Single-Provider Solution or Best-of-Breed for Source to Pay

Tuesday, August 14, 2018

5 minute read

Single-Provider Solution or Best-of-Breed for Source to Pay

The Hackett Group’s Integrated Suite vs. Best of Breed study (2018) reveals that many organisations are moving toward a single, integrated suite for source-to-pay functions.

In the age of digital transformation, source-to-pay process automation is critical to organisational success.

The Value of Source-to-Pay Process Automaton

Developing a fit-for-purpose future-state design blueprint requires a clear understanding and documentation of current procurement processes. Implementing a new digital service delivery model that leverages emerging technologies requires harmonising existing processes with services as configured in these technology platforms. Customer journey mapping and lean methodologies may also be applied to solve existing problems and challenges. Both require understanding the current-state process architecture.

Even without newer digital technologies, core process automation has and continues to have a significant impact on our organisations. In an analysis of Hackett’s benchmark database procurement organisations with high levels of core process automation had:

  •   66% higher savings

  •   26% fewer clerical staff

  •   37% more savings from reduced maverick spend

  •   influenced 39% more spend.

Source-to-Pay Automation Technology

Organisations should take a systematic approach to digital. By focusing first on the core source-to-pay process, organisations can maximise use of automation for sourcing, contracting, and performance management. Modern cloud tools offer lower-cost and faster deployment options. And only after that can procurement leaders follow with newer technologies like cognitive, AI, or other emerging tools, as those technologies are dependent on the financial and supply data collection made possible through automation.

The investment in a modern portfolio of source-to-pay technology is fundamental to digital transformation. Software selection impacts user satisfaction, data management, process efficiency, and so on. One question that organisations struggle with, particularly in purchase to pay, is whether to bring on a single-solution provider via an integrated suite or take the best-of-breed approach. Each option has its own merits and pitfalls that will appeal uniquely to each organisation.

The Purchase-to-Pay Suite versus Best-of-Breed Solutions

Procurement technology providers today offer cloud-based integrated suites that package functionality across both upstream (source to contract) and downstream (purchase to pay) processes (Fig. 2). This is reminiscent of the way traditional enterprise resource planning (ERP) platforms historically combined business systems and processes in a single data model. By providing a common platform framework for system configuration, data management and process workflows, integrated procurement suites offer a way for procurement organisations to deploy technology as part of their digital transformation strategy.

The trend toward deploying integrated suites is a hot topic in procurement. While most organisations still rely on an ERP or a hybrid of source-to-contract or purchase-to-pay solutions, data collected from The Hackett Group’s Integrated Suite vs. Best of Breed study (2018) reveals that many organisations are moving toward a single, integrated suite for source-to-pay functions. However, given the differences between upstream and downstream processes, more organisations appear to be choosing to consolidate functional areas logically, such as purchase-to-pay or source-to-contract, over moving all functions to one source-to-pay provider (Fig. 3).

Software Suites Support Broader Source-To-Pay Capabilities

The development of integrated suites on cloud-based platforms also promises reduced data and process-related operational challenges in managing downstream processes related to supplier information management, contract enablement, and realisation of compliance and sourcing savings (Fig. 4). For instance, an integrated suite offers a common framework for system configuration that facilitates linkage between procurement policies, data management, process workflows, and reporting. Using standard, administrator-led configuration as part of the suite provides the potential to enable more complex workflows based on interrelated data, metadata, and supply base documents.

Further, integrated suites offer the potential to improve management of master data related to supplier, contract, item and article masters. Master data management is often accompanied by both inaccuracies and inefficiencies in areas like supplier information management and compliance management, due to use of internal data silos, and other barriers to collaboration, efficiency and visibility. By using a common data model, integrated suites provide an impetus to harmonise information that was traditionally spread out across systems (MRP, ERP, spreadsheets) and departments.

How to Get Started

As procurement organisations consider replacing their existing systems with newer, cloud-based platforms (as part of their functional digital transformation), they must decide how much functionality can be consolidated safely and effectively onto fewer platforms, or even a single platform. These decisions need to be made within the wider context of the enterprise’s overall digital transformation goals. While purchase-to-pay organisations face a variety of options for their software suite, finding an efficient software solution is generally a great initial goal to set. Once a longer term technology backbone is in place, leaders can turn their focus to the new and exciting emerging digital technologies that enhance visibility, predictability, compliance, security, and agility.

Ready for more?

Check out Basware’s comprehensive guide to source-to-pay automation and reach out – they are standing by to help.