is not finding the
perfect technology solution
but solving the problem of
data management, enabling
information to flow smoothly
from one system to another.
13Single suite vs best-
of-breed: sorting
myths from reality
Getting to the facts.
14The right procurement system can deliver benefits for a decade or more.
Focusing on the facts is the first step to making it happen.
“No one ever got fired for “Let’s be clear, the vast However, Nic Walden, a senior
buying IBM,” so the saying majority of the clients that we advisor in The Hackett Group’s
goes, meaning it’s generally currently work with prefer the procurement advisory program,
safer to go with a household single-suite solution,” says Iain says that while an all-in-one
name when you’re in the Kirwan, a director in Deloitte’s may offer more across the
market for new technology. UK supply chain consulting board, “if you need to be
But does that still hold true in practice. “It provides end-to- the best in supply chain risk
2019? And given the speed of end capability in one place, management ... then a best-of-
technological development, is with one vendor to deal with.” breed solution in that area might
buying a suite really the “safe” actually be better for you”.
option today?
15Three myths about all-in-one suites
They’re big and bloated
Drew Hofler, vice president of portfolio marketing at SAP Ariba, says there is a common
misconception that all-in-one suites are a big, bloated package that you have to implement
(and pay for) all at once – even though your employees might only need some of the features
it offers. “That’s simply not the case,” he explains. “You don’t have to buy it all at once; you
can just buy the tool you need at that moment.” Additional modules that will “seamlessly fit”
with those you already have can be added at a later date. SAP Ariba “can grow and evolve with your
business”, he says.
They offer the lowest common denominator
user experience
There’s a widely held belief that a suite won’t deliver the kind of precise functionality
required, driving users to develop workarounds or simply avoid using it. However, Mr Hofler
says the idea that a suite will only ever provide a monolithic, homogenized, lowest common
denominator user experience is simply wrong. While the different features of a suite are
designed to work well together, the platform is purposefully designed to handle distinct
processes and user experiences, including through APIs, he says.
They’re more expensive than best-of-breed
solutions
For small to medium-sized businesses, a suite may seem too expensive for their needs.
Even with a modular approach to implementation, there may be features that seem like
overkill. But once you start investing in multiple solutions from multiple best-of-breed
vendors – and factor in the IT spend needed to maintain the connections between them
over the course of numerous updates – you might find that the suite option suddenly looks
a lot more affordable. What’s more, says Mr Hofler, the modular nature of a solution like SAP Ariba
means there’s no need to go scouting for a bespoke vendor every time you want to improve one of
your processes, further saving time and resources.
16Three myths about best-of-breed solutions
They’re riskier than a well-known suite
Many CPOs and IT teams believe a suite is the straightforward and reliable choice, but
all-in-one platforms are arguably harder to remove once they’re in place. The sunk costs
and daunting management effort of a total replacement mean you are effectively locked in to
one vendor. It’s also arguably a risk to invest significant time and resources in implementing
a large suite that might not turn out to be an effective solution for the organization’s needs.
What’s more, if there’s a problem with a suite, it will typically affect numerous business processes.
Best-of-breed solutions, by comparison, are more compartmentalized and can be removed with
relatively little fuss or expense. It isn’t as easy as downloading a new app on a phone, but it’s easier
than a company-wide change.
The big suites offer the same functions
It’s fair to say the big suites offer an increasing array of features and options. Indeed, some
of the big players have snapped up numerous best-of-breed vendors to improve their
offerings. Still, many best-of-breed solutions retain an edge over the suites in their particular
vertical. “One of the myths that has been pushed by some of the single suite providers
is that they can do everything,” says Iain Kirwan, a director in Deloitte’s UK supply chain
consulting practice. “And I think that we’re now seeing that actually ... there may be gaps that need
to be addressed within a single suite solution.” Specialist vendors have built their entire business on
delivering excellence on their part of the procurement lifecycle, which should drive constant innovation.
Also, they are smaller companies so your business is more valuable to them and you have a better
chance of being a VIP customer.
They’re hard to integrate with other solutions
Vivek Bharti, general manager of product management at Icertis, a specialist provider of
contract management systems, says executives often believe that suites integrate the
different elements of the procurement process more efficiently than best-of-breed solutions.
“They think it’s going to be like it was ten years ago, when you had two different systems
that could never talk to each other,” he explains.
But times have changed. Best-of-breed solutions are much more user-friendly than they once were,
and the vendors behind them are a lot more proactive when it comes to developing and maintaining
integrations with other software tools. In addition, the increasing range of APIs has further helped to
dispel the myth that best-of-breed tools are a source of major integration headaches. If the underlying
data is accurate – and if it isn’t, no type of solution is going to deliver results – piping data around the
different pieces of software is no longer a challenge. By embracing the strengths of all the different
players, businesses can have the best of all worlds at their fingertips.
17HICX is the Low Code Platform for Supplier Management.
We enable business to find, maintain, and re-use trusted
Supplier Data and Information across their Enterprise, across any
spreadsheet, app or system. Our solutions enable your businesses
to be more reliable, flexible, and scalable. Building from a rock solid
platform of good quality data, we help businesses become digital
in supplier management, third party management, compliance and
risk, master data and finance management.
© Copyright 2021 HICX Solutions. All rights reserved.
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