February 22, 2022
May 11, 2022
Public authorities are - in most cases - failing to benefit from the new wave of technologies and tools available to the modern procurement professional.
To help procurement teams to navigate the world of e-procurement tools, this guide:
- Talks through the pitfalls of current e-procurement approaches
- Portrays the overall direction of the procurement tech sector
- Outlines how authorities can work with new best-of-breed procurement suppliers.
Procurement tools used by government are out-of-date and in need of modernisation. In fact, anyone who has ever used them - as a buyer, a supplier, a data analyst, an auditor - knows that they are generally hard to use, have ancient interfaces, and are limited in functionality.
Meanwhile, there has never been so much innovation and investment in the procurement tech sector. With a number of major deals last year, 2021 was a record year for procurement startup fundraising. In fact, over the last eight years some $750m has been invested in procurement technology, whereas the previous 8 years saw just $8m dollars of investment. Far too little of the resulting innovation is making its way into government.
🔵 $750m was invested in innovative procurement solutions over the last 8 years. Not enough is making its way into government.
This is not a problem unique to the public sector - as procurement tech guru Dr. Eloise Epstein describes: current approaches in private sector procurement are also around 10 years out-of-date. But as we show later, it is particularly bad in government.
The wave of technology tools and innovation we have seen in the new generation of best-of-breed tools is encouraging and exciting. But so far, public authorities have failed to realise the benefits offered by these systems. This article explains why, and what they can do about it.
Enterprise suites vs. best-of-breed
At the centre of this article is an important distinction, frequently used in the procurement sector: ‘enterprise suites’ and ‘best-of-breed tools’. This distinction can be usually borne out by looking at the tasks performed by a procurement team on an end-to-end procurement process. Below, we show this distinction by taking an indicative eight key tasks, moving from planning, to payment, to data analytics (there are, of course, many more than these eight steps for a real-life procurement).
The enterprise suite aims to do all of these within a single system. Every single step and every single feature. For public procurement, think Jaggaer, In-Tend, Bravo, Proactis, Coupa. They have a module for everything. They sometimes charge in a modular way, depending on an authority’s needs, but they offer everything.
This approach has a number of advantages, which explains its large market share in the public sector. Enterprise procurement solutions offer authorities the genuine benefit of keeping all of their data on one system, regardless of the process that they come from. Having a single system, of course, can keep things simple for a complex organisation, spending billions across multiple categories. Finally, as with other areas of government technology, their growth has benefitted from their position on key strategic procurement frameworks (in the UK, for example, Bravo / Jaggaer is the sole supplier on CCS’ eSourcing Framework).
Some examples of the enterprise tools of choice
Compare this to the ‘best-of-breed’ approach. Procurement technology has come a long way, and the last five years have seen a relentless wave of increasingly specialist and sophisticated tools. There are hundreds of these tools: far too many to mention here. But for examples, look at Silex or Globaility for sourcing, Fairmarkit for automated supplier engagement, GovMarket for startups and SMEs, Risk Ledger for risk assessments, EcoVadis for ESG assessments, Deployed for SoW design, Ignite for analytics, DeepStream for collaborative RFPs, Juro for contract approval.
The quality of some of these new tools is astounding. And even where enterprise suites are able to offer the same functionality, the quality and user experience is a long way behind the best-of-breed. There are genuinely far too many great tools to mention here, but take a look at the excellent ProcureTech 100 site for a flavour of what the new players can do.
In the diagram above, we have included a thin grey line between each of the point solutions. This line is important, but is still largely hypothetical for public authorities. Best-of-breed tools are modern SaaS companies, and are optimised for quick and seamless integrations with other tools via flexible, lightweight APIs. This kind of configuration of connected best-of-breed tools is rarely seen in the public sector, but is becoming increasingly common amongst private sector trailblazers.
These specialised tools are not only better at what they do, but they can offer a flexibility and plug-and-play modularity that is simply unmatched by enterprise suites. Want a new feature? Pay for what you need, in whatever combination works best. And in many cases, these smaller, more lightweight companies will work collaboratively with their customers to quickly design and spin up new features. This podcast conversation between Ignite and one of their early customers, German automative firm SEG, gives a lovely example of the kind of close collaboration between customer and supplier that can only happen with small, best-of-breed teams.
In the enterprise model, by contrast, government buyers seeking additional services or features have to pay large (in some cases, totally unreasonable) configuration costs, or expensive custom integrations. We have seen the pain of this first-hand. And we have also seen the disappointment on a government buyer’s face when they are told that their simple new feature request will take 6 months.
So, in most cases, best-of-breed tools offer more specialised functionality, better product experiences and interactions, greater flexibility, lower customisation costs, and generally a more collaborative approach to partnerships. But because the enterprise suites do everything, government buyers have been reluctant to budge away from their current tools.
