Hype Cycle For Procurement 2 217670

This research note is restricted to the personal use of mark.robichaux@itc.hctx.
net
This research note is restricted to the personal use of mark.robichaux@itc.hctx.net
G00217670
Hype Cycle for Procurement, 2011
Published: 14 November 2011
Analyst(s): Deborah R Wilson
Procurement spans a rich and diverse range of activities. The variety of tools
available that supports and enables procurement activities continues to
expand and mature.
Table of Contents
Analysis.................................................................................................................................................. 2
What You Need to Know.................................................................................................................. 2
The Hype Cycle................................................................................................................................ 3
The Priority Matrix.............................................................................................................................8
Off the Hype Cycle........................................................................................................................... 9
On the Rise.................................................................................................................................... 10
Social Procurement Tools......................................................................................................... 10
Mobile Procurement Applications............................................................................................. 11
Services Procurement.............................................................................................................. 12
Source-to-Pay BPO..................................................................................................................13
MDM of Purchased Parts..........................................................................................................15
MDM of Supplier Data.............................................................................................................. 17
Multienterprise Business Process Platform............................................................................... 18
Supply Base Management........................................................................................................21
At the Peak.....................................................................................................................................22
E-Invoicing................................................................................................................................22
Indirect-Procurement BPO........................................................................................................26
Business Process Networks..................................................................................................... 27
Procure-to-Pay Solutions..........................................................................................................31
Vendor Risk Management.........................................................................................................32
Source-to-Settle Solutions........................................................................................................34
Sliding Into the Trough....................................................................................................................35
Procurement Networks.............................................................................................................35
Supplier Portals........................................................................................................................ 36
Contingent Workforce Management......................................................................................... 37
Contract Life Cycle Management..............................................................................................39
Sourcing Optimization...............................................................................................................41
Climbing the Slope......................................................................................................................... 43
Spending Analysis.................................................................................................................... 43
Strategic Sourcing Suites..........................................................................................................44
Online Supplier Directories........................................................................................................45
Information Exchanges and Global Data Synchronization..........................................................47
Procurement E-Catalog Management Solutions....................................................................... 49
Entering the Plateau....................................................................................................................... 50
E-Procurement......................................................................................................................... 50
SaaS Procurement Applications............................................................................................... 51
Telecom Expense Management................................................................................................53
Travel Expense Management....................................................................................................54
Appendixes.................................................................................................................................... 58
Hype Cycle Phases, Benefit Ratings and Maturity Levels.......................................................... 58
Recommended Reading.......................................................................................................................60
List of Tables
Table 1. Hype Cycle Phases................................................................................................................. 58
Table 2. Benefit Ratings........................................................................................................................59
Table 3. Maturity Levels........................................................................................................................ 59
List of Figures
Figure 1. Hype Cycle for Procurement, 2011.......................................................................................... 7
Figure 2. Priority Matrix for Procurement, 2011.......................................................................................8
Analysis
What You Need to Know
Procurement technologies, when paired with process improvement and staff development, are
delivering step changes in procurement process productivity and effectiveness.
Page 2 of 61 Gartner, Inc. | G00217670
Innovation continues in procurement technology, as evidenced by the significant number of

solution types on the initial slope before the Peak of Inflated Expectations. Some of the most
promising newer technologies include supply base management, multienterprise business
process platforms and social collaboration tools.
An increasing number of procurement applications, including strategic sourcing applications

and Web-to-print solutions, have entered the Plateau of Productivity as they stabilize, mature
and gain market traction. However, many technology solution types are first-generation or
second-generation applications subject to evolving requirements, and so will have gaps in
functionality.
With a few notable exceptions (such as SAP and Oracle), specialty vendors dominate the
procurement solutions market.
The Hype Cycle
The 2011 Procurement Hype Cycle, an update of our 2009 research, reveals a market that
continues to offer a rich and diverse set of solutions to support the various processes and activities
related to procurement. We are now roughly midway through what is shaping up to be a 25-year
evolution that is fundamentally changing the way procurement operates. When the evolution is
complete, procurement professionals across industries, geographies and organization sizes will
have most of the capabilities discussed in this research as a part of their standard application
portfolio.
Specialty vendors have been the primary drivers of innovation in this market, although some ERP
vendors (including SAP and Oracle) have reasonable to very competitive offerings in several
procurement technologies. The market continues to be geographically fragmented, because of
differences in regulations and the make-up of participating supplier communities. Demand for
enterprise-level solutions that support shared services is pushing the market toward an inevitable
consolidation, and to global networks.
Notable trends illustrated in this Hype Cycle include:
Innovation: Technology Triggers, such as the improved graphics renderings on mobile devices
and the growing popularity of social websites like Facebook, are likely to facilitate useful
features for procurement solutions, and thus appear early on the Hype Cycle.
Hype: Vendor risk management solutions are the most overhyped offering as buying
organizations seek a means to reduce supply risks (such as from events like natural disasters,
security breaches and vendor bankruptcies). Solution vendors have responded to the demand
with sometimes scarcely credible claims of how their solutions can help.
Unforeseen barriers to adoption: Trying to leverage the various modes for supplier
collaboration is an area of frustration for clients, and thus a major theme in this market.
Unanticipated adoption issues and business model problems are graphically depicted by both
the supplier portal and procurement network being moved backward from the Slope of
Gartner, Inc. | G00217670 Page 3 of 61
Enlightenment to before the Trough of Disillusionment. We also lengthened the anticipated time
to mainstream adoption for these technologies.
Maturing solutions: Meanwhile, the movement of key solutions such as e-procurement and
strategic sourcing applications to at or near the Slope of Enlightenment means that
organizations have an increasing number of mature solution types to choose from to support
procurement activities.
Since our last Hype Cycle for Procurement, some technologies have progressed along the adoption
curve very slowly, while others have moved toward mass adoption more quickly.
Slow-moving technologies include:
Services procurement, because service transactions (such as contingent worker hires versus
statement-of-work-based agreements) are highly differentiated in terms of process steps and
process flow, and so a single solution does not necessarily work well for all service types.
