Benefits of Integrated Solutions: Sourcing, P2P, Supplier Management

This post is focused on the decision of selecting a niche vendor solution versus an ERP module that is seamlessly integrated. The question is often asked: Niche solution or the module from the ERP provider? There are many answers from various perspectives including:

  • Niche vendor or perceived “best of breed”
  • ERP/financials provider
  • CIO
  • CFO
  • Procurement/sourcing team
  • End user

Faced with this decision—which has multiple proponents, opponents, fans, and detractors—what are the important attributes determining the selection criterion and decision?

Niche also known as “best of breed,” “shiny new thing” or bolt-on perspective: The niche option decision is faced by all large companies and there are niche solutions that deliver what they say and are created with latest and greatest technology, but that is not what the decision can solely be based upon. If indeed it is best of XYZ, what are short- and long-term benefits and risks to your organization for selection?

  • How is the company funded?
  • How has the company delivered for other companies? Often times there are multiple smaller sales to populate a website with many logos.
  • Many companies have a philosophy to be first on the block to select newer technology, followed by less conservative companies that will follow the crowd.
  • All represent that integrations are part of deliverable to SAP, Oracle, Lawson, Infor, etc.
    • The type of integration is rarely detailed because flat file or FTP is the norm here. This is not true integration. There is continual testing of file formats as bolt-on delivers new releases and patch upgrade or major upgrades to ERP occur.
    • Real time integration is a rarity with bolt-on solutions for reason detailed in CIO perspective.
  • End user perspective of latest and greatest GUI often creates satisfaction in selection process, but that perspective is lost after deployment of any selected solution.

The ERP provider truly believes its module that competes against bolt-on solution is best. The reality is that because there is seamless integration to all modules, especially when integrating sourcing, contracts and supplier management, the GUI may not look as pretty as the bolt on, however the functionality is often within 90-95% of the bolt-on solution.

  1. The five to 10 percent differential is often what the ERP vendor has to differentiate and defend.
  2. Price is most often higher, but the cost is lower.
  3. ERP providers often have some flexibility in module up-sells.

The CIO often delegates some of the lower cost, perceived less strategic project decision to directors or VPs. When selecting sourcing, supplier management, contracts and integrations to existing purchasing and eProcurement solutions, the CIO would be remiss in not collaborating with CPO for this most valuable tool.

  • The CPO in today’s large company is often tasked and held accountable for bottom line profits based on spend savings!
  • Saving 10 to 20 percent of direct and indirect spend often adds more net profit to companies’ bottom lines than increasing sales by 10 to 20 percent. This is today’s dynamic facing CPO. The CIO needs to be a contributor to this profit generating project. Strategically, the CIO contributes the C-Level success in these dramatic savings.
  • Security: There is risk today that the CIO is responsible to secure. Frequently, your ERP vendor is the safer solution.
  • Integrations: The CIO knows and understands integration options, challenges and third-party solution integration expense versus integrated ERP where integration is seamless.
    • Bolt-on solutions require 3x testing for security, bolt-on upgrades, ERP upgrades.
  • Budget, sourcing, supplier management, contracts provide the highest ROI of all ERP/bolt-on investments, period.

Procurement and sourcing team. Sourcing often engenders excitement about latest and greatest “shiny new product.” Decisions made in a vacuum without procurement, IT security, IT integrations, and category managers result in unintended consequences and cost overruns!

Sourcing, spend visibility, contracts and supplier management solutions are a toolset. The critical success factors after deployment include:

  • Support of solutions
  • Support of the process
  • Support of suppliers
  • Support of end-users
  • IT support and integrations of contracts and supplier data
  • Support of event results populating in procurement systems to achieve the savings and monitor bottom line contributions. The result of the sourcing event projects saving based on purchasing again the agreements! If the results of event do not direct buyer and requisitioners to buy these sourced items, the savings are not realized.
  • PO need to correlate with contracts from repository via supplier management solutions.
  • Suppliers can facilitate load of successful event data to supplier portal to reduce sourcing/procurement team data entry.
  • AP 3 way match needs to facilitate all above.

End-user experience. There are two end-user groups: strategic and tactical. When end-users participate in a dog and pony show, the best of breed and bolt-on solutions shine. There is no doubt here. The question that needs to be addressed is that although companies want to collaborate and gain end-user buy-in, these are often strategic decisions and the end-users generally cannot effectively weigh pros and cons of solutions because they are rarely involved in security, integration or cost/price decisions. As a C-level decision maker, end-users will use what you select.

The trend today is that most Fortune 2000 companies are committing to their ERP vendors for security, integration and support reasons. The value of the relationship with ERP vendor grows exponentially and rarely effects future pricing in today’s competitive marketplace.