Per Year, How Much Should You Outlay for ADVANCED Source to Pay? 250K to 500K, MAX!!!

That’s right! Continuing last week’s post, we are again putting a stake in the ground on a real, actual, number! (With similar caveats, of course, but still, a real number!)

Why? Because, at least in North America, the one question everyone asks but no one wants to answer, is,

how much for that product on the SaaS cloud
the one with the advanced software
how much for that product on the SaaS cloud
I do hope that software’s priced fair!

Most vendors, especially in the enterprise software space, want to get as much as possible (as failing to do so, especially if they are public or owned by a PE Firm with a tight timeline to enhanced profitability, gets them a “bad” rating), and, thus, obscure their (true) pricing. Their (big) analyst clients want them to get as much as possible (as they all dream of the day they get that Million-Dollar PO from a vendor in exchange for simply keeping the vendor at the top of the charts). Clients who think they got a deal don’t want you to underpay (and then have their renewal prices hiked up as the vendor seeks to maintain it’s profit margins) … and clients who think they’ve overpaid don’t want to tell you. And when some of the bigger vendors won’t even talk to you unless they think you’re good for seven (7) figures (i.e. One Million Dollars) a year or more, you might be tempted to think good (DIY) suites are out of your grasp.

However, as per our last installment, they’re not! And, if you’re smart, they can be quite affordable (especially for baseline end-to-end functionality with some advanced functionality sprinkled here and there) and lead to not just an identified, but realized, ROI in a short time frame.

But sometimes the base is not enough! What if you need advanced features such as:

  • strategic sourcing decision optimization (SSDO)
  • enhanced analytics with market intelligence (commodity pricing, GPO/anonymized community pricing), ESG data, project tracking
  • supplier development with orchestration, network management, discovery, enablement, etc.
  • CLM with analytics or enhanced authoring with augmented intelligence
  • I2P with smart OCR/Free-Form Processing and partial m-way match

These, and other advanced features, are going to pump up the price. How much? It varies. For the list above,

  • the most advanced commercial solvers, which most of the SSDO offerings are built on, charge 5K+/month for their solver to be embedded in a third party application, and that’s one of the reasons this software is not cheap (and the other is that these models require extremely skilled and experienced PhDs to build and deploy; but considering it is the only application that, when you’re ready, will consistently identify 10%+ savings on categories that have never been optimized, it can be worth it)
  • you can get the most powerful analytics solution on the market for 2K/month, but if you want market intelligence, you’re either going with a company that has a large enough install base to build that (and paying a lot more for the company to collate, anonymize, and offer that) or multiple third party market feeds; this will cost you another 3K to 5K a month (but you don’t understand your should cost without this data, and can’t identify the true opportunities in some categories without this data, so it can be worth it)
  • networks seem easy enough (all the big vendors have one), but you need a lot of suppliers, and true networks are multi-tier (meaning every supplier is a buyer in a sub-network), orchestration requires a lot of different data of a lot of different types and sometimes requires complex graph algorithms to get right, discovery isn’t easy if you need specific capabilities and not just commodity products, and enablement, well, as you can tell if you go back and review the CORNED QUIP mash of vendors, there really aren’t that many that do true enablement for the supplier
  • core semantic tech seems pretty cheap with a lot of open source models, but well tuned and well trained semantic tech on appropriate data is not (because training it on social media garbage produces the electronic equivalent of hazardous waste as output, as per a piror/upcoming article), so you’re going to pay for this, especially if you want technology finely tuned to analyzing your contracts, auto-building suggested templates appropriate for your business, guiding you on where legal focus needs to be (due to low confidence or ambiguity), etc.
  • if the invoice comes in as a PO-flip or using an EDI/XML standard, any platform can process that efficiently and cheaply; but if you’re tying to process PDFs, even if a supplier sticks to a template, that’s work; you not only have to train models, but build customized models to each invoice type; that’s a lot of manpower on the vendor’s part to build those for you (or on the vendor’s part to build tools you can use to define those templates for the software using WSIWYG low-code or no-code interfaces)

The reality is that any advanced application you need/want is going to triple to quintuple the price you’re paying for that module, depending on how advanced the functionality is, how much expertise is needed to build and maintain it, and how much the vendor itself has to pay in SaaS/license fees to third parties for advanced models/capabilities it is building off of or appropriate, reliable, human vetted data sources. What was a 2K module is now going to be 6K to 10K a month (or, if you have to augment what you have with a third party application, an additional 6K to 10K a month).