Multienterprise business process platforms (ME-BPPs), due to buying organizations' preference

for more-mature collaboration offerings, such as procurement networks and the complexity of
the ME-BPPs.
Master data management (MDM) of purchased parts and supplier data inched ahead as difficult
economic conditions stifled platform architecture-level investments. This issue also incited us to
delay the expected time to mainstream adoption for MDM of supplier data.
Procure-to-pay solutions remained stuck near the Peak of Inflated Expectations as buyers
demand and vendors market complete solutions; however, the reality is that buyers purchase
scanning and e-invoicing network services, rather than support requisition through payment via
a single tool.
Contract life cycle management (CLM) solutions made slow progress, because of the lack of
hard-dollar ROI, an issue in strained economic times. Also, recent CLM clients have tended to
focus on implementing just the basic functionality, which means vendors don't get the feedback
they need to hone full solutions.
We lengthened the expected time to mainstream adoption for spending analysis, because
getting good results is ending up to be more challenging than initially thought (see "Spend
Analysis Best Practices").
E-procurement and travel and expense (TEM) solutions inched toward full maturity as they
entered the mainstream market.
Fast-moving technologies include:
Web-to-print applications, which reached maturity when successfully positioned as a solution

for printers, rather than for buying organizations.
Supply base management solutions vaulted up the initial slope toward the Peak of Inflated
Expectations as many strategic sourcing suite vendors realized that RFI functionality could be
positioned as supplier information management.
Contingent workforce management solutions flew from the Trough of Disillusionment to the
Slope of Enlightenment, driven by organizations' use of temporary workers instead of
permanent employees to reduce the risk of excess head count in these economically
challenging times.
There were also several changes in the composition of procurement technology profiles covered
since our 2009 research.
New Profiles:
Telecom expense management was added as a result of procurement having greater

involvement in telecom category management. Evidence of this trend is Emptoris' acquisition of
Rivermine in January 2011.
Vendor risk management is a newer technology aimed specifically at IT vendor risk

management. Vendor risk management can be classified as a special-purpose supply base
management solution.
Social procurement was added as a brand new technology for adding Facebook-like
capabilities to procurement solutions.
Mobile procurement applications is another new technology and a capability recently being
offered by some procurement solution vendors.
Procurement e-catalog management solutions were added to highlight an option to supplier

portals and procurement networks for e-procurement solution content provisioning.
Deleted Technology Profiles:
Tactical sourcing is no longer listed separately. As predicted, it has become a feature of other
solutions, such as e-procurement and contingent workforce management, rather than a viable
stand-alone offering.
Extended purchasing suites are no longer a distinct offering from procure-to-pay solutions, and,
therefore, are not listed as a separate profile.
Secure Web stores, Web-to-print and strategic sourcing applications have reached the Plateau
of Productivity and are no longer listed on the Hype Cycle.
Other Changes:
Procurement business process outsourcing (BPO) has been split into indirect procurement BPO
and source-to-pay BPO, because the characteristics of the offerings are differentiated.
Enterprise contract management has been renamed CLM, the more broadly accepted name in
the market.
Services e-procurement is renamed services procurement to reflect the most common name in
the market.
Global data synchronization is renamed information exchanges and global data synchronization
to reflect a broader scope of solutions.
For advice on how to approach and order investments in procurement technologies, see
"Understanding Your Top Procurement Processes" and "Use Gartner's Pace Layers Model to
Structure Your Procurement Applications Portfolio."
Figure 1. Hype Cycle for Procurement, 2011
Technology
Trigger
Peak of
Inflated
Expectations
Trough of
Disillusionment
Slope of Enlightenment
Plateau of
Productivity
time
expectations
Years to mainstream adoption:
less than 2 years 2 to 5 years 5 to 10 years more than 10 years
obsolete
before plateau
As of November 2011
Services Procurement
Source-to-Pay BPO
MDM of Purchased Parts
MDM of Supplier Data
Multienterprise Business Process
Platform
Supply Base Management
E-Invoicing
Indirect-Procurement BPO
Business Process Networks
Procure-to-Pay
Solutions
Vendor Risk Management
Source-to-Settle Solutions
Supplier Portals
Contingent Workforce Management
Contract Life Cycle Management
Sourcing Optimization
Spending Analysis
Strategic Sourcing Suites
Online Supplier Directories
Information Exchanges and Global Data Synchronization
Procurement E-Catalog Management Solutions
E-Procurement
SaaS Procurement Applications
Telecom Expense Management
Travel Expense Management
Social Procurement Tools
Mobile Procurement
Applications
Procurement Networks
Source: Gartner (November 2011)
The Priority Matrix
All organizations buy goods and services to support operations. Technologies that enable
procurement to improve productivity and effectiveness can, therefore, deliver significant benefits in
terms of cost savings and process improvements.
The procurement technologies that deliver significant benefits are those that can reliably support all
or most types of spending. Moderate-benefit technologies are solutions that support a particular
category of spending or a single mode for supplier collaboration, are too immature at this time to
deliver reliable ROI, or are capabilities that we eventually expect to be features of broader solutions.
We do not list any procurement technologies as transformational because, despite its potentially
important contribution to the organization, procurement does not by itself enable a business to
dramatically alter its overall business proposition.
The time-to-mainstream adoption of the various technologies in the procurement solutions market
is well-distributed during the next 10 years. Although we do expect continued innovation in this
market through Technology Triggers and improved offerings, it's likely that, during the next five to
10 years, many of the procurement solutions in this Hype Cycle will be as commonly deployed as
accounts payable solutions in organizations with $1 billion or more in revenue.
