Source-to-Pay Insights from Nitor

Procurement Technology is for Every Organization (yes, even yours!)

Posted by Lynn Barras on Aug 3, 2017 9:54:53 AM

Procurement technology is now for everyone. This has not always been true. The perception has been that procurement technology solutions are too expensive, do too much or are not worth the incremental investment. This is now simply false.

Let’s dig into this:

1- The Tech Industry wants everyone to have access, including mid-market organizations

The evolution of technology in general and procurement technology is as follows:

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1970’s and before…

Giant buildings with huge air conditioners housed massive mainframes that ran on tapes and cards. These mainframes barely had enough RAM to check emails – something we now do on our iPhones with ease. Life was better, but still big, expensive and required a degree in Engineering.

1980’s – The ERP!

Enter the ERP era; Enterprise Resource Planning can solve all of your core business functions! AP, AR, GL, Finance, HR, Operations, Manufacturing…and yes, Procurement. A light-year jump forward, one place for all of these functions to coexist among 1’s and o’s.

Mid to Late 90’s

Thank you Al Gore (yes, we know the invention of the internet is still a debate)! Netscape, AOL and eventually Google entered the market. Email, Calendars and intranets! Things were looking up and by the late 90’s the famous tech boom hit. Internet accessed software (but still behind the firewall) and provided a new level of agility and connection. In our case, this was between buyers and suppliers.

2005 – Today

The age of cloud, super-computing, rapid development, satellite ‘plug and play’ applications. Either personally and/or professionally, we all know this story and live in the cloud.

Why is this important? At each stage of maturation in the commercial tech industry, the innovation revolved around access. Be it access to technology, access to markets, access to verticals or access to information. As this evolution has taken place it is no accident that more and more organizations (enterprise, mid-market, small business, global) have been able to make similar investments.

Finally, software companies love big valuations. Nothing drives valuation more than customer logos and a new base of recurring revenue.

Reason #1 why procurement technology is for everyone – from the biggest to the smallest software company, they want you in their ecosystem.

2 – Availability of Information

We all crave data and information and we know it is there. Whether in our personal or professional lives, our access to organized data sets has made us truly data driven.

For example, when I log into my bank account (via the app of course) I am greeted by a dashboard of categorized transactions, personalized product offers, messages and the ability to dig into any transaction I may not immediately recognize. I crave that, I expect that and I depend on it being there each time I log in.

In a professional setting, whether your organization has Spend Analytics or not, we have all been to the conferences or attended the webinars where we see the same power- the ability to drill down into Level 4 UNSPSC by Business Unit and put a giant target on the Marketing team (no offense Marketing folks!).

The point is, we know the data is out there. Our CFO’s are asking us to provide it. We need it to properly source and report our operational efficiencies. The demand is high and this is yet another reason why procurement technology companies are adapting to provide small and mid-market organizations solutions in a cost effective way.

3 – Cloud Investments are Paid Off

A pure cost driver from 2005 to 2010 for most software companies was the conversion to the cloud. There is a massive upfront cost to architect and move the code base to a cloud platform. Beyond that, there is physical infrastructure, testing, redundancy, disaster recovery plans that have to be considered, tested and re-tested. This list goes on, the point is just to move to the cloud was a major capital cost.

Beyond the initial investment there was years of sizing and re-sizing – data centers, servers, database software, network issues and overall performance. This naturally took a very long time to get right and continues to be tweaked and re-invented.

The recovery of that investment and required ROI has been achieved. Those that were on the innovator curve, quite simply paid more. We have seen a consistent and enduring flexibility in cloud software purchases across the board. Actual price, how you pay, when you pay, on what basis you pay – are all fair game in negotiations.

The other way to think about this is fixed-cost basis. In today’s world a software company delivering a cloud application to a single customer has a fixed cost (data center, server, software licenses, physical security etc.) of between $20,000 and $50,000. With that reduced fixed cost, it provides a platform to make software affordable relevant to who you are, how complex you are and how you intend to use the solution.

4 – You CAN Deploy in weeks not months

Another myth that exists is that Procurement technology solution deployment takes the same effort as an ERP deployment. This is false. So lets just agree on this point and move on to our actual point here:

If you believe;

  1. Technology is about inclusion not exclusion
  2. Demand for information exists in companies of all sizes
  3. Procurement Technology companies can afford to sell software to you

Then…deployment has to be simpler and cheaper while still delivering the same functionality and problem solving capabilities as any project before it.

Well, at Nitor part of our business is deploying procurement technology. We can tell you that while technology has been adapting to inclusiveness, so have we. Having delivered over 570 procurement technology projects in our 15-year history, we challenged ourselves over the past five years to develop alternative deployment models based on need, budget, size, complexity and vertical.

The same tasks are required to deploy a project of any size. How long it takes, who performs the work and how complex the environment is drives the implementation investment. By controlling for those tasks while also applying our 15 years of experience we have a solution for any size company.

Summary

If you are in the camp that your mid-market organization cannot afford Tier 1 procurement technology – then take another look. Ask more questions. There is now a viable solution for organizations of all sizes. Procurement technology continues to evolve and the evolution includes you.

As always, we would be happy to chat about this or any other Procurement topic. Feel free to reach out to us by visiting our website at www.nitorpartners.com.

Topics: Mid-market procurement, Mid-market source-to-pay