Digital procurement tools – there are literally hundreds of them out there now. We have over 440 of them listed in our software database.
So, which one should be your first investment.
In this article I give you my thoughts about where I would start in a couple of different circumstances. I’m not going to suggest you go out and buy a specific brand of software, but rather I focus instead on the categories of tech and what order of priority I would put each of them in.
If you’re in a greenfield role as a Head of Procurement, especially in a mid-market, or smaller or growing business, this should help you cut through the noise.
Enterprise organisations are way more political, and the diversity of enterprise tech out there is huge. I’m therefore keeping things simple.
For anyone who wants to make a big impact in a greenfield procurement role and who doesn’t have corporate politics to grapple with, here is how I’d approach.
If you’re wondering what budget you need, we covered the cost for different procurement tech apps in a separate piece,
What big challenge could digital procurement tools fix?
Let’s assume a fictitious Head of Procurement role in mid-market business, with approx. $200 – $300 million in revenue.
You’re probably going to have a procurement team of around 10 for a business of this size. Maybe a few more if you’re lucky. If you’re still building your function, maybe it’s just you and a couple of Buyers. Especially if Procurement as a function itself is still quite greenfield.
These 10 FTEs should ideally be focused on strategic work. The reality though is that many of them are spending a disproportionate amount of time on tactical work and firefighting day-to-day operational purchasing issues.
Many of you reading this who are in procurement leadership roles at mid-market businesses, or coming into a greenfield role perhaps from corporate setting, will likely be nodding your head to this.
Resources and budgets will be a lot different vs. enterprise counterparts.
Let’s be real. You’re not going to be spending hundreds of thousands of dollars on a Coupa or SAP Ariba implementation. Nor will you likely have the luxury to invest in an expensive supplier risk, market intelligence or ESG platform. It’s no coincidence that most of these digital procurement tools are focused on enterprise customers.
I’m going to assume that you have no procurement tools in place, but you probably do have an ERP. Especially if your business is manufacturing or distributing goods. In high growth businesses and tech startups, you’ll at least have an accounting / finance platform to pay suppliers, even if there’s no ERP.
OK, now we’ve got the parameters determined, let’s get down to business. What procuretech would I implement first.
1. Spend analytics tools
It’s hard to sell a procurement team’s benefit to your stakeholders and to implement category management processes across key areas of spend if you don’t have a grasp of what those are.
That’s why I’d invest in a spend analytics tool first. Especially in businesses where data is coming from multiple ERP systems. If growth has been through acquisition, you probably have a lot of dirty and unstructured data. Getting to grips with this should be first priority.
Spend analytics tools serving the mid-market exist now, whereas they really didn’t even just 5 years ago. Expect to pay around $25k per year for entry level spend analytics software, and around $50k for something that has machine learning built in to help you with automatic data classification.
Proving ROI on a spend analytics tool in procurement should also be easy. Quantifying benefits of other procurement technology often relies on soft savings. Spend classification, on the other hand, can directly drive strategic sourcing events and negotiations which deliver tangible savings.
If you’re looking to get started, then Spendata or Onventis’ spend analytics module are both good entry-level solutions.
Take a look at Mithra AI or Spendkey for something a bit more tech-enabled with AI built in.
2. Source-to-Pay Platforms for mid-market
OK, so you’ve got a grip on what’s being spent where, and any areas of single-sourced products or services. Now comes tackling the transactional and administrative waste that’s part of your team’s everyday existence.
Next up for me would be a Source-to-Pay platform. Or perhaps a Procure-to-Pay tool with a best-of-breed e-Sourcing tool on top, if the budget allows for it. It really depends on how many strategic sourcing events you’d do versus the standard three-bids-and-a-buy type of RFX.
A S2P or P2P tool is key because very few procurement leaders in the mid-market have a well-resourced procurement team. Therefore, we need to free up their time to spend on more strategic work.
The biggest time suck for most small procurement teams is day-to-day supplier communication. Taking this outside of emails and spreadsheets will typically free up a couple of hours a day. Instead of suppliers or stakeholders coming to your team for info on PO and invoice status, they can use a P2P tool instead.
A few things to look out for here, based on the different S2P and P2P platform offerings:
- Do you need RFX functionality? Or perhaps even a more advanced e-Sourcing module?
- Is travel & expense management or issuance of virtual employee credit cards required?
- Do you want real-time visibility departmental or cost centre budgets in the system?
- Should stakeholders be encouraged to buy non-complex items themselves through punch-out catalogues?
- Is full mobile app functionality a must-have?
- Does the tool need to integrate via API to your ERP or accounting system?
- Can suppliers, requisitioners and accounts payable communicate with one another directly in the tool?
If you’re wondering how to navigate all of this, then don’t. We’ve done all of this for you. We’ve covered over 30 points of data across over 20 Source-to-Pay and Procure-to-Pay platforms for SMEs and the mid-market.
Contact us for more details, or for a quick intro call of what we’ve got covered in our analysis.
Still have budget? Lucky you…then what else?
What’s your biggest challenge over and above these two?
Every business is different, but I suspect high on the list will either be Contract Management, or Vendor Lifecycle Management and Supplier Relationship Management.
Again, these areas have seen a proliferation of digital procurement tools over the past few years serving the mid-market. Entry level solutions in each of these categories can be found for under $10,000.
Then you’ve got niche category tools focusing on specific areas of either direct or indirect spend in procurement.
There are best-of-breed applications now, specifically built for managing such diverse requirements SaaS procurement, transportation RFPs, print and promotional items spend, contingent workforce management, and subcontract manufacturing, to name just a few.
What if you’re Head of Procurement for an SME?
Before concluding, I wanted to cover anyone who heads up Procurement for an SME or a rapidly scaling tech firm.
Here, spend analytics is probably going to be less relevant because your spend and systems are likely not as complex.
I would therefore be focused first and foremost here on:
- Improving the intake and purchasing experience for stakeholders.
- Automating as much as possible of the invoice-to-pay process.
- Enabling suppliers to onboard and then self-serve in your P2P or SRM tool.
All of these are easily avoidable sources of administrative waste. Additionally, they are areas which commonly frustrate internal users and vendors alike if they are too cumbersome.
If your stakeholders and suppliers enjoy working with procurement and with your digital procurement tools, then it will be a lot easier for you to drive change and deliver value to the business.
Our analysis of P2P and S2P tools has you covered here too. We can get you to your destination much faster than if you try to figure this out yourself.
This means faster ROI and more savings delivered to your business, so it pays for itself.