Figure 2. Priority Matrix for Procurement, 2011
benefit years to mainstream adoption
less than 2 years 2 to 5 years 5 to 10 years more than 10 years
transformational
high
E-Procurement
SaaS Procurement
Applications
Telecom Expense
Management
Contract Life Cycle
Management
E-Invoicing
Spending Analysis
Multienterprise Business
Process Platform
moderate
Travel Expense
Management
Business Process
Networks
Contingent Workforce
Management
Online Supplier
Directories
Procurement E-Catalog
Management Solutions
Supplier Portals
Information Exchanges
and Global Data
Synchronization
Mobile Procurement
Applications
Procure-to-Pay Solutions
Source-to-Pay BPO
low
As of November 2011
Off the Hype Cycle
Three procurement technologies that were listed in the 2009 Procurement Hype Cycle are not listed
on the 2011 Hype Cycle, because they have reached the Plateau of Productivity:
Secure Web stores: The Secure Web store is a B2B, customer-specific, supplier-hosted
Internet site that provides product/service catalog content, customer-specific pricing, account-
level reporting, support for multiple users and customer branding. Secure Web stores are most
often deployed as customer-specific Web stores accessed via the Internet or as a "punchout"
website that provides content for a buyer-deployed e-procurement solution. E-Commerce
solution vendors, such as Adobe, Allurent, Amazon, Bazaarvoice, eBay, Google, IBM, Microsoft,
Oracle, PowerReviews and SAP, deliver secure Web store functionality as a feature.
Strategic sourcing applications: Strategic sourcing applications enable buyers to establish

sources of supply for direct materials, indirect materials and services through online RFIs, RFPs
and reverse auctions. These applications also help buyers compare and evaluate the resulting
bids, and they notify participating suppliers of event results. Vendors include Ariba, SAP,
Emptoris, BravoSolution and Curtis Fitch.
Web-to-print applications: Web-to-print applications (which technology providers sometimes

refer to as print e-procurement) are a specialized class of e-commerce solutions that support
the unique and complex specification development and RFP process associated with buying
printed materials and services. This technology is used by printing companies involved with
B2B and retail consumer (business-to-consumer [B2C]) sales. Vendors include EFI's Digital
StoreFront and Bitstream.
Four procurement technologies have been fully mature for some time and, therefore, have not
appeared on recent Hype Cycles:
Purchasing applications: the traditional purchasing module of an ERP or financial system that
creates purchase orders, blanket orders and change orders. Purchasing applications also
generally enable receiving. For communicating orders to suppliers, purchasing applications
typically offer hard-copy printouts, automatic email and/or autofax. Virtually all ERP and
financial suite vendors include a purchasing application in their offerings.
Procurement cards: special-purpose credit cards that are issued to individuals to make
purchases on behalf of the organization (see "The Role of Procurement Cards in EIPP" and
"Turbo- Charge Procurement Value-Add With Consumption Management" [Note: This
document has been archived; some of its content may not reflect current conditions.]). Most
major banks offer procurement card programs.
E-notification solutions: applications that allow public-sector organizations to publicly post

opportunities for tender (bid) on a central website. The purpose of the technology is to create a
fair and open venue for any interested party to participate in larger government opportunities.
Sample commercial off-the-shelf (COTS) vendors include Mediagrif, BidSync and Vortal.
Acquisition management: specialized solutions for U.S. federal-level procurement. Functionality

includes building acquisition plans, obtaining and documenting plan approvals, budget
encumbrance, contract assembly, bid solicitation, award documentation, and change order
management. Vendors include Oracle, SAP, Compusearch and CGI.
On the Rise
Analysis By: Deborah R Wilson
Definition: As social networking sites become increasingly significant in the personal lives of
procurement solution users, it has become clear that some social networking features could be
useful in procurement processes. Social procurement tools are procurement application features
that mimic the capabilities of popular social websites, such as eBay, Facebook and LinkedIn.
Sample capabilities being created by procurement solution vendors include detailed user profiles,
the ability to gain access to information by joining a group and embedded activity "walls" that
provide a chronological listing of events related to a particular topic. Facebook-like walls can
provide a useful place in a sourcing suite for a virtual team to document the activities and team
member comments associated with a particular sourcing project. Another way social functionality
can be leveraged is to enable requisitioners to rate products and services listed in the corporate e-
catalog, as is done on popular e-commerce websites.
Social collaboration for procurement is being developed and offered as a feature of procurement
applications, rather than as stand-alone solutions, because they leverage the documents and data
in the procurement application. For example, although procurement organizations could use third-
party tools such as SharePoint to create virtual team spaces for a sourcing project, the RFP,
contract and supplier contact data already exists in the sourcing solution, and it would be inefficient
to replicate and maintain these project artifacts elsewhere.
Position and Adoption Speed Justification: Procurement technology vendors will continue to
focus primarily on stabilizing customer requirements and refining the functionality of the solutions
that help organizations accomplish such tasks as placing orders and managing contracts. Because
of this focus and the moderate value that social features offer in procurement, we expect the
movement of this technology along the Hype Cycle to be relatively slow.
User Advice: Organizations should look to their procurement solution vendors for social technology
to enhance the procurement experience for casual users and professionals. Expect most solution
vendors to eventually add such capabilities as team spaces, extended user profiles and simple
ratings to their procurement suites.
Business Impact: Social procurement tools promise the benefit of helping virtual teams get to
know each other better and work more efficiently. The reasonable hope of this technology is that
greater familiarity and easier access to what's going on will improve the efficiency and effectiveness
of these virtual teams. Social features such as user ratings can improve procurement effectiveness
by enabling user feedback on product and supplier performance.
Benefit Rating: Moderate
Market Penetration: Less than 1% of target audience
Maturity: Embryonic
Sample Vendors: Fullstep Networks; Pool4Tool; Vortal
Recommended Reading: "Social Infrastructure"
Mobile Procurement Applications
Definition: Mobile applications are procurement solution extensions that run on mobile devices
such as the iPhone, BlackBerry, Droid or iPad. These applications can use HTML5 applications that
support multiple mobile devices, or they could be native applications for a specific device, such as
iOS solutions for Apple products.
