Cloud e-procurement is procurement. It’s time to declare CD versions of e-procurement software — and in most cases, broader procure-to-pay (P2P) solutions, inclusive of e-invoicing — dead. Cloud e-procurement has not only become the de facto standard for even large companies going into new software selection processes. It is also now the perceived migration path for the majority of those organizations that we have spoken to recently that have previously deployed and installed software solutions such as Ariba Buyer, SAP SRM, Oracle E-Business Suite or PeopleSoft SRM.
We can distill down into three reasons why companies are investing in cloud e-procurement almost exclusively today.
Companies are gaining a greater understanding that their processes may not be the optimal processes. In other words, the rush to customize previous CD versions around a perceived optimal procurement process that was unique to a specific organization has now come full circle to most organizations wanting to conform to the “80%” norm when it comes to search, transactional buying, approval workflow, supplier onboarding/connectivity and the like.
We are hearing this more and more from large companies, as well, that want to be finished with the “our buying process is unique” refrain. The trend is for companies to want to learn from P2P providers — and by extension their current customers — and become a procurement version of the best practices buying “Borg” rather than being nonconformist. We see this especially with many of Coupa’s prospective customers.
2. Data Security
IT has largely given up the battle over data security and stewardship, has become an ally to procurement in certain cases and simply gotten out of the way in others. IT has come to realize that the cloud may change its role and value to the overall organization, but there is no turning back from the migration to externally managed solutions, especially in areas that do not confer strategic advantage or pose dangerous IP risk from an R&D, technology, operations, production or related perspective.
3. The External World
Companies are realizing that processes, transaction and information exist as much (or more) outside the organization than within. Cloud e-procurement is as much about connecting the external world with an organization than connecting internal procurement with suppliers. Supplier onboarding, transactional connectivity, SKU/supplier information, external benchmarks, leveraged contracts, demand aggregation and countless other elements of standardized or customized P2P processes all require the careful orchestration of external sources of supply, content and information. What happens inside the four walls is simply a part of the transactional buying battle. The main “war” on spend actually takes place externally and requires coordination between organizations. This is one of the reasons why cloud models are becoming ubiquitous.
There are of course other reasons why cloud e-procurement is becoming the preferred solution for the vast majority of organizations, including constant enhancements; lower total cost of ownership (TCO); faster deployment times; cheaper initial implementation costs; large SI/consultant acceptance and embracement of the cloud model; suite investment by providers primarily in cloud innovation versus CD, such as Ariba/SAP; and hybrid deployment options. And let us not forget for the 10–20% of the market that needs the ability to mirror complex CD environments based on heavy configuration/customizations and suite/ERP/business applications linkages — including Ivalua, Verian, SciQuest and BuyerQuest — that the cloud can finally deliver on what CD solutions could previously only do, and often more.
It is time for all of us to wave the cloud e-procurement victory “W” flag. With apologies to my Cubbies, who had a bit of a rough October, “Go Cloud Go.”
(Cross-posted @ Spend Matters)