Not cheap, but when advanced technology, properly applied on the right categories / problems in the right circumstances can deliver 2X to 3X the cost reductions, it becomes very affordable. For example, let’s say you have a 100M components category in electronics and all a well-constructed RFP and analytics manages to find is a 3% cost reduction opportunity. That’s 3M, if captured, but what if there’s really a 6% opportunity through non-obvious re-allocations when logistics, tariffs, FTZs, and volume breaks are taken into account. That’s 6M, or an extra 3M. If the SSDO module cost you an extra 60K per year, even if used ONLY on that one category, that’s a 50X return! Similarly, if advanced contracted analytics with augmented intelligence allowed your legal team to dynamically build up clause libraries and templates on the fly, reducing contract preparation time by 70% on every category, that’s going to greatly increase your sourcing cycle velocity, allowing you to get through more events, and compound cost reduction opportunities. The manpower savings will likely be 10X the extra 60K a year.

And so on. The value is there, but, as per our S2P series, only if you have a need for it AND are ready for it. (That’s why we suggested implementing one module at a time, and starting with baseline capability so you can get your spend under management, get the data for a proper spend analysis, determine where the true opportunities are, determine what you need to address the true opportunities, and then upgrade to the advanced offerings of the vendor (or augment with third party modules).

But, at the end of the day, based on our knowledge of what provider offerings with best-in-class opportunities start at, average multiples over baseline, and just how much a mid-size organization will need across source to pay, we’re putting a stake in the ground that an advanced S2P offering with advanced capabilities across all 6 core modules should top out at 500K, and, in fact, we’re betting that an average organization, which will only need advanced capabilities in half the modules, should only need to pay 240K to 300K a year — or the cost of 2 FTEs, which is peanuts compared to the efficiency improvements the organization will realize and the cost reductions they will see. Even if a smaller organization (500M-ish in revenue with 250M-ish external spend that Procurement can influence) only gets 30% of their addressable spend under management (75M-ish) and only sees a reduction of 3%, that’s still 2.25M, which is 8X+ the cost, and definitely worth it!

However, all the same caveats from our last installment hold.

[01] You are a true mid-market company, which we’re defining as a company more-or-less between 500 Million and One Billion in Revenues and an addressable spend of 250 Million to 500 Million (as you can’t address payroll, government controlled utilities, mortgages/long term lease rates, etc.).

[02] You have an average sized procurement team of under 30 people. (In a 2019 Benchmark, average organizations had 33.5 Procurement personnel per 1 Billion in revenue.)

[03] You’re doing an average number of projects per year for those people (and likely maxing out at addressing 20% to 30% of the addressable spend per year).

[04] As you have (next to) nothing in terms of modern source-to-pay technology, your primary focus is the baseline capabilities (as defined in our Source-to-Pay series). You might want a few of the more advanced capabilities, but right now, getting the baseline (which will likely provide 80% of the value by allowing you to get all of your processes, and costs, under control) is the primary goal.

[05] This does not include integration costs, training costs beyond access to all of the online-training materials/virtual academy, and the implementation costs are limited to flicking the switch to activate the license and any necessary setup configuration. (Unless you are buying an advanced module, in which case the vendor will include more setup, configuration, and additional data load support.)

[06] The sales cycle is mostly virtual (web demos, video conference meetings, etc.). You won’t get to meet the sales rep in person more than once during the sales cycle (and that’s only if you’re buying a mini-suite or multi-year deal; these vendors stay affordable by keeping their costs down, and multiple on-site demos and meetings do nothing but drive up overhead and costs).

[07] Most vendors will help you with the initial data load (provided you are loading data from a supported system in a supported format), but refreshes will typically not be included in the ongoing support, which will mainly be limited to online help and workaround support for identified bugs while the bugs are being fixed.

[08] With the exception of some market intelligence from anonymized customer data or free public data sources, this will typically not include any data enrichment offerings also offered by the vendor, especially if those data enrichments are coming from third parties, but these will be pre-integrated and you will only pay the third party fee if you want to turn them on.

But what if you’re a borderline/true multi-national enterprise? Or a small company / borderline “small” mid-market? What should you pay then?

To be continued.

Get it Together! Good Data Ain’t That Hard!

A few weeks ago, the Supply Chain Management Review published a short piece on
Procurement’s Data Problem that noted recent surveys from Globality and SpendHQ had some appalling statistics, including the findings that 82% of leaders are not managing indirect spend well, 79% don’t have dedicated software to track and manage performance, and 75% doubted the accuracy of the data they present. What The Hell? It’s not 2003 anymore. It’s 2023. And this is easy stuff. Get it together people!

The data problem is easy. (At least at a basic level.)