Position and Adoption Speed Justification: Mobile devices are playing an increasingly significant
role in the personal lives of business professionals, providing access to business applications off-
hours and while traveling. So far, mobile device support has been informally delivered for
procurement solutions, and for e-procurement applications in particular, by enabling managers to
review and approve requisitions through email. Seventy-one percent of the 32 vendors profiled in
our recent report "E-Procurement Market and Vendor Landscape" said that approvals can be done
directly in an email, without a separate log-in to the e-procurement application. Beyond this,
procurement solutions have historically offered little or nothing for functionality tailored to PDAs. For
example, in the same study, only 28% of the vendors said they currently have a native application
for a mobile device, and telecom expense management solution vendors have been slow to launch
mobile clients.
Gartner expects native mobile applications for procurement to progress steadily along the Hype
Cycle curve because user demand for native applications is strong, and providing elegant native
PDA clients can provide meaningful differentiation. Advances will occur in waves. First-generation
solutions will address low-hanging fruit such as approvals with more content than a simple email.
The second generation will take advantage of device-specific capabilities such as location
capabilities. The third generation, which will take five-plus years to reach mainstream, will be role-
specific applications that take advantage of unique device capabilities.
It is possible, however, that the mobile procurement application will never reach the Plateau of
Productivity, because in the next few years mobile devices may evolve to the point where they are
no longer distinct offerings from the PC.
User Advice: Procurement solution users tend to be heavy users of mobile technologies, and
robust mobile procurement applications may improve user experience and adoption rates. Choose
procurement solution vendors that acknowledge this trend, and that make appropriate investments
in native or HTML5 mobile procurement applications.
Business Impact: Procurement applications are often viewed as clunky, difficult-to-use solutions
that sometimes impede, rather than enhance, productivity. The rich and compelling graphics and
user experience offered by mobile applications have the potential to make interactions with
enterprise applications more appealing and impactful, which may improve user adoption. Mobile
applications will also provide better access to procurement applications for individuals on the go.
Market Penetration: 1% to 5% of target audience
Maturity: Emerging
Sample Vendors: Basware; BirchStreet Systems; Coupa; Hubwoo; IQNavigator; Ivalua; Oracle;
Paperless Business Systems; Puridiom; SAP; Wallmedien; Wax Digital
Recommended Reading: "Separating Enterprise Tablet Applications From Consumer Apps"
"Hype Cycle for Wireless Devices, Software and Services, 2011"
Services Procurement
Definition: A services procurement solution is a software application tailored to handle the
requisitioning and purchase of all services, including legal, consulting, construction, contingent
worker services and maintenance payments. Services procurement solutions are often delivered as
an element of a broader e-procurement suite.
Position and Adoption Speed Justification: Most specialized services procurement solutions in
the market today were originally created eight to 10 years ago, but have attracted only a few dozen
clients. The problem is that services are not a homogeneous spend type in terms of requisition and
payment profile. Services can be payable by the hour, milestone or annual fee; requisitions must
often include special information, such as work instructions or a job description; and actual prices
for services rendered often vary significantly from estimated costs. These characteristics have made
it difficult for a single, specialized solution to successfully support all service spend types.
The market has evolved to address these issues. Contingent workforce management vendors have
added functionality to their solutions to make them more suitable for supporting statement-of-work-
based services. Accounts payable invoice automation vendors, such as Readsoft and Kofax, have
provided functionality to allow managers to use invoice approval as proof of service delivery,
although this is not an ideal solution. The net result is that the specialty services procurement
solution has been marginalized and as a separate solution and no longer attracts many new
customers.
User Advice: Services procurement solutions have not proved robust enough to deliver real
benefits to organizations' buying services. To improve and support services procurement
processes, look to e-procurement, purchasing and contingent workforce solutions to deliver results.
Business Impact: Specialty services procurement solutions are struggling to deliver ROI. We
predict that vendors with services procurement solutions will eventually deliver services
procurement functionality as a feature of other applications, such as e-procurement and contingent
workforce management solutions.
Benefit Rating: Low
Maturity: Emerging
Sample Vendors: Ariba; Emptoris; Oracle; SAP
Source-to-Pay BPO
Analysis By: Cathy Tornbohm
Definition: Gartner defines source-to-pay (S2P) business process outsourcing (BPO) as the
provision of the full end-to-end outsourced service of sourcing of direct or indirect goods, the
administration of purchasing services, and accounts payable services. In BPO, the focus for service
offerings is shifting from departmental boundaries toward end-to-end processes. The end-to-end
process of S2P BPO, therefore, incorporates sourcing goods and services, procuring them, and
providing accounts payable services that prepare the invoice for payment.
The word "procurement" has assumed a new dual meaning. Although it can still mean the entire
purchasing department where goods and services are bought, BPO providers are increasingly using
it as a term for which procurement is defined as the activity that follows sourcing of actually buying
goods and/or services and tracking those purchases prior to the accounts-payable activity.
The word "sourcing" means the process of selection of a supplier, although sourcing is still a
subcomponent of the procurement department. Therefore, as BPO providers increase their scope
of offering to include both project sourcing (for terms, conditions and pricing of goods and services)
mainly for indirect goods, the term and scope of "procure to pay" is moving to "source to pay." The
sourcing definition is for strategic and tactical buying, but the word procurement now typically
means only the administration related to the purchase order.
Position and Adoption Speed Justification: Sourcing and procurement BPO services have had
relatively limited adoption over the past 10 years, but it is the indirect procurement area that is,
goods and services that are not directly accounted for in the cost of goods sold that have mostly
been outsourced. Direct goods and materials are the sourced items in the supply chain, and these
are rarely outsourced. However, the administration of the accounts payable may already be
outsourced because the finance and accounting (F&A) aspect of this activity has been outsourced
to a great deal and is a fairly mature offering.
User Advice: There are multiple ways in which an organization can address its S2P requirements;
therefore, multiple types of competitors present themselves along the end-to-end activity. Because
the term "source-to-pay service" is relatively new, leaders will be set apart by an ability to be
flexible in offering all, or part, of the S2P process, an ability to communicate the service to clients,
and offering insightful analytics capabilities and a global network of buyers, support staff and
offshore delivery centers.
