CPO increasingly desires single suite

The main reason is the increasing pressure from laws and regulations, kicks off John Schouten. He is director of product management at ISPnext. As evidence for his thesis, he points, among other things, to the European directive CSRD (Corporate Sustainability Reporting Directive). This requires large organisations to report on the impact of their business activities on people and the living environment. "For this reason, large companies want to monitor not only their suppliers but also the suppliers of those suppliers."

It irrevocably leads to closer cooperation between Procurement and Finance, Schouten foresees. "Making the supply chain transparent is primarily the responsibility of Procurement. But reporting on ESG aspects often lies with Finance, because it has to become part of the financial statements. Both departments have a strong interest in recording unambiguous data and especially being able to access it."

According to him, both CPO and CFO therefore yearn for a single overarching suite for Business Spend Management. "For good ESG reporting, it is actually a prerequisite. An additional advantage of working within one data model, over data stored in different places, which is readily available."

A similar development is taking place around the topic of risk management, notes Schouten. "The question ‘Who do I do business with?" used to be a real Procurement matter. But here too - partly prompted by CSRD regulations - Finance will become more involved.’

"There is an increasing need for certainty about deliveries. For example, you don't want to buy materials that have come about through child labour," he gives as an example. "At the same time, you want to be able to impose sustainability requirements on suppliers. You can tackle all that in the preliminary stage."

A BSM platform covers the entire procurement process, from Source-to-Pay. In other words, from finding and monitoring the best suppliers (Sourcing and Vendor Management), to agreeing and monitoring contract terms (Procurement and Contract Management), to delivery and invoice processing. "Information you have through one part, you want to be able to share with the other branches," he says.

He gives the status of certifications with suppliers as an example. "If a red flag is raised somewhere - for whatever reason - it should also be visible within other departments. So that no more orders are placed with that supplier or no more invoices are paid until things are in order. In the meantime, the system can provide alternatives."

"A BSM platform functions alongside an ERP system, it is not a substitute for it," Schouten clarifies. On the other hand, an ERP system is not suitable for all procurement activities, he stresses. "For the entire domain of Business Spend Management, an ERP is insufficient. Important parts of sourcing and contract management can hardly be managed in it, if at all. The result is then that benefits in terms of risk management, compliance and cost savings are not achieved."

On top of that, the user experience of an ERP system leaves much to be desired. "An ERP excels at processing transactions and storing a lot of data," acknowledges Schouten. "But little attention has been paid to the User Experience. Moreover, an ERP contains a lot of static data, which is not up-to-date. Exchange with external systems is problematic, which also makes information enrichment difficult. A BSM platform operates in the cloud and is precisely made for the flexible exchange of data with other systems, including the ERP system."

On the regulatory front, the European Digital Operational Resilience Act (DORA) directive is also relevant. The directive aims, especially for financial organisations, at better control of IT risks and more resilience against cyber threats. "Another reason to prefer working with one provider rather than multiple providers of standalone partial solutions," Schouten argues. "If you work with one umbrella application for all procurement activities, you also only have to deal with a release cycle once instead of all kinds of separate releases."

Besides regulation and risk management, rising workload is a third reason for CPOs to seek an overarching suite approach. "There is a huge tightness in the labour market. This is playing out in several Western countries. The forecast is that the workload for people in procurement functions will increase by 8% this year. And the workload is already high. It is forcing organisations to look for ways to deploy the people with knowledge and experience to be so optimal."

In his view, digitisation alone is not yet an adequate answer to this. "Having a single user interface for all procurement activities does make the buyer's job easier. The big gain arises when the input in one process is usable in another. This calls for a holistic approach rather than symptom management on partial problems."

But at the bottom line, of course, both the CPO and the CFO also just want to make money, Schouten concludes. "Sharing information from different processes within the same platform provides insights you would never achieve with stand-alone solutions. With those insights, you can do smart things. If you do that, you will see that in expenses lies a huge potential for savings."