We’re Not In Kansas Anymore

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In MGM’s classic 1939 movie “The Wizard of Oz”, a young Dorothy Gale finds herself in a new and unfamiliar setting and famously remarks to her canine companion, “Toto, I have a feeling we’re not in Kansas anymore.” If you’re one of the many procurement professionals who have not actively followed the Source to Pay […]

In MGM’s classic 1939 movie “The Wizard of Oz”, a young Dorothy Gale finds herself in a new and unfamiliar setting and famously remarks to her canine companion, “Toto, I have a feeling we’re not in Kansas anymore.” If you’re one of the many procurement professionals who have not actively followed the Source to Pay (S2P) technology market, you may find yourself thinking the same thing. For many companies, S2P automation was a topic addressed five or ten years ago and has since received relatively little attention. For those of you who may have become a bit myopic when it comes to S2P technology read on to gain some insight into recent advances that have occurred while you were preoccupied with trying to drive value out of your company’s legacy S2P toolset.

Here are five S2P technology trends that we think every procurement professional should be aware of:

Software as a Service (SaaS) – disruption in the S2P technology market: The advent of the SaaS delivery model as a viable alternative to the previously dominant “on-premises” model has revolutionized the S2P technology market. The biggest effect SaaS has had is its significant reduction in barriers to entry for many providers. By allowing more and more vendors to enter the market (often with impressive solutions in a particular S2P niche) the SaaS delivery model has significantly driven innovation in the market. In addition to the effect SaaS has had on innovation, it has also changed the economics of S2P technology investments. Seeing the financial benefits of a lower cost delivery model buyers and vendors alike have moved quickly towards a preference for SaaS. In fact, according to a 2010 Gartner report, only 26% of vendors still delivered their solution on-premise. Although some (especially within IT) continue to have concerns regarding SaaS (confidentiality of data, security, system reliability, etc.), the benefits of this delivery model (lower cost, faster time to value, seamless upgrades, etc.) will likely guarantee its continued use.

  • Now you see them, now you don’t – consolidation through M&A: If you read something interesting about an S2P vendor today, don’t be surprised if tomorrow they no longer exist – at least not as you remembered them. Many vendors are consolidating; with larger firms acquiring strong niche players.  For example, SciQuest has greatly expanded and improved its service offering through the acquisition of AECsoft in 2011 and Upside Software in 2012. This type of transaction has increased consolidation in the market and has threatened the existence of niche, stand-alone solutions altogether (with Upside Software now acquired, can one make a valid case for a stand-alone contract management solution?). The second type of transaction is the acquisition of dominant S2P solutions by major technology companies. Two recent transactions are worthy of note: the 2011 IBM acquisition of Emptoris and the 2012 SAP acquisition of Ariba. These transactions have the potential to be significant, yet the ultimate effect is still unknown as we wait to hear plans from IBM and SAP (For additional analysis see the recent post “A is for Ariba, SAP’s big move”, http://www.capgemini.com/procurement-blog/2012/06/01/ariba-saps-big-move/).
  • Scope change – realized versus identified savings:  S2P vendors are rapidly expanding the scope of their S2P solutions. For example, Zycus, originally a niche vendor focused primarily on spend analysis, has been steadily expanding their solution to include sourcing as well as a complete P2P offering.  Not only is this a natural growth opportunity for Zycus but it also aligns well with companies’ desire to go beyond simply identifying savings opportunities to capturing those opportunities. This is good news for the average procurement professional who would gladly trade in their five, 10 or more procurement tools for a more efficient, end-to-end solution set.
  • Midmarket is the new market: Before more cost efficient SaaS S2P solutions became available, only large companies with annual spend in the billions could realize the savings necessary to justify the large investment in an S2P solution. That has all changed. Many midmarket clients are now also looking to implement S2P solutions to realize procurement savings and many S2P vendors are directly targeting those firms. The arrangement works well for all – vendors receive a new growth opportunity and buyers get to leapfrog their way to procurement excellence as their procurement organizations tend to be less mature than their large cap counterparts.
  • What will they think of next?:  As the S2P technology market continues to evolve, new entrants and fierce competition compel all vendors to focus on innovation. Recently, vendors’ focus has been on three key areas – visibility, compliance, and sustainability. Take for example Seal Software, a company founded in 2010 that has entered the market with its cDiscovery solution meant to provide deep visibility into contracts for clients who lack such visibility internally or who want deeper insight into the contracts of a potential M&A target. Once implemented, cDiscovery is able to scan multiple systems (CLM, CRM, ERPs, etc.) where contracts are stored to extract key data such as contract type, parties involved, pricing, discounts, start/termination dates, renewals, indemnification, IP rights, and much more.

If you’ve gotten this far and are feeling a bit like Dorothy – in an unfamiliar setting and unsure of where to turn – rest assured, you are not alone. In fact, the need for S2P transformation has increased so dramatically in recent years that Capgemini Consulting has developed a service offering – Technology Advisory – specifically targeted at giving companies the knowledge and tools necessary to make optimal S2P technology decisions. This is an area of particular expertise – partner with us and we’ll lead you along the yellow brick road to delivering significant value for your organization.


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