Clearly evaluate what strengths the providers of this service have. The different backgrounds, either
providers of F&A BPO services or others from a sourcing specialism both have gaps in their
offerings from an end-to-end perspective. Providers of F&A BPO have spent the past few years
slowly providing more procurement support, especially the services of procurement data
management and indirect sourcing services. This is exemplified by the recent acquisition of Ariba's
sourcing services business by Accenture, Capgemini's acquisition of IBX, and IBM's acquisition of
Key MRO. Sourcing specialists are also extending consultancy services to longer-term outsourcing
relationships and partnering with F&A BPO providers, as seen with ICG Commerce's partnership
with Genpact.
Business Impact: Many providers have specialized in sourcing and procurement outsourcing
services with a range of business models, from services that are heavily consultancy-based to
business marketplaces. The clearly delineated lines that have long separated sourcing/procurement
from accounts payable outsourcing have rapidly blurred in a logical if less-mature market of
multidomain S2P BPO. Few businesses have a clear view of their end-to-end process, and BPO
can be a way to support attaining this visibility and control. This would allow organizations to
address the issue that they are not designed or organized to optimally manage the end-to-end
process, from sourcing and procurement, through to accounts payable. Typically, no single buyer or
service owner is apparent; therefore, engaging a service provider for the whole service helps clarify
what steps are really necessary in the end-to-end process.
Maturity: Emerging
Sample Vendors: Accenture; Capgemini; Genpact; HP; IBM; ICG Commerce; Infosys; Tata
Consultancy Services; Wipro
Recommended Reading: "Magic Quadrant for Comprehensive Finance and Accounting BPO,
Global"
"Competitive Landscape: The Source-to-Pay BPO Tide Rises as New Entrants Flood the Market"
"2010 Gartner FEI Technology Study: Planned Shared Services and Outsourcing to Increase"
"Serco Plans to Acquire Intelenet to Boost Global BPO Capabilities"
"EXL Service to Acquire OPI to Enhance F&A BPO Offerings"
"Case Study: Pricing Model Challenges Moving from an Internal Finance or Shared-Service
Organization to BPO"
"Outsourcing Advisory: Pricing Options and Trends in BPO"
"What Is 'Platform BPO' and When Would You Use It?"
"Six Best Practices When Using Offshore BPO"
MDM of Purchased Parts
Analysis By: Mickey North Rizza; Andrew White
Definition: Procurement-centric master data management (MDM) technology has been split into
two pieces: MDM of purchased parts and MDM of supplier data. This reflects the fact that the use
cases, vendors and audiences for the two types of MDM differ.
MDM of purchased parts enables organizations to cleanse, identify, link, consolidate, enrich,
maintain, publish and protect master data for common-item parts. This is done by creating and
managing a system of record founded on a database, typically by the ERP system, procurement or
PLM solution, and by enabling the delivery of a single view of purchased parts data across systems,
across lines of business and/or by commodity. MDM of purchased parts, including catalog and
fabricated components and subassemblies, facilitates an organization's ability to leverage parts
numbers across product lines, inventory assets, distribution and service inventory, and it facilitates
parts reuse strategies in new product designs for economies of scale. These benefits are rarely
sought together and are often only tackled opportunistically and separately. This helps explain why
this technology is both splintered from core MDM and also (the now-revised) slow to mature/adopt
along the MDM Hype Cycle.
MDM of purchased parts is a specialized case of MDM and is relevant to industries that maintain
item parts masters, such as manufacturing and supply chains (for direct materials), and oil and gas,
for maintenance, repair and operating (MRO) items. MDM of purchased parts solutions publish
and/or coordinate data across ERP solutions, product life cycle management applications,
procurement, inventory, installation/service and other applications. Retailers and wholesalers use
specialized applications, often offered as a part of a merchandising or private-label sourcing
solution. (These are not covered here.) Most MDM of purchased parts solutions use third-party
content to cleanse, normalize and validate descriptions.
Position and Adoption Speed Justification: Procurement is typically a center-led organization that
is closely tied to the local supply chain and accounting systems of the divisions, operating units or
locations, and is further disaggregated by many active decades of acquisition and divestiture. This
has left most larger organizations with multiple item parts masters, which stifle the ability to
promote reuse in design, substitute parts and source purchased parts by leveraging volume at the
enterprise level. The economic downturn of the past few years has moved more companies to SKU
rationalization exercises, which have forced the consolidation of products, parts numbers and
inventory. This, in turn, forces them to look at what items are required for current products, sunset
products and new products. It requires more visibility for purchased parts in terms of new product
design, where to buy, how to buy and from whom. Purchased parts MDM solutions facilitate this
process by establishing a means to coordinate design and leverage parts numbers, commodity
types and components, inventory management, and purchase activity across the organization.
Vendors of MDM of product data have been responding to the resulting demand for solutions,
because the functionality required to support MDM of purchased parts is similar.
However, formal purchased part MDM tools have been inhibited by several factors. MDM
techniques offer clearer and stronger return on investment (ROI), when applied to customer and
product data. Because this use can grow top-line revenue, most MDM activity has focused there
first. However, this has started to change with the SKU rationalization activities of the past few
years. Governance issues related to who owns the purchased parts record (engineering, operations
or procurement) have been an obstacle, but this has subsided because of the economic importance
and benefit for organizations. MDM of purchased parts solutions can help organizations identify
similar or like parts in other divisions or locations; improve working capital with substitute like or
similar parts (use current inventory/avoid a purchase); consolidate multiple manufacturers' catalog
parts numbers into one brand owner part; consolidate duplicate brand owner parts numbers and
supply contracts; and pinpoint opportunities for rationalization. The economies of scale and
collaborative visibility are the reasons to make MDM of purchased parts mandatory, and enable
bottom-line contribution.
