In this blog, Paul van Rietschoten, managing director and founder of Spendlinq, outlines the development of the software landscape. Where do we stand now, in 2023? Is the choice still as black and white or are there more colours in the spectrum?
For several decades, the choice between a best-of-suite or best-of-breed approach was one of the most important decisions when digitalising the procurement and invoice processing process. Specifically, this meant a choice between software that supported all business processes or software developed to optimise one specific business process. In the late 1990s, this often led to questioning the existing ERP package. From a functional and technical perspective, many organisations at the time preferred to have all their business processes in one comprehensive system. Little by little, more specialised software did emerge, but organisations hardly went beyond an ‘ERP unless’ policy, defined by IT departments. You really needed to have a very strong case from a functional perspective to introduce something new. In this blog, Paul van Rietschoten, managing director and founder of Spendlinq, outlines the development of the software landscape. Where do we stand now, in 2023? Is the choice still as black and white or are there more colours in the spectrum?
“In our field, organisations started using specialised procurement technology when the first e-procurement solutions arrived, especially for secondary or non-strategic procurement categories,” says Paul. “An often-heard argument was that ERP was not very user-friendly, and that these new solutions would enable all, often occasional, users to place orders without any training being necessary. Reference was often made to the user experience of well-known web shops, where consumers went through virtually the same process, only from a B2C perspective.”
“Another important reason for this type of solution to become popular lay in the fact that the software was available on the Internet and not only covered the purchasing side (buy-side), but also offered functionalities for suppliers (sell-side),” adds Paul. “ERP software on the other hand mainly focused on automating internal business processes, and therefore did not really allow for communicating externally with suppliers. The first generation of e-procurement solutions enabled organisations to more easily exchange transactions with their suppliers.”
However, there were also significant drawbacks to the first generation of procurement software. First of all, integration with existing technology left a lot to be desired. In practice, this often led to sub-optimal collaboration between applications. In addition, these solutions offered only limited functionality. The software was mainly suitable for facilities procurement, while organisations naturally have a much broader procurement package and, perhaps more importantly, these software applications did not support the integral process. “This integral approach is very important, because the operational ordering process is inextricably linked to any preceding processes such as strategic purchasing, supplier and contract management, and it is also directly linked to the invoice processing process,” adds Paul. “Before you can pay an invoice, for example, you need information about the employee who placed the requisition order and when, and whether the products or services have actually been received. And when an employee places an order, you would of course prefer them to use only suppliers with which the organisation has a contract and which have gone through an accreditation process.”
“This situation led to the emergence of more fully integrated Purchase to Pay (P2P) or even Source to Pay (S2P) solutions,” explains Paul. “In this way, more and more good alternatives to ‘best-of-suite’ ERP applications came on the market, not only internationally, but also locally.
Nevertheless, many organisations were still not entirely convinced about such a best-of-breed strategy. In fact, the demand for more integrated applications increased so much that many providers felt compelled to add missing functionalities to their best-of-breed solution. However, this often led to insufficient technological conjunction. Individually, these solutions would offer acceptable functionality for the various parts of the process, but their mutual integration still left much to be desired.
“At the same time, competition increased due to a growing number of specialised providers, which in turn gave a whole new dimension to the choice between best-of-suite versus best-of-breed,” says Paul. “Opting for a best-of-breed S2P/P2P solution often meant compromising on the quality of handling the various parts of the process only because it all had to fit into a single application. In fact, the whole discussion around ERP seemed to repeat itself.”
“In recent years, more and more software providers have decided to focus on developing the very best software for specific applications, such as Contract Lifecycle Management (CLM), Contingent Workforce Solutions (CWS), Supplier Relationship Management (SRM), Travel & Expense Management (TEM) and Accounts Payable (AP). And this trend is still very strong, driven by the fact that the latest technological developments have made integration a standard functionality rather than a separate and costly project.”
“This development is very good news,” says Paul. “The software landscape has evolved to allow endless combinations between ERP, best-of-suite S2P/P2P and best-of-breed S2P/P2P solutions. The choice is no longer black and white, but comes in many different colours! You can now choose exactly those ‘colours’ that suit the specific needs and ambitions of your organisation and employees. The choice you make will take into account the applications you already have and which are working well, but it also allows you to fill any gaps in the best possible way. You can go for a multi-coloured solution that will meet your specific requirements and result in the successful and sustainable digital transformation of your S2P/P2P process.”
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