How to Adopt Best-Of-Breed as Part of a Procurement Digital Transformation Strategy
Table of Contents
A new era for Procurement
Recent disruptive events have been forcing Procurement to become more agile and resilient. Procurement practitioners agree that these demands will have to be supported by digital solutions.
As a result, interest in best-of-breed solutions has been quickly growing, with a significant rise in their adoption and overall investment.
“There are more and more new solutions that enable large companies to capture the business case that they see in certain categories or domains. Because there’s so much innovation and VC money now in the field, it’s not possible for any player, even for the SAPs or Coupas of the world, to cover all of the areas. I think that opens up an opportunity for businesses, and smaller players, to fulfill certain specific needs. Because of cloud, because of APIs and so forth, it is feasible for companies to complement transactional process systems with these best-of-breeds,” says Sammeli Sammalkorpi, CEO at Sievo.
In this article, we explore:
- Why best-of-breed solutions are needed
- Re-defining ‘value’
- Planning for best-of-breed
- Elevating the role of Procurement
Why are best-of-breed solutions needed?
While single suites have elevated Procurement to the important function it is today, they can not always support the specific needs of the market, especially when it comes to complex supplier relationships. Intricate processes within large enterprises and the need to facilitate two-way communications or workflows in niche areas are frequently found to be outside the scope of ‘integrated’ suite solutions.
Pierre Laprée, CEO of Per Angusta, comments, “The fact is, within a lot of the big suites, the incumbents, or the legacy players, no one has ever been really close to what Procurement is, and the result is that these things have been built by people with no real procurement experience, or second-hand procurement experience. They are brilliant pieces of technology, don’t get me wrong, but to me as a former practitioner it always feels slightly disconnected from my day-to-day reality.”
As a result of the single suite approach lacking functional depth and flexibility, best-of-breed software has emerged as a way of bridging that gap. In our recent survey on the topic, only 9% of respondents were committed to retaining a pure suite strategy while 38% now prefer a hybrid approach, with a growing number preferring best-of-breed software, at 16%.
“As a result, we’ve seen more niche solutions that have been addressing very specific needs, very acute pains on the market that were not properly filled or fulfilled by the suite vendors,” Pierre Laprée adds.
It should not come as a surprise that large enterprises have been the ones heralding the adoption of best-of-breed alternatives, as they have not only experienced first-hand the shortcomings of the single suite but also have more complex requirements across Source-to-Pay than what a single suite solution can handle.
“What we have seen, at least with our customers, is the ones that are in industries which have very mature procurement functions, is that they have started to trend more and more to best-of-breed. Because, if you think about it, as a procurement function matures, you have more acute, specialized needs,” Costas Xyloyiannis, CEO of HICX adds.
According to Dr Elouise Epstein, Partner at Kearney, as a result of the rise of best-of-breed solutions, “the future-state technology architecture will be an ecosystem of connected microservices offering value-creating point solutions.”
The diagram shown below, termed as ‘the procurement value chain deconstructed’ consists of centralized platform components, supported by a range of specialist solutions from providers with deep expertise and knowledge in specific fields.
The flexibility of best-of-breed solutions means that once the market evolves and needs change, new services, such as around sourcing or pricing, can easily be added to the system.
A good data foundation will be a key driver of new services, which means having the right centralized platform configuration to provide the basis for enablement of a best-of-breed landscape is crucial and needs to be taken into consideration when planning a best-of-breed strategy.
Planning for best-of-breed
A common misconception is that best-of-breeds are trying to replace single suites. Rather, they are complementing them by adding on more functional capabilities.
As Costas Xyloyiannis explains, “There is a place for the suite. That’s why they’re there, I wouldn’t argue against that. It definitely isn’t a question of ‘one or the other’ because the suites themselves are ‘best-of-breed’ in specific fields.”
A key factor that determines the success, and a starting point of planning a best-of-breed strategy, is setting the right data foundation which will be able to support the hybrid, best-of-breed environment. The most sustainable way of managing supplier data is by creating and controlling a single-entry point, such as via a supplier portal. It is much simpler to funnel data through one entry point down into different systems rather than creating multiple different systems and then struggling to bring it all together.
According to Adriano Garibotto, this is vital as, “In the last years, with more and more sophisticated processes supported by those platforms, you require more sophisticated fuel, and the more sophisticated fuel is the quality of the data.”
With the vast number of solutions available on the market, it can be hard to choose the right one which aligns with the overall business goals. Dr Epstein has defined six principles which should guide the organization throughout the evaluation process. These include:
- High quality data
- Ubiquitous analytics
- Full automation
- Best quality user experience
- Enabler to create value: The focus should move away from ‘cost savings’ to ‘growth enablement’
“There are a lot of facts out there to show that the old way isn’t working. We’ve also seen that best-of-breed ProcureTech is going to happen. So, you can either plan for it, or let it happen. But it’s going to be much more successful if we are planning for it,” Costas Xyloyiannis adds.
Elevating the role of Procurement
Being suite focused often means an organization is making technology-driven, rather than business-driven decisions. Anthony Payne, CMO at HICX, explains that most large companies tend to address issues on a department-by-department basis, despite the fact that the workflow often spans multiple departments, and with it, the issues. This leads to poor visibility into the end-to-end view, causing more long-term issues.
Andrea Sordi, Academic Director, Global Supply Chain Institute at the University of Tennessee, believes, “We need technology to be able to handle multiple suppliers, and the last two years demonstrated that, as we needed to expand our collaboration with the supplier base for creativity, for innovation, for resilience, for many, many different reasons.”
The visibility and collaboration enabled by best-of-breed solutions provide the foundations for elevating the role of Procurement as a partner for business and as a partner that is able to drive corporate objectives.
Pierre Laprée believes the way to achieve this successfully is by having tough conversations with other departments, particularly Finance, and deciding on overall priorities. “So, the way to do that is to have transparency, alignment and collaboration. This is what will help us elevate the role of Procurement,” he concludes.
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