User Advice: This technology is applicable to organizations with:
Multiple divisions buying similar items and/or sharing common inventory across multiple
locations
ERP consolidation efforts looking to develop a centralized procurement function
Local procurement processes with global manufacturing processes

Such organizations (public sector or private) should consider MDM purchased parts tools, but
should also expect to serve as early-stage adopters of this technology. Users should compare and
contrast a domain-specific effort like this versus the broader effort and greater value from a
multidomain MDM program. Thus, you should include concrete plans in your project for
collaboration on like and similar purchased parts, and link these to internal parts numbers to
improve visibility in parts selection and inventory across the enterprise.
Business Impact: The business impact of MDM of purchased parts is significant when
organizations consider its use for commodity-sourcing leverage and in SKU rationalization, and
moderate for current center-led organizations with multiple divisions or locations designing with
and/or buying the same or similar parts. If there has been lots of M&A activity, then the value of this
program may increase due to the fragmented nature of the data. Organizations have started to
understand that MDM of purchased parts can assist with working capital initiatives and supplier
collaboration activities. Once the vendors in this market connect the dots to SKU rationalization
activities, working capital initiatives and supply chain partner collaboration, the products will gain in
demand. However, the vendors in this market need to innovate to provide additional application
functionality and services that connect supplier collaboration information to brand owner forecasts
and demand management.
Maturity: Emerging
Sample Vendors: iTradeNetwork; Oracle; PartMiner; Riversand; Zynapse
Recommended Reading: "Vendor Guide: Master Data Management, 2009"
"Should Organizations Using ERP 'Do' Master Data Management?"
"The Differences, and Similarities, Between Operational MDM and Analytical MDM"
Definition: Master data management (MDM) of supplier data is a technology-enabled discipline in
which business and IT work together to ensure the uniformity, accuracy, stewardship, semantic
consistency and accountability of supplier data. The typical MDM of supplier data solution includes:
E-forms for requesting a new supplier
Workflow for new and updated data gathering and approval
A link with one or more third-party content providers, such as D&B, for identifying and/or
validating related suppliers
A data repository for storing the master data
A means to receive and publish the appropriate data to subscribing systems

Position and Adoption Speed Justification: Only a few hundred technology-based MDM of
supplier data programs have been undertaken during the past 10 years, because of the cost,
complexity and immaturity associated with initiatives of this type, and because most organizations
tackle MDM of product and customer data first. The worldwide economic recession of 2009 to 2010
stymied further adoption of MDM of supplier data. With the global financial outlook getting better,
and companies' increased interest is becoming "socially aware" and green, we are seeing renewed
interested in MDM of supplier data, so its position on the Hype Cycle has advanced slightly.
User Advice: An MDM of supplier data technology strategy should be scoped as an element of a
wider, multidomain MDM strategy (for example, encompassing customer, product, employee,
location, asset and financial master data). Begin an MDM of supplier data program by cleaning up
current files and implementing strong supplier master file governance and control policies. Explore
spending analysis, enterprise contract management and/or supply base management (SBM)
technologies as logical extensions to traditional MDM of supplier data prior to making investments.
Business Impact: Most organizations pursue MDM of supplier data programs to prepare for an
ERP implementation or an ERP consolidation project. This type of MDM program is most commonly
achieved with business consulting services, rather than purely an investment in technology.
MDM of supplier data is increasingly contemplated, however, to enhance the organization's ability
to analyze spending, to enforce compliance with contractual terms and conditions (such as
payment terms across multiple business units), and/or to maintain cleaned-up master data from
being recorrupted. These use cases involve implementing a solution, but have proved somewhat
problematic for delivering business impact, because the expense of these systems often outweigh
the benefits, and because the solutions available have not provided an effective means to keep
ever-changing supplier data up to date.
A newer technology is altering these dynamics. Supplier information management (SIM) is a new
class of applications that enables suppliers to maintain their own business data, as well as update
content such as equipment lists, insurance certificates and signed codes of conduct. Putting
suppliers in charge of keeping their data up-to-date simultaneously reduces the burden of data
management on the buyer and keeps information current enough to be more useful. Some SIM
vendors are building and/or leveraging shared databases and document repositories, so suppliers
can update multiple customers at once, which can further reduce costs. Data collected and
updated in an SIM solution can be published to an MDM solution, or, in some cases, the SIM
solution can serve as an MDM solution. As a result of this development in the market, we are
increasing the benefit rating for MDM for supplier data from Low to Moderate this year.
Maturity: Emerging
Sample Vendors: Aravo; GXS; Oracle; Pool4Tool; Riversand Technologies; SAP; Xcitec; Zynapse
Recommended Reading: "Governance of Master Data Starts With the Master Data Life Cycle"
"The Supply Base Management Application Market and Vendor Landscape"
"Toolkit: Supply Base Management Vendor Evaluation Tool"
"GE Lights Up Supplier Management With Aravo"
Multienterprise Business Process Platform
Analysis By: Andrew White; Deborah R Wilson; Benoit J. Lheureux
Definition: A multienterprise business process platform (ME-BPP) is Gartner's high-level
conceptual model of a multistakeholder environment, where multiple businesses' operational
processes that model multienterprise business processes are governed. The ME-BPP is a
combined set of shared IT and shared solutions and services that enables multienterprise process
design, modeling, improvement, composition, execution and management. The business services
repository (BSR) portion of an ME-BPP exposes automated business functionality as reusable
software services to be used in complex multienterprise process compositions. This differs from a
BPP, which focuses on governance of information and application assets for enterprise-centric
business processes.
When participating in an ME-BPP, the following technologies and assets will be governed in a
shared fashion: B2B data and application integration technologies and a range of packaged
business application solutions, coupled with technology services related to (supply chain) visibility,
business intelligence, analytics, performance management, workflow, business process
management technology, multienterprise master data management, multienterprise security and
governance, supplier community management services and portals. A BSR will be used and
implemented in a shared environment, where reusable services are exposed to support composition
and integration.