  • Have a process that forces ALL spend through the e-Pro/AP system.
  • Make sure there are POs (Purchase Orders) for everything that’s not a recurring invoice such as a utility or lease payment, and VPOs (Virtual Purchase Orders) for these recurring invoices that define either agreed to amounts, hourly/usage rates, or expected ranges (that can then be corrected to the actual amount when the monthly bill arrives).
  • Make sure all invoices are imported into the e-Pro/AP system before any payment is made.
  • Make sure they match the PO before they are paid.
  • Make sure all payments are captured in the e-Pro/AP system.

Now you have an accurate, trustworthy, record of every single transaction from order, through approval, to payment. Now you have good spend data that you can trust. To extract insight and/or create reports, just use a good spend analysis tool. Basic, accurate, trustworthy data is easy.

Baseline Performance Management ain’t hard either.

Spend performance is just analyzing the average price per unit paid over time. If you don’t have a a performance management (sub) module, you can literally do this with a spend analysis tool where you create a report for every sourcing project you do that tracks spend over time against a baseline from which savings/cost avoidance over time can be created. Associate each with a user, a department, and a category and you can easily create performance reports by user or department or category.

Managing Indirect Spend is straight forward as well.

  1. Use your spend analysis tool to identify categories and spend level.
  2. For high spend categories, do strategic sourcing projects that are (multi-round) (hybrid) RFX and/or auctions.
  3. For low spend categories, do 3-bids-and-a-buy / approved catalog Procurements (through your e-Pro tool).

Sure, you might not realize the maximum opportunity, but this simple recipe will likely capture 90%, often without significant effort, and you go from losing 15% or more on the tail of the indirect spend and 5% to 15% on the higher volume indirect spend, to only losing a few points on the higher volume and less than five points on the tail. It’s simple. It works. It only needs an e-Pro tool and a cheap RFX/Auction tool, and there are examples of each of these tools that support mid-size enterprises with unlimited use for less than 2K a month. There’s just no excuse not to have the basic tools and not to use them. (As for spend analysis, Spendata Enterprise starts at 1,200 a month! And Anydata Solutions has mid-market pricing under 2,000/month as well! [Both require minimum commitments.])

Less than 60K solves these problems. That’s less than a fully burdened junior buyer. There’s no excuse for this situation anymore. Simply none. So get it together please.

Source-to-Pay+ is Extensive (P36) … Here are some Intake/Orchestration Vendors

As promised in our last installment, Part 35, here is a partial, starting list of intake/orchestration vendors that provide one or more of the following capabilities:

  • Intake management (and requester/stakeholder visibility into the process)
  • Project/process management throughout the source-to-pay cycle
  • Orchestration between multiple applications

As with other every list, we must inform you that this list is in no way complete (as no analyst is aware of every company — and sometimes a new company launches its first product, or a new product literally after one of these lists goes up), is only valid as of the date of posting (as companies sometimes go out of business and acquisitions happen all of the time in our space), and does not include vendors which have project management limited to just one (or more) of their internal modules.

As with our lists of e-Procurement Companies (in Part 7), Spend Analysis Companies (in Part 12), Sacred Cow Companies that do, or support, customized “spend” analysis on Marketing, Legal, and SaaS (in Part 13), Supplier Management Companies (in Part 20), Contract Management Companies (in Part 25), and e-Sourcing Companies (in Part 30), and Invoice-to-Pay/Accounts Payable Companies (Part 33), we provide the company name, URL and LinkedIn URL if available, headquarters country, and list other offerings we are aware of.

Remember that if we say Source-to-Pay, it means that vendor offers modules that cover (baseline) Sourcing, Supplier/Vendor Management, Contract Management, Spend Analytics, e-Procurement, and Invoice-to-Pay/Accounts Payable. As to whether or not SI would consider these modules meeting the majority of baseline functional requirements, you will have to check the previously published starting vendor lists in those areas and other prior coverage on SI (if available).

Do your research, and reach out to an expert for help if you need it in compiling a starting list of relevant, comparable, vendors for your organization and your needs. For many of these vendors, good starting points might be the Sourcing Innovation archives, Spend Matters Pro and Gartner Cool Vendor write-ups if any of these sources has a write-up on the vendor.

And while this list is currently (much) smaller than the other lists, as it’s pretty easy to find at least 60 vendors for any core module you want in Source to Pay, and we barely cracked the twenties with this list, we don’t expect it will stay that way for long!

Shout-out to The Revolutionary and The Procurement Dynamo for their thoughts on what vendors might fit into this emerging category!

Finally, a second reminder that inclusion on this list DOES NOT imply Sourcing Innovation is recommending the vendor.

