Calling All Procurement Leaders: Did You Know You Needed a Strategic Spend Terminal?
At PeakSpan, we have been developing our thesis on procurement technology over the last six years. We have analyzed SMB vs. Mid-Market vs. Enterprise, direct vs. indirect, verticalized vs. horizontal suites and my favorite of the bunch — category-specific solutions. We’ve also evaluated tons and tons of “best in breed” players looking to specialize and out-gun the incumbent P2P vendors in a specified procurement function. The most infamous case study in this space is ScoutRFP, a sourcing solution who exited to WorkDay for $540M. We are not inherently bearish on these solutions but as the market has been flooded with other “ScoutRFPs,” it has resulted in an ecosystem crowded with too many procurement software solutions that do not speak to each other in a coherent manner. This simply won’t work for finance and procurement professionals. It adds to what is already too much friction in adoption.
For years, the debate has been “suite provider” vs. “best in breed,” however; more recently, a new brand of solutions have been making noise, and we call these solutions “Alt suites.” Major credit goes to Jason Busch and the Spend Matters team for their work here: When Worlds Collide: The rise of 5 “Alt” Suites for procurement technology. This blog post covers five “Alt” suites but we intend to cover just one below, the “Strategic Spend Terminal” or “SST.”
Full disclosure, we invested in a SST here at PeakSpan through our 2021 partnership with Simfoni. However, our experience with Chirag, Ron, and team nonetheless diminishes the ongoing strategic value we have witnessed the Simfoni team bring to customers through their closed-loop platform approach. This is real!
The Simfoni Strategic Spend Terminal is comprised of three main components 1) analytics, 2) sourcing, and 3) contract lifecycle management (or “CLM”). The three can co-exist and sit on top of any legacy P2P vendor. However, to be truly effective, the three modules need to remain fully integrated in a “closed” loop to generate strategic value for customers.
Why can’t a P2P do this?
P2P’s are not ingesting and touching data sitting outside their core systems. This is essential to uncovering insights through spend analytics which is why stand-alone analytics platforms have grown in popularity and adoption. Further, most sourcing modules sitting within P2P platforms are quite basic, “3 bids and a buy” as we like to say. For complex organizations with spend sitting in lots of places, a “best in breed” sourcing tool is table stakes. Closing the loop is CLM, which we can very simply say is a huge point of weakness in the modern P2P suite and is honestly considered its own category given the importance of enterprise contract management (that said….CLM should be tied at the hip to spend). I’ll repeat this point again for impact. CLM is highly strategic and needs to be tightly integrated with spend analytics and sourcing. The three solutions working synergistically is a 1+1+1 = 5 scenario.
Why All Three? What is Closed Loop?
Assuming we agree on the above, why do these three solutions need to be fully integrated in a closed loop? Logically speaking, spend analytics is the most strategic “first step,” required to identify which categories offer the most savings, which sourcing events to run and how to run them. Additionally, you can identify avenues to decrease supply risk or increase spend with diverse suppliers or other organizational goals beyond cost savings. Without synthesizing the data, we are flying blind and so before anything else, procurement leaders need to ensure they have full spend visibility before any strategic sourcing can take place. An understanding of how much we are currently spending and with what suppliers can be thought of as the proverbial “ally-oop” to strategic sourcing. Or to use a golf analogy, analytics is the caddy who reads the greens for the golfer (or sourcer) to sink a strategic 15 foot put for birdie. The tight integration and coherence of these two solutions is key. We need to know what spend is currently a top candidate for cost savings and from there, we can leverage the strategic spend terminal to kick off a project to realize this. The management and orchestration of these events is a key differentiator for SST relative to the primary competing offerings which are i) do nothing, and ii) utilize a P2P suite with subpar functionality. Lastly, sourcing can then be fully optimized with a tight data hand off to the CLM module for execution and to capture rich contract data for future use in spend analytics projects.
Full circle, we have yet to see each of CLM, analytics and sourcing really take off on a stand-alone basis over the past decade and while each category is maturing and advancing, true “mass-market” adoption has been more elusive than anticipated. The value prop associated with the Strategic Spend Terminal “Alt” suite is just that much more powerful. Procurement practitioners leveraging a P2P + Alt Suite will set their organizations up for success through i) increased spend under management, ii) better adoption with deeper levels of spend intelligence and iii) stronger optimization capabilities through harnessing the power of the closed loop system. If interested in learning more, please contact my friend and colleague Ron Emma (Ron.Emma@simfoni.com), CEO at Simfoni!