An ME-BPP supports the consumption of packaged business processes as well as packaged
integration, along with the ability to design and implement custom integration and business
applications for specific business processes. The delivery (or access) of an ME-BPP is always via an
on-demand and software as a service model, so it lends itself to a cloud-based approach, though
does not require it. An ME-BPP is not a technology, but is more a commitment by an organization
to govern the many tools, applications and data services it uses for all its B2B interactions with
external parties, through a single lens, in order to rationalize and simplify the previously many
moving parts. Newly emerging cloud services brokers may play a key role in the formation of ME-
BPPs.
Position and Adoption Speed Justification: The issue that is driving increased interest in ME-
BPPs is the question that many large and some midsize organizations are asking of their technology
providers: "Why do I have so many different vendors to support all my different interactions with my
trading community?" These users are looking to rationalize their investments into a fewer number of
moving parts. The focus on the cloud in 2011, however, is not yet providing a new answer to this
question; it is really changing the way the current set of services are being consumed. Longer-term,
the increased adoption of cloud services brokerages (CSBs) may provide a suitable commercial
rallying point and just the level of flexibility needed by organizations to make an ME-BPP more likely
and sustainable. Regardless, ME-BPP has emerged as a result of the inherent complexity of
implementing complex multienterprise processes, and almost with exasperation users have sought
a suitable approach to addressing the requirement. However, no single vendor supports a complete
ME-BPP, yet. Since 2009, however, numerous vendors have been emerging and/or evolving across
many fronts, toward the same general direction of an ME-BPP, perhaps oriented around a
transaction type or business process category, industry or set of similar services. There are some
business process hubs (BPHs) and business process networks (BPNs) with a combination of
technology and methodologies in varying stages of evolution (notably Ariba, E2open,
iTradeNetwork, Perfect Commerce, Elemica, Hubwoo, GHX and e-Builder, which are converging
toward an ME-BPP). More recently, the formation of CSBs (from some of the same providers, as
well as system integrators and other IT services organizations) seems to provide a more flexible way
for users to access large swathes of services, and these too may start to form into something larger,
like an ME-BPP. Some vendors might be more focused on multienterprise integration (BPNs) and
others on multienterprise business applications (BPHs). None has unified BPN and BPH technology
with metadata-driven process modeling and service-oriented architecture, and the sufficient
community management and performance management infrastructure needed to fully qualify as
supporting the needs of an ME-BPP. Due to the poor economic climate, adoption of this technology
has not continued to evolve, as many organizations have focused on cost optimization rather than
longer-term strategic investment. Anemic economic growth will likely continue to inhibit hype and
investment in long-term initiatives such as ME-BPP.
Users will have to continue to look opportunistically for ME-BPP-like offerings among the multitude
of BPHs, BPNs and CSBs offered in the market. The barriers that are slowing the adoption and
development of ME-BPPs are gradually eroding, and include lack of maturity in infrastructure,
trading partners not at the same stage of IT maturity or readiness, insufficient use of metadata-
driven approaches to master data and application modeling, a lack of shared-governance models
(although industry- and community-based process and data standards will help) and inertia (current
investment plans have a return on investment target that still has to be met). ME-BPPs are less
hyped (so far) than the enterprise "version," BPP, which matured as a discipline earlier, since it is
older in concept and pertinent to every enterprise. It is quite likely that the hype related to ME-BPP
will always be less than its enterprise-oriented version.
User Advice: To gain a good understanding of their multienterprise processes, clients should create
a multienterprise process architecture that identifies needs for differentiating multienterprise
processes; needs for standardized, enterprise-oriented business processes would be governed
internally with a BPP, not via a shared ME-BPP. Business process analysts should focus on
designing the differentiating multienterprise processes for change, and on working with their own
and partner IT organizations to implement the first iteration of such processes, including a strategy
and plan for ongoing changes to keep them differentiating, or to move them gradually into the core
as competitors catch on and copy their approach. Users there might conclude that they need to
simplify their overall B2B complexity, but you won't be able to deploy an ME-BPP without the
necessary leadership, investment and organizational maturity to drive adoption of something as
forward-looking as an ME-BPP.
Leverage emerging component parts or delivery vehicles for your current B2B strategy (BPHs,
BPNs and CSBs) that are building toward an ME-BPP offering, to implement configurable,
extendable, shared multienterprise processes. Recognize that an ME-BPP is part technology and
part application infrastructure design concept, with methodologies to support a multistakeholder-
governed infrastructure. An ME-BPP supports a business strategy enabled by technology that
involves communities of interest (business relationships), communities of trust, shared infrastructure
(including integration as a service), and shared or multienterprise business applications. Develop a
multienterprise strategy involving a "portfolio approach" of B2B interactions that might, over time,
rationalize a move toward fewer methods. Seek to consolidate separate B2B projects on one
infrastructure; incorporate your B2B integration strategy into your business application strategy, and
establish clear metrics for tracking the success of your multienterprise projects.
Business Impact: Initial impact is being seen in a number of areas, notably global trade, third-party
logistics, distributed order fulfillment, procure to pay and multienterprise collaboration. In the longer
term, we expect to see more adoption across widespread deployed business processes, such as
those found in application domains, such as CRM, ERP, procurement, product life cycle
management and supply chain management, as well as industry-specific applications.
Benefit Rating: High
Maturity: Emerging
Sample Vendors: Ariba; Capgemini Ernst & Young; e-Builder; E2open; Elemica; GHX; Hubwoo;
Perfect Commerce; SciQuest; Sterling Commerce
Recommended Reading: "Findings: Ownership of Processes Distinguishes Internal BPP From
Multienterprise BPP"
"The Emergence of the Multienterprise Business Process Platform"
"Best Practices: Checklist for Issues to Consider in Multienterprise Collaboration"
"Examining the Embedded Multienterprise Integration Market"
Definition: Supply base management (SBM) applications improve the ability of procurement
organizations to proactively and effectively manage supplier performance, information and risk by
providing a means and a place to assemble, organize and leverage enterprise supplier data, such as
performance scorecards, capability summaries, risk assessments and credential documents. Data
sources for SBM include suppliers, third-party vendors and internal systems. Through self-service,
embedded portal functionality or procurement networks, suppliers maintain contact information,
firmographic data (company size, location, etc.), equipment lists, capabilities summaries and
credential documents, such as signed codes of conduct and insurance certificates.
