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Focus: Sourcing/Procurement: Feature Article from Our Sourcing and Procurement Subject Area - See All

From SCDigest's On-Target e-Magazine

- March 26, 2015

 
Supply Chain News: Strategic Sourcing Software Enabling Companies to Continue to Raise the Bar on Capabilities, Gartner Says

 

Best-of-Breen Vendors Continue to Dominate, as Cloud Delivery has become the Standard

 

SDigest Editorial Staff 

 

A few weeks ago, the analysts at Gartner released their latest "Magic Quadrant" for strategic sourcing applications. While we can't publish the actual MQ itself, with its series of vendor "dots" (that's reserved for Gartner clients, though some of the vendors make the document available on their web sites if you do a search), we can summarize much of the surrounding commentary, which is very interesting.

First, some definitions: Gartner defines strategic sourcing application suites as a set of related, integrated solutions that support "upstream" procurement activities, meaning the strategic work a procurement organization performs for planning, assessment and performance management. That as opposed to basic procurement software - usually from an ERP provider - that do the basic transactional blocking and tackling related to operational requisitioning, ordering and payment processes.

SCDigest Says:

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53% of the vendors covered in the report offer the ability to approve a contract or sourcing event from a mobile device, up dramatically from 34% in 2013.

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"Gartner says within that strategic sourcing context that there are four main blocks of functionality in supporting software application suites:


Spend analysis: Software for cleansing, enhancing and classifying spend activities. This category of solution generally features rule-based data cleansing, automated category-level classification, analytics and decision support. Automated spend analysis is used in procurement and sourcing to quantify spend by supplier, category, item and more and to identify opportunities for cost reduction through improved procurement leverage and supply base resizing.

E-sourcing: These applications help organizations solicit and evaluate information, such as RFIs and RFPs. Gartner says this category of software supports "project" bidding where the outcome is a long-term agreement. Some solutions enable large-scale, complex bid events with thousands of line items and awards spanning multiple suppliers."

Contract management: The solutions in this category of sourcing software help organizations document and track supply agreements. Gartner says that contract management functionality offered by sourcing software vendors varies widely. At one end of the spectrum, they create a database of information such as supplier name, agreement value and expiration date. At the other end, some suites support contract negotiation, pre-signature approval workflow and post-execution activities, such as version control, burn rate tracking and change order management.

Supply base management (SBM): These applications help procurement organizations solicit and manage supplier information, risk and performance. They accomplish this by providing a means and a place to assemble, archive and organize supplier data. SBM data sources include information such as contact information, insurance certificates and plant locations collected directly from suppliers through a portal interface. Third-party information can be pulled in via web services, RSS feeds or manual input, and can include financial performance data, social sentiment analysis, news and public information, such as export filings. Internally generated data, such as audit records and performance statistics, round out the information managed in the SBM module

Gartner says other functionality sometimes available in strategic sourcing application suites includes project management, category management, savings tracking and supplier marketplaces.


New Capabilities Enabling Procurement Transformation


Of course, there has been a substantial evolution - perhaps better characterized as a revolution - in the procurement profession over the past 25 years. Over that time, procurement organizations have transformed from paper-intensive processes focused on purchase order processing to a strategically-oriented enterprise function working to fully leverage spending power to build a competitive advantage.

The advent of the Internet, and more recently the Cloud, have enabled collaborative capabilities in procurement and served as a trigger for a new generation of procurement solutions that support and enable this transformation, Gartner says.

This procurement transformation has naturally impacted the market for strategic sourcing solutions.

"A decade ago most organizations expected to license, deploy and significantly customize an ERP vendor offering to serve as a "system of record" for upstream activities," Gartner says. "Most of these initiatives failed because ERP solutions are architected for transaction-oriented processes."

Instead, the market for strategic sourcing software is now dominated by "best-of-breed" providers (including SAP's Ariba unit), today largely delivered as packaged, multi-tenant SaaS solutions that deliver much of the needed functionality out of the box, Gartner says. These best-of-breed solutions have displaced the ERP-based sourcing modules "by delivering a knowledge-management-oriented flexible architecture, quicker time to value, lower overall cost of ownership and order-of-magnitude improvements in access to innovation," Gartner notes.

Interestingly, none of the solutions evaluated in the 2015 strategic sourcing Magic Quadrant are native ERP applications, again noting that SAP's Ariba unit, acquired several years ago, is in the leadership quadrant in the MQ.

The focus of procurement leaders now, Gartner says, is to use the software to better track procurement savings, measure and monitor supply risk, support advanced category management, and leverage community/ecosystem knowledge.


(Sourcing and Procurement Article Continues Below)

CATEGORY SPONSOR: SOFTEON

 

All that said, "Prospective buyers looking for leading-edge capabilities should anticipate that suite vendors may not meet all their needs, Gartner writes. "Niche vendors may be the most effective choice for point capabilities such as supply base management and sourcing optimization."


Key Strategic Sourcing Software Market Trends


Garter identifies a number of key market trends In the strategic sourcing space:


Multi-tenant SaaS delivery dominates: Eighty-one percent of the references provided for this report are deployed as multitenant SaaS. Fourteen percent are private cloud, and the remaining 5% are on-premises installations. The major driver for multitenant SaaS is significantly easier upgradability and, thus, access to innovation. Organizations chose private cloud or on-premises delivery when they wanted to customize their solution and/or maximize privacy.

Mobile support is on the rise: 53% of the vendors covered in the report offer the ability to approve a contract or sourcing event from a mobile device, up dramatically from 34% in 2013. 85% support HTML5, up from 69% in last year's report. Half offer a touchscreen tablet client.

Big data is on the rise: 70% of the vendors in this report offer a supplier marketplace, although SAP Ariba's network is by far the most extensive. 36% of vendors pull third-party data into their suites for at least half of their clients, and 65% allow suppliers to input once, for multiple buyers to access, common "firmographic" data such as the tax ID and address. However, only 14% offer social sentiment analysis and tracking out of the box.

Procurement is the buyer: 82% of references said procurement was the lead decision maker for selecting a strategic sourcing suite. The next-closest role was supply chain at 17%. IT was the lead decision maker only 10% of the time.

Private cloud (single-tenant SaaS) solutions are proving significantly more difficult to upgrade than multi-tenant cloud solutions: Reference clients graded all solutions delivered primarily via private cloud low in terms of ease of upgrade.

Strategic sourcing suite vendors are getting serious about SBM: To date, SBM has been dominated by niche vendors in supply risk and governance, risk, and compliance. Several references in this report utilize their strategic sourcing suite vendors to build extensive programs for tracking risk, information and performance.

The systematic import and use of third-party data, such as financial viability scores or social analytics, in strategic sourcing suites is not widespread: Half of the vendors in this report indicated that fewer than 25% of their clients have configured their strategic sourcing suite implementations to pull in third-party data.

The report concludes with an overview of requirements for strategic sourcing software specifically for discrete manufacturing sector. SCDigest will report on that next week.


What do you think of Gartner's Take on Strategic Sourcing Software? Let us know your thoughts at the Feedback button (email) or section (web form) below.




Recent Feedback

Great article. However after accessing the magic quadrant it needs the following to be answered. I wholeheartedly agree with most of the placements, especially Ariba, Zycus and Invalua - however the glaring lack of Coupa in any quadrant makes one ask "Is this really an unbiased quadrant or did Coupa just not spend enough money with Gartner to be considered?"


Dawn Tiura
CEO
Sourcing Interests Group
Mar, 27 2015
 
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