Company LinkedIn
Employees		 HQ (State) Country I P O Other Offerings / Notes
Arkestro 98 California, USA O e-Sourcing
Celigo 720 California, USA O Integration Platform, App Marketplace
Cirtuo 40 Austria P Category Management, Supplier Management
Focal Point 26 Georgia, USA I O
Graphite Connect 66 Utah, USA I Supplier Management
Ivalua 912 California, USA I P Source-to-Pay
Kissflow 528 Delaware, USA O e-Procurement, I2P/AP
LevelPath 22 California, USA O
Mercell Negometrix ?? Netherlands I e-Sourcing, Supplier Management, Contract Management, e-Procurement
Omnea 16 United Kingdom O
Opstream 13 New York, USA I New York, USA
Oro 60 California, USA I Supplier Management
Pega 6081 Massachusetts, USA O
Pipefy 580 California O
Qntrl 16 India O
ServiceNow 23,206 California, USA O e-Procurement
Spend HQ Per Angusta 53 France O Spend Analysis, ESG
WorkFridge InGeek 7 India O
ZFlow 8 California, USA O
Zip 351 California, USA I e-Procurement, I2P/AP
Zycus 1607 New Jersey, USA I P Source-to-Pay

We aren’t done yet … we dive deeper into the capabilities required starting in Part 37.

Source-to-Pay+ is Extensive (P35) … Do I Intake, Manage, or Orchestrate?

In our last installment, Part 34, we noted that, after working through our series, many of you would likely have selected a number of best-of-breed solutions to meet your various need as opposed to a suite (due to unique capabilities that were attractive to you, attractive price points, quick setup times, etc.). And after selecting a few of these, you got to wondering “what’s the best way to integrate these and make sure that, once I have a full set, they support my source-to-pay processes end-to-end in a seamless fashion“. The point of these solutions is to control costs in an efficient, and effective fashion, and this requires effective management of requests, communication, projects, and/or processes.

Plus, even if you selected a suite, even when you finish implementing the last of the six core modules we’ve covered to date in our series, that’s just the beginning … since you will eventually have to enrich your data, deal with ESG/CSR, integrate with services management, asset management, logistics and supply chain management and support other features these core modules won’t have in order to get to the next level of enterprise buying.

In other words, you need to intake requests, manage projects, and/or orchestrate your technology-enabled processes, depending on what the modules/suite you have does and doesn’t do and what your particular situation warrants. Let’s discuss what each of these capabilities are and what a few core features are (especially since you won’t yet find a platform that does it all and does it all well, at least not yet, as intake and orchestration are rather new solutions).

Intake Management

Often known as intake-to-procure or intake-to-pay, this type of solution focusses on allowing anyone in the organization who has a procurement need to make a request which goes to Procurement, get visibility into that request, and know it will get done because the solution allows a buyer to turn a request into a procurement project. Key capabilities:

Configurable Enterprise Procurement Request Portal ANY Employee can Access
In order to make a procurement request for whatever they need, be it resupply of the local office supply closet, special materials and promotional items for an event, short-term services, a restock of materials needed for MRO, or new products for resale to meet (new) client needs. And the interface must be capable of being configured in a way that ensures that whatever information the buyer needs to fulfill the request will be collected before the requester can complete the request (such as high level categories, any budgets [codes] they have, whether or not any of the needs can be met with current contracts / catalog items, etc.).
Request to Project
Once the buyer analyzes the request, they must be able to flip that request into a Sourcing Project, a re-negotiation/Contract Addendum with a current supplier, a catalog buy, or a PO-against a current contract (or whatever else is needed) in order to begin the process of filling that request (or, if the request is not valid, deny it and flip it back with a rejection or a request for modification into a request that would be acceptable).
Process Visibility and Messaging
At all times, the buyer must be able to see where the request is: in queue, approved, being sourced/procured, order placed, goods arrived, invoice paid, process done; etc.

Project Management

The capability to manage a project from beginning to end, no matter how many steps it has, how many modules are required, how many approvals are needed, how many obligations need to be tracked, and how many milestones need to be completed.

Standard Project Management Functionality
The ability to create phases, milestones, tasks, owners, obligations, and track progress throughout the project timeline is a core must. Basically, what you would expect any other project management tool to do.
Links into the appropriate modules from each step of the project.
If all you can do is define and track project steps, you might as well use an open source project management tool. It’s only useful if it allows you to jump into the right screen of the right tool for where you currently are in the process.
Configurable approval flows
The platform should enforce verifications that obligations are met, milestones are completed, and quality is acceptable before projects are allowed to advance.

Orchestration of Processes

The capability to easily integrate as many modules as you need into a configurable workflow that suits your specific organizational processes.

