Indirect procurement is a hot topic in the world of payments right now. As companies continue to grow and globalization continues to expand, CFOs the world over are finding it increasingly more challenging to keep hold of an appropriate level of control and visibility of the masses of indirect purchases that are being made by an ever-expanding workforce.
We covered this problem in some depth in our recent post “The Truth, The Whole Truth, And Nothing But The Truth Is Required For B2B Commerce“, in which we highlighted Traxpay’s mission to provide a meaningful solution through its flagship Dynamic Payments Platform.
The Procure-to-Pay (P2P) process is still, however, a global challenge, and one that many vendors of P2P suites around the world are continuously trying to meet. Earlier in March this year, information technology research and advisory firm Gartner produced a report entitled “Magic Quadrant For Procure-to-Pay Suites For Indirect Procurement” which takes an in-depth look at the vendors in the procure-to-pay (P2P) suite market as it begins to mature.
Gartner’s Magic Quadrant
The Gartner Magic Quadrant (MQ) series produces regularly updated reports (normally every 1-2 years) that provide qualitative analysis of several specific technology industries, and takes a close look at a market in terms of its direction, maturity, and participants.
This is the first year that Gartner have created a Magic Quadrant for P2P suites for indirect procurement. The vendors that Gartner included in the report are rated upon two criteria: “Completeness Of Vision” and “Ability To Execute”. The scores that these vendors accumulate (using a methodology that Gartner does not disclose) result in the vendors being placed within one of four quadrants:
- Leaders: Typically the leaders will be mature businesses that presumably score highly on both Completeness Of Vision and Ability To Execute.
- Challengers: Again, these will normally be large, settled businesses, which score highly on Ability To Execute, though not so well on Completeness Of Vision (i.e., perhaps with only minimal future plans for the industry).
- Visionaries: Typically smaller companies whose Completeness Of Vision scores higher than their Ability To Execute.
- Niche Players: Normally smaller businesses that score low on both criteria.
The Magic Quadrant For Procure-to-Pay Suites For Indirect Procurement
Procure-to-Pay Suites For Indirect Procurement
Companies with at least $800 million in annual revenue are the primary users of P2P suites for indirect procurement. For organizations under this size, the technology adopted is normally in response to regulations, or to cost-reduction pressures.
This is a market that is now over a decade old. P2P suites for indirect procurement are essentially sets of software solutions for the purposes of supporting transactional procurement.
Interestingly, nearly all of the vendors in the report offer some kind of payments capability or “e-payables” as part of their suite. Unfortunately, the financial part of the transaction remains disconnected – an entirely different stream – making visibility and control of the overall transaction a tough problem for both the buyers and the suppliers. Connecting the data and financial steams together is paramount, and can only be done using a Dynamic Payments Platform.
As we survey the P2P landscape, these vendors provide the enterprise with four main capabilities:
- E-purchasing – This is the functionality that provides a self-service solution for employees of a company (who are not necessarily procurement professionals) to place orders for indirect goods and services via catalogues, e-forms, or free-text orders.
- Catalog Management – This is the functionality that manages the content of cataloged commercial off-the-shelf (COTS) indirect goods and services in terms of search tools, catalog content upload staging, content normalization services, and content update evaluation tools.
- E-Invoicing – E-Invoicing is the process of computer-to-computer invoicing. It is an automated process that is faster, safer, cheaper, and much more reliable than traditional forms of sending paper-based invoices.
- Accounts Payable Invoice Automation (APIA) – APIA modules monitor, approve, and control all incoming invoices. They do so by matching the invoices against specific criteria, such as POs. Usually, manual approvals (such as quality inspection of goods) are additionally required to match the invoice, but these approvals are supported by the automatic workflows. A further function of APIA tools is to manage invoice exceptions.
The strengths and cautions of the leading vendors can be summarized from the report as follows:
|Vendor||Customer Satisfaction Score (on a scale of 0 to 4, with 4 being the highest and an average of 3.10)|
|Usability – a main point for high customer satisfaction.||No hosted catalog content for new customers.|
|Global support for AP invoice automation and e-invoicing.||Complex price model – total spend, number of ERP integrations, and documents transferred all factored into pricing, plus more.|
|Strong ongoing technical support.||Ariba Network Membership fees apply.|
|Strong configuration support.||Limited support for public sector buying.|
|Strong sales execution over past 18 months.||Limited support for inventory management.|
|Strong support for search, e-requisitions, reporting, and analytics.||Numerous complaints surrounding challenges to configure workflow.|
|Highest overall customer satisfaction score.||Reports of bugs in version 11.|
|Good reference feedback on ease of use.||Fast growth is proving to make staffing a challenge.|
|Strong support for mobile devices.||Seat-based pricing model can prove to be counterproductive in broad rollouts.|
|Scores high for core P2P, product functionality, inventory, and reporting.||In 2014, Ariba and Coupa settled a federal patent infringement lawsuit.|
|New modules can be developed and deployed quickly.||Coupa remains a defendant in a trade secret dispute filed by Ariba.|
|Easy to upgrade.|
|Pioneer in global network approach.||Mixed feedback for new Alustra platform.|
|Offers one of the most extensive global e-invoicing networks.||Limited service procurement.|
|Highest reference feedback score for e-invoicing, and AP invoice automation.||No native support for inventory.|
|Strong brand in finance space.||Low feedback score on catalog management, search, and reporting capabilities.|
|Broad global customer base.||Low brand recognition outside Europe and Australia.|
|Partnership with MasterCard, which enables clients to leverage MasterCard’s existing global payment network for settlement.|
|High scoring on customer satisfaction.||No procurement network offered (portal capabilities in use instead).|
|High scoring for analytics and reporting capabilities.||User interface only available in seven languages.|
|Provides a highly configurable platform.||Majority of clients confined to France and U.S. (although offices are established in the UK, Scandinavia, Italy, Brazil, and Canada).|
|Strong support for catalog search and e-requisitions.|
The automation of the full P2P process is being adopted by organizations. It is taking time, but it will get there – which is a good thing – as the holistic approach will inevitably lead to greater business benefits. The key to unlocking full control over the P2P process lies within issues surrounding data visibility and transaction control, which can only be done by combining the data stream and the financial supply chain together. The vendors who will offer the most value to their customers will be the ones that can provide such visibility and control throughout the network and supply chain, and Dynamic Payments is the way to do this.
This is only the first year of Gartner’s new Magic Quadrant in the P2P Suite space, which, as we have seen, only credits four companies as being leaders in this market. However, over the coming years, Gartner expects there to be between five and ten vendors to establish themselves as being truly global, and will have the capabilities to support full global P2P deployments. It will be the network providers who can offer some sort of dynamic payments solution like Traxpay, who will ultimately lead the industry to a much smarter, data-driven visible future.