Acquisitions, consolidation and partnerships
For the reasons given above, enterprise suites are reaching out to work with some of these best-of-breed tools. The wave of innovation in the sector has triggered a number of recent acquisitions and partnerships. Enterprise suites have recognised the capabilities that best-of-breed tools offer in niche areas, as well as opportunities for customer acquisition. The result has been a highly active M&A sector for procurement technology, with the big players constantly introducing new features to their enterprise suites by means of acquisition. There have been four corporate acquisitions and partnerships in January 2022 alone, including twoby SAP in a month. This kind of new relationship can be visualised like this:
Enterprise suites are acquiring best-of-breed tools
These partnerships and acquisitions are important for the sector. They are providing the motivation and ‘jet fuel’ for new founders coming into the sector with new solutions and new companies. And, ultimately, government buyers will start feeling the benefits of this too. SAP’s acquisiton of Taulia, for instance, will make it significantly easier for SAP’s customers to employ working capital solutions for their supply chains.
These partnerships still do not provide true flexbility to government buyers. They can create additional capability to embed into their current enterprise suites, but they still do not allow governments to constantly find, trial and tinker with new best-of-breed tools. And the transition of acquired best-of-breed tools into their new corporate homes will also likely take away some of the lightweight agility and commitment to collaboration that made them so great to work with in the first place.
A second important recent development is that best-of-breed companies themselves have begun creating specific partnerships and integrations (providing a joint offering for clients / users) as part of their go-to-market strategy. This is particularly common with specialist data providers (say, partnering with EcoVadis to provide on-system ESG analytics). This can make life easier for customers, with ready-made integrations without the need for custom configuration.
Best-of-breed tools are forging new partnerships
So far, we have explained the difference between enterprise suite and best-of-breed strategies, and why governments have found it so difficult to move from their trusted enterprise partners. In government, there is another important consideration to keep in mind: governments in most cases use, or have access to, multiple enterprise tools. They rarely have a single end-to-end tool to run all of their procurement. We call this the ‘enterprise jumble’
The enterprise jumble rarely makes good business sense, but sadly happens very frequently. If you asked most authorities to explain their procurement stack, they would show you a misaligned jumble of enterprise suites (or different components of enterprise suites) all offering the same things, without the benefits presented by best-of-breed tools. This means that they do not get the consolidation benefits of a true enterprise approach, nor the quality benefits of best-of-breed. To return to the end-to-end process, we can visualise the jumble like this:
A jumble of enterprise suites
Away from the jumble, and towards the procurement data ecosystem
If the enterprise jumble is the worse case, what does the best case look like for authorities?
There isa model which we have not discussed yet - one that brings together the benefits of consolidation and best-of-breed functionality. The vision - which we call the ‘procurement data ecosystem’ - brings together an ecosystem of different tools, underpinned by a single, consolidated data layer. This means that an authority can connect a number of best-of-breed tools across the entire procurement value chain to a unified register of contracts, competitions, suppliers, performance outputs, and payments. A single source of truth.
At a high-level, a data ecosystem would be a single, linked database of all of your important contracting and procurement information, which would act as both an input to your ecosystem of tools, but would also collect data as an output. This could be done in real-time via an API, via regular timed push reports, or via manual download and upload. This is also sometimes helpfully referred to as the hub-and-spoke model: with the database represented by a central hub, and the different tools across your ecosystem represented by the spokes on a wheel.
What constitutes an effective data ecosystem for every organisation is different, and would depend partly on the use cases of the different best-of-breed tools. It would likely provide a single, linked data database of every contract (with a unique contract identifier - from planning to implementation), every supplier (assigned to each relevant contract), and to key contract outcomes measured against original specifications. Supplier assessments, SRM, ESG and cyber audits could all be built on the data collected in your master supplier database. E-tendering, awards and negotiations could all use the same contract ID as relating to a single, joined-up process. That ID could also be tied to invoice and payment platforms, for fully joined-up spend data. In fact, the potential use cases of a fully joined-up system are endless. We might visualise six indicative point solutions joined to a single data layer like this:
This is not a straightforward task, and requires a great deal of organisational buy-in, technology transformation and process change. But going on the journey is worth it for authorities. If executed correctly, the model is extremely powerful for governments. A central supplier database could be fed and enriched by a number of different tools and data sources. A single contract could pass seamlessly through different systems, with authorities undertaking different tasks associated with it, and sustainability reporting could be automatically generated based on the contract and supplier details. This would involve moving away from the misaligned jumble, and towards a carefully configured ecosystem of different specialist tools, with different areas of focus.
Good procurement is impossible without good tools. In fact, as procurement and spend management are becoming increasingly digitised, the equation is becoming more emphatic: good procurement = good procurement technology.
The allure of the enterprise suite approach is obvious. And it is unsurprising that so many authorities have selected data and system consolidation over best-of-breed functionality and UX. But over time, the enterprise suite has become the enterprise jumble. And this should give authorities good reason to re-think the value-for-money and effectiveness of their procurement stacks.
Instead, they should start looking at the best-of-breed tools cropping up in new sectors, countries, industries and categories. From pipeline planning, all the way through to payments, the calibre of tools available on the market is exceptional, and improving all the time. A careful, structured approach to integrations between tools, and with a central database of contracting information, can enable authorities to move away from enterprise jumbles, and towards best-of-breed ecosystems.
If you are a government buyer, we encourage you to think carefully about whether your procurement stack really contains the best-of-breed solutions (and prices!) for what you need. And if you find yourself with a jumbled mix of enterprise suites, think about what you can strip away and replace, and quickly!
For some help in understanding what today’s procurement technology landscape looks like, or creating a robust data layer at the centre of it, get in touch with us. We would be happy to help you on this important journey.