Legacy Source-to-Pay suites and big consultancies seem to stick together like birds of a feather.
Have you ever taken a critical look at why this might be?
If not, then you’re in the right place. I’m going to try and break this down for you, and show you why large consultancies definitely aren’t your trusted friends. They’re not impartial, and they certainly don’t have your best interests at heart.
At the end, I’ll also offer you some alternative options if you want some fresh, independent thinking. Jump to the last section if you can’t wait and want to skip the main article!
Big 4 + legacy Source-to-Pay suites ≠ innovation
Big consultancies have a very corporate mentality.
Because that’s the client base whom they typically serve. Their digital procurement team usually won’t know that much about the non-enterprise software market. And yet, there’s a whole world out there of procurement software solutions that don’t serve large corporate organisations.
In fairness, there are some great individuals working for some of these consultancies, extremely knowledgeable about digital procurement. But many are also unaware of the software that serves small and medium businesses or mid-market companies.
How do I know this? Because I can see email addresses from major, household name consulting firms who have downloaded our Procurement Tech Map for Mid-Market and Procurement Tech Map for SMEs.
Big Consultancies are susceptible to flawed Analyst Reports
Many large consultancies have subscriptions to the major research houses, for example Gartner, Forrester and IDC. Then you also have the more niche providers focused on procurement, such as Spend Matters or Ardent Partners.
Analyst reports, especially those firms which don’t solely focus on procurement tech, usually only take into consideration legacy, established players. Often, the criteria for making it into a Gartner Magic Quadrant or Forrester Wave means they must meet certain feature requirements to even be considered.
If a software solution doesn’t have a specific functionality, then it’s cast out. That’s how rigid some of these reports are put together. But the success or failure of a digital procurement transformation is rarely down to the esteemed features of the Source-to-Pay suites. It’s much more nuanced than this.
Even if we ignore the people factor aspects of change management, analyst reports rarely consider user experience, speed of implementation and time to ROI.
I get it that a researcher has got to be scientific in his or her analysis and has to be objective rather than subjective. Research houses must set an evaluation criteria and minimum requirements for the software that they’re comparing.
This is where large consultancies need to take the initiative are also consider some of the up-and-coming solutions. If they’re beholden to research houses, it’s little wonder that they’re only talking to the legacy tech players.
Are big consultancies impartial…or milking affiliate commissions?
Let’s however now turn to a more sinister reason why big consultancies love the legacy Source-to-Pay suites.
It’s because there’s a direct conflict of interest: namely, they’re receiving partner commissions for each sale they make.
A large consultancy will typically partner up with one, maybe two, specific legacy S2P software suites. Usually, it will be one of the big boys. By those, I mean SAP Ariba, Coupa, Ivalua, Jaggaer, maybe also GEP or Zycus.
The major consulting firms have a lot of leverage. They have huge marketing budgets, sales teams and reach, as well as global branding. They’re going to want something in return for partnering with a Source-to-Pay suite as an implementation or consulting partner. “Something in return” usually comes in the form of affiliate commissions. Each license, enterprise plan or module that they sell will be incentivised.
So, there’s obviously a massive conflict of interest. If you approach a consulting firm who’s a partner of one of the S2P suites, you’re not going to be receiving impartial advice.
Don’t all consultancies have software partners?
Yes, some – but not all – do. And it’s not necessarily unethical. You just need to ask them the right questions.
For the sake of transparency, we at ProcurementSoftware.site also have software partners we work with. More on this, as well as full transparency on how we work, at the end of the article.
The point here is this.
If you’re getting a 20-30 % commission on software sales typically north of $1 million, that’s a big chunk with each sale. It’s obviously a lot more than if you’re getting a 20-30% commission on a product that costs $50,000.
Selling a more expensive product equals a higher average commission per sale. Meaning consultancies are incentivised to sell more expensive software, regardless of whether it’s the best product fit for the customers.
All these big consultancies have very expensive office towers in big, tier 1 cities. Commercial real estate in these places is expensive. Someone has to pay for it, and that “someone” is the dairy cow that is their client.
Yes, there are commissions, but the real $$$ is in billable hours
So, we’ve seen that there’s a conflict of interest in terms of consultancies shilling S2P suites who are paying them partner commissions.
Maybe some of you figured this already and just shrugged, acknowledged the conflict of interest, and thinking, well, that’s capitalism.
Let’s turn to how large consultancies really earn their money in terms of digital procurement transformation projects.
It’s on implementation.
The holy grail for consultancies is still the business of selling hourly labour. This is a dinosaur business model that is overwhelmingly calculated on time and materials, rather than tangible outcomes.
The way they price projects is typically based on how many consultants they need to provide for the project. Junior resources are like the infantry. You have a lot of them, and they’re just following orders. Then you’ll typically have a senior manager leading the project and managing the team of junior consultants. And finally, there will be a principal or maybe even a partner that’s overseeing it.
