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June 18, 2015

Getting clarity for building a holistic approach to Procurement technology (Part 1)

Terms like eSourcing, ePurchasing, and eProcurement that describe the electronic “source-to-pay” processes have been established for some time, probably a decade or more. But when they become interchangeable, or are used inconsistently within our industry, it makes understanding their differences and why they’re important confusing.

Lack of common definition is not just a challenge for practitioners but for analysts as well. For example, Forrester Research notes the definition of ePurchasing as the entire source-to pay-process, while Gartner describes ePurchasing as only a part of the wider procure-to-pay process for indirect procurement.

eSourcing is a little clearer, but there are often inconsistencies of what truly comprises an eSourcing platform, and whether the definition should include areas like contract or supplier management. Moreover, what should or should not be included in a platform has changed over the last decade; what was once accepted as discrete functions may now be outdated due to changes in the business environment.

Discrepancies in defining technology often demonstrate why organizations are bewildered about how to manage their source-to-pay processes. It may very well be why driving change to add value with technology is met with obstacles. You might have heard of a few scenarios including the following:

  • A lack of clarity of who owns the tool that was started with a separate P2P or Sourcing platform. Several years later, the low rate of ROI is still being debated as the result of lack of user adoption.
  • Answering wider ERP deployment questions with “Oh yeah, our ERP solution has a module that can do that” often disregards the benefits of using a best-of-breed solution. These tools are usually designed from the ground up to integrate with ERP and manage a specific source-to-pay process in question.
  • The desire to implement everything “best in breed,” but becoming aware, two years into the deployment, that organizational changes have taken place preventing the realization of ROI. Typically, a merger/acquisition may have replaced your P2P or Sourcing platform with the incumbent solution already in place.
  • The inability to find answers for how to fit contract management or supplier management into the existing solution framework. Given the increasing burden of risk and regulatory compliance, it has become procurement’s Gordian knot. CPOs need a simpler solution by cutting through the complications of the past with new, innovative approaches.

During a recent webinar, Building a Holistic Business Case for Procurement Technology, we briefly touched on the challenges that modern CPOs have in building the foundation of procurement technology. Joined by Forrester’s senior analyst, Duncan Jones, we highlighted the struggle to secure a budget for investing in vital procurement software. The challenge is to describe, “What is the intent of technology and where value will be extracted,” particularly when confronted by other key stakeholders like Finance and IT.

It is perhaps easiest to explain the source-to-pay process by its two core areas – “upstream” in the context of strategic sourcing and “downstream” for procure to pay. It becomes simpler to understand the role of electronic contract management or supplier management in the bigger context defining eSourcing or eProcurement solutions.

Over the next series of blogs, we plan to touch on the nuances of the upstream and downstream definition further, and look to provide some insights for helping promote a holistic procurement technology approach.

In the meantime, how often do you hear these terms eSourcing, eProcurement, or ePurchasing? Do they cause confusion internally? What is the most challenging element in trying to describe what you need from technology or convincing your peers in finance or IT that a solution is needed?

* Read this paper to learn about how procurement contributes to bottom-line savings, which tools are best to track reduced costs, and new ways to increase profitability.

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