Easy Self-Serve Module Integration
A buyer should be able to select the supported applications that they own, enter their license codes, and it should automatically integrate with the orchestration tool. In addition, they should be able to integrate additional modules easily with
Low-Code Integration
Where a buyer can define the API link, the core data tables/objects, the entry screen links, and that is sufficient for pushing data into the application / extracting processed data out, launching the application, and integrating the new module into process workflows at a high level.
Workflow Automation
The entire idea of process orchestration is to support the right workflows to support the various sourcing, contracting, onboarding, procuring, developing, payment, and other source-to-pay projects the procurement organization needs to undertake.

Of course, these platforms should do more and have more, but these are the core foundational requirements to be classified as an intake, project management, or orchestration solution.

In our next installment [Part 36], we’ll provide you with a list of the solutions available today.

Source-to-Pay+ is Extensive (P34) … But How Do I Orchestrate Everything?

You’ve worked your way through the S2P series and are working your way through finding the initial solution(s) that you need and putting together a plan to select, implement, integrate, train on, and utilize those solutions as part of your daily processes. Since you’ve selected a number of best-of-breed modules (because you realized that you don’t necessarily need a suite, that no suite is best in class across all of the modules, and many of the modules only need endpoint connectivity because you’re not jumping back and forth when you’re within the process of that module), you’ve started wondering about the best way to integrate them (beyond data-based endpoint integration), and, more importantly, how to manage the projects around them (especially since it’s very likely that you won’t find general purpose S2P project management in any of the modules, as even suites can be lacking in this regard).

[Even if you selected a suite, you should still read on to find out just what that suite should be doing to make sure you are getting maximum value, especially since, and we’re sorry to tell you this, the 6 basic modules that form the core process are just the beginning — you will still need data enrichment, ESG/CSR, integration with services management, asset management, inventory management, logistics and supply chain, and other features these core modules won’t have in order to get to the next level of enterprise buying once you get through the first two rounds of opportunities.]

That really depends on

  • what S2P project tracking/management capability you have in the modules you bought (i.e. if the spend analysis module came with a savings tracking module that allowed you to define and track all sourcing/procurement projects at a high level, that may be enough, or it may not)
  • how much insight / visibility stakeholders need into the process status (some modules may provide them with the free/read-only access they need, some may not)
  • how much of your work comes from (one-off) requests vs. corporate purchasing mandates (i.e. are you mainly purchasing bulk products for resale, bills of material for engineering, etc. or are you purchasing a lot of start-up kits for new-hires, one-off requests for conferences/events, special BoMs for build-to-order, etc.)

If i) the spend analysis module contains basic project management in it’s saving tracking component ii) the stakeholders only need visibility during the selection and award phase of e-Sourcing, and they have that through the e-Sourcing module and iii) the team does very little one-off purchasing as they are supporting a manufacturing operation that has low turnover and only goes to the same old shows every year, then chances are customized end-point integration between the modules will be enough.

But, if i) the only “project” tracking is in the e-Sourcing tool and it ends at the award identification, ii) the stakeholders need visibility into the award process, contract negotiation cycle, and current/outstanding POs, and iii) there is a lot of one-off purchasing that needs to not only be tracked, but the status regularly communicated, then you may need a solution to integrate them in a process-oriented workflow and provide visibility into where each purchase request and project is to the appropriate stakeholders. These solutions are typically known as “intake” (and often marketed as intake-to-procure or intake-to-pay) or “orchestration” (and typically marketed as “procurement orchestration” or “sourcing orchestration”) solutions and are starting to pop-up rather regularly now.

The first solution, the granddaddy, of these was Per Angusta, which was recently acquired by SpendHQ. Founded in 2012 to manage the source-to-pay workflow, Per Angusta built one of the first open API frameworks to allow it to integrate with best-of-breed solutions on the market across the Source-to-Pay cycle, and to allow those best-of-breed companies to easily integrate with it proactively. By the time of its acquisition, it integrated with over two dozen best-of-breed solutions (and even a couple of suites) that allowed organizations to incrementally build their source-to-pay workflow in the order that made sense to them, and then easily integrate all of those solutions through one integration to Per Angusta.

It was more-or-less by itself for the first half of its existence, but since then options have cropped up to help you orchestrate the process, some within existing vendors (to provide an interface to the organization and orchestrate their various modules) and some new solutions to solve the orchestration process (and some of these vendors are now building core procurement/payment capabilities if they started as “intake” solutions).

So what are these solutions? And what do they do? We’ll tackle the latter question in our next installment [Part 35] (and then provide a list of vendors in the installment after that).