Big consultancies are essentially selling their brand name and their process. The junior consultants that actually are doing the implementation are recent graduates. They’re not highly experienced digital procurement transformation professionals. They’re following a playbook and doing exactly what they’re told.
So essentially, you’re paying for the process knowledge and track record of these large consulting firms. You’re not getting skilled experts with a deep knowledge of Source-to-Pay processes implementing your software.
Legacy S2P suites are complex; big consultancies love that
Implementing enterprise Source-to-Pay suites is complex. They require a lot of configuration and customisation.
Even in cases where the end customer knows exactly what they want, and have a team of A-players on their internal team. Best case, you’re looking at 3-6 months to implement Coupa, SAP Ariba, or a direct competitor product.
On the other hand, if the client is clueless and not well prepared, it’s often years rather than months, depending on the project complexity. A consultancy is going to rub their hands at this situation. They can build in a lot of contingency and “what ifs” in their pricing.
If the client is unable to really push back on this in negotiations because of lack of in-house expertise, the consultancy will often exploit the typical profit-maximising “land and expand” strategy.
In their defence, the client should be prepared. But the profit margin for the software implementation consulting with these legacy suites is often huge as a result. The more consultants you can deploy to fix stuff when it goes wrong, and the longer that a project takes, the more profitable it becomes.
Of course, I’m not accusing every implementation partner for large S2P suites of being guilty of this. However, it’s certainly easy to see where the conflict of interest lies.
If a project starts to go a little bit off-track, then they can just throw more resource at it and bill you even more consultancy hours. And the sad fact is that clunky and complicated software requires a lot of consulting resources because it needs a lot of technical configuration.
Implementation of Source-to-Pay suites is just the start
So, we’ve already looked at how it takes a long time to configure and launch legacy S2P software.
After this, you’re going to have their consultants in your operations during the hypercare phase because it’s complex system. You’re then probably going to need them in your organisation to train people within your team as superusers.
This isn’t the type of software you can watch a few YouTube videos and figure out yourself.
You’re possibly then going to need them to help with internal comms because you don’t have the in-house resources to do this effectively. Either because your procurement team’s resources have been cut to the bone or because, well, procurement isn’t known for being stellar at internal comms.
And then, what if you need any sort of additional software customisation further down the line? Perhaps you find six months, maybe a year after launch, that something doesn’t really do what you want it to, and you’re going to have to customise it further.
Who ya gonna call?
Clue: it’s not Ghostbusters.
This is a relationship you’re going to find it increasingly difficult to break free from.
Why? Because you didn’t know what you were getting into, and you didn’t properly understand the conflict of interest.
You may even end up needing some kind of managed service from the consultancy to plug gaps in your team’s capabilities or resources. Implemeting complex software means you need a competent team and substantial resources.
Don’t have them?
Then a big consultancy will treat you like the gift that keeps on giving.
There is a better way
Before we finish up, I’ll explain a little about how we work at ProcurementSoftware.site when it comes to affiliates and partners.
Yes, we do have some affiliate partners where we get a commission if we recommend them. They’re listed transparently on our website.
But we only look at these solutions exclusively if a client comes to us and doesn’t have a budget for consultancy.
If a client approaches us for impartial advice and we’re billing them for that, we forfeit any software commissions and offer a completely independent appraisal of who is out there on the market offering what the client specifically is searching for.
I set up the business this way because I fundamentally think it’s unethical to take money from a solution provider and a client at the same time.
So, we’ll do either one model or the other, but never both. Because that’s a blatant conflict of interest.
Want impartial advice on the procurement tech that’s out there?
Then we’ll do that, at a fair price (because we don’t have fancy office towers in Tier 1 cities and we’re a fully remote team).
But I’m certainly not going to be taking any money from the solution provider in addition.
No software is the best fit for every single potential client. They each have nuances in the type of product that they’re looking for and the specific challenge it should solve.
That’s why we recommend a tailored approach.
If you’re interested to have a no obligation, 30-minute intro call, schedule some time with me here!
Beware of Big Consultancies claiming to be your friend
If you intially thought large consultancies and their legacy S2P suite partners are trusted, impartial advisers who will advise you objectively, then I hope you’ve woken up and smelt the coffee.
Let’s make procurement tech advisory ethical again. That’s our mission.
Oh, and by the way, if you’re not an enterprise organisation, most of these legacy Source-to-Pay suites won’t be a good fit for you anyway.
We’ve done research on over 20 easy-to-implement, user-friendly P2P and S2P solutions for SMEs and the lower end of the mid-market.
Curious as to who’s out there? Reach out and book a free intro call, and I’d love to walk you through the possibilities.
