When adopting or expanding your e-procurement capabilities, the idea of a full suite end-to-end solution with the huge investment of time and money (thereby risk) might not be as attractive as an alternative, Lego®-IT or brick assembly approach.
One overriding feature of the procurement technology landscape over the past 15 years, which is often understated, is change; not so much in what solutions are being offered (of course fantastic, game-changing products have evolved over this period) but how the solutions are offered.
What I am referring to is the fact that at around the beginning of this century, the approach being championed by many providers of indirect procurement solutions was a single solution, from Source-to-Contract, integrated into Procure-to-Pay, ideally as a Cloud solution. In particular, the closed loop Source-to-Pay was key for technology players in the market, and some of them are still driving that agenda.
However, if you take a closer look at how procurement organizations have evolved in the last few years and what is really needed to address the clients’ desire to drive business outcomes, the demand for specific solutions for different processes, or brick assembly, upgrade or adaptation, pulls sharply into focus. This is becoming an increasingly attractive option, which I think is due to a few prominent factors.
- Procurement organizations have been investing in processes, technology, and change management for a long time and would like to reuse these investments. A new, one size fits all, end-to-end solution represents a huge investment, which many companies are trying to avoid. The priority these days tends to be given to smaller investments designed to bring faster ROI along with greater flexibility and ease of build.
- Procurement still needs to comply with IT strategy and roadmaps. As such, large companies are increasingly looking for solutions to address gaps in the existing process and technology landscape instead of trading in completely for a new end-to-end platform.
- Strategic procurement planning is seen more and more as one single function to obtain a holistic view over the whole supplier base, direct and indirect, to predict risks and opportunities for the whole organization, not only for indirect products.
Operational procurement for indirect purchasing is also moving more and more into focus as a business outcome driver through automation and industrialized spot buy and tactical buying scenarios.
In many cases, spend and supplier management is moving into on-premise solutions that are tightly integrated into vendor master and production systems, to have a real, 360-degree view of the supplier and spend base. On the other hand, smart solutions for operational and tactical procurement need to be able to drive user adoption, automation and industrialization quickly, not by exchanging existing solutions, but rather by enhancing them. This enables procurement to avoid huge IT strategy discussions and to gain quick time-to-value and quick ROI, thereby improving business outcomes.
This trend was predicted and indeed started before 2008 and can be described as a Lego®-IT approach. It has long been predicted that this approach will become more and more important in the coming years, in particular for non-IT related functions, specifically: procurement. I think this prediction is being born out as an increasing number of businesses discover the obvious benefits of fast ROI and flexibility.
Do you agree? Share your thoughts on Lego®-IT concepts around procurement applications.