Third-party information can be pulled into the application via Web services or batch file upload, and
can include financial performance data, news and public registry information, such as export filings.
Internal data is generated and maintained by the buying organization, and can include user/
requisitioner surveys, supplier audit records, supplier performance scorecards and supplier ideas
programs. The SBM application unites this information to create a single, enterprise record for
suppliers, and it enables organizations to track their responses to that data. For example, an SBM
application will map risks to remediations and track action plans to address performance issues.
SBM solutions are a superset of supplier information management (SIM), supplier performance
management (SPM), vendor risk management (VRM), and supplier risk model map and track
solutions.
Position and Adoption Speed Justification: As a result of significant market growth last year, and
because the hype surrounding these solutions has greatly increased, the SBM solution has
progressed toward the Peak of Inflated Expectations. Several of the vendors we rated in last year's
"The Supply Base Management Application Market and Vendor Landscape" have since been
acquired, because larger suite vendors do not want to be left behind in this hot market by newer
best-of-breed providers. This includes Emptoris, which acquired Xcitec in May 2011; SciQuest,
which acquired AECsoft USA in January 2011; and GXS, which acquired Rollstream in April 2011.
User Advice: Consider SBM solutions, rather than SIM, SPM or supplier relationship management
point solutions. These subtypes are rapidly converging in the market. Invest cautiously in this
market segment; however, because requirements are still evolving, applications are new and the
solutions are likely to have gaps in functionality. Don't expect solutions to provide a complete
picture of supplier performance. Most buyers are early adopters helping vendors identify issues,
correct deficits and innovate.
Business Impact: In terms of profitability and agility, organizations that holistically track their
suppliers and leverage their data to achieve a best-in-class supply base will significantly outperform
organizations that don't.
Maturity: Emerging
Sample Vendors: Aravo Solutions; Archer (EMC/RSA); Ariba; BravoSolution; Curtis Fitch; CVM
Solutions; Decideware; D&B; Emptoris; Fullstep; GEP; GXS; Hiperos; Ivalua; MetricStream; Oracle;
Pool4Tool; SAP; SciQuest; Upside Software; Vortal
Recommended Reading: "The Supply Base Management Application Market and Vendor
Landscape"
"Toolkit: Supply Base Management Vendor Evaluation Tool"
"Understanding Your Top Procurement Processes"
At the Peak
E-Invoicing
Analysis By: Paolo Malinverno
Definition: Electronic invoicing (e-invoicing) cuts through many disciplines, requires a lot of
knowledge (spanning business, regulations and IT) and involves a lot of complexity. A good
definition of e-invoicing is "the interchange and storage of legally valid invoices in electronic format
only among trading partners." See "Cost Savings Finally Make the (European) E-Invoicing
Steamroller Pick Up Speed" for more details.
The interchange does not use or require paper-based invoices. E-invoices have legal validity, and
can be used to prove compliance or as tax originals. In general, most considerations for e-invoicing
apply whether you are sending e-invoices or receiving them. Operationally:
The seller must ensure that the invoice contains the correct data and is authentic.
The buyer must verify the authenticity of the invoice, match it to goods or services received, and
execute payment.
Both the seller and the buyer (or a third party on their behalf) must store the readable and
authentic invoice (this comes with a lot of added strong security) for a period of time, and must
make it available to a tax authority on request.
Position and Adoption Speed Justification: E-invoicing touches internal business processes,
mutual agreements among business partners, financial transactions, tax and legal implications, and
a lot of the IT infrastructure that supports all that. Several studies and surveys are available on the
current e-invoicing uptake, and on the projected growth of the market in the next few years. So, e-
invoicing is possible, viable and beneficial today, not only in Europe, but also across the world; in
some cases (such as Mexico and Brazil), it is even mandatory.
Normative standards abound across the world, and they keep coming; as always happens in B2B,
standards accumulate, and too many standards means that there is no standard at all. In Europe,
the EU issued a directive in 2001, and has revised it twice since, with a view to "simplifying,
modernizing and harmonizing the conditions laid down for invoicing with respect to the value-added
tax in the EU" for all member states. A core theme of the directive was to promote the efficient
cross-border creation, transmission, acceptance, storage and retrieval of invoices. To allow for
technological differences among all member states, and to stay technology-neutral, the directive
enabled several ways of meeting conditions for e-invoicing. For example, the requirements to
ensure authenticity and integrity can be met either through advanced or qualified electronic
signatures, or through electronic data interchange (EDI) with contractual security measures.
Unfortunately, this technological flexibility has led member states to adopt state-specific versions of
the directive that have disparate requirements for meeting the functional objectives. These
requirements, in turn, have led to more-stringent or less-stringent controls, depending on the
member state. Several governments in Europe (and other governments around the world, especially
in South America) mandate the use of e-invoicing for government agencies, and more are likely to
follow suit in the next year or two.
Many intricacies are associated with cross-country e-invoicing projects (supplier e-invoicing and
generic e-invoicing projects with all business partners in one country are considerably easier). There
are several axes of variance for e-invoicing requirements (internal and multienterprise business
processes, IT infrastructures, and law and security, to name a few), and they cause many
differences from the seller's and the buyer's perspectives; frequently, for example, different laws
apply to buyers and to sellers. This is, by far, the most common source of difficulties in e-invoicing
projects, and is compounded by continuously evolving regulations and general requirements.
Another complication is that most requirements, in practice, are not properly published by member
states, and are extremely difficult or expensive for businesses to obtain, interpret and monitor.
The European Association of Corporate Treasurers identified the average processing cost of a
paper invoice across Europe to be around 30. It also determined that, by using e-invoicing, an
80% cost savings is possible. Confirming that data, initial case studies also indicate that e-invoicing
has been proved to reduce the cost of processing a single invoice to less than 7. E-invoicing offers
a range of potential benefits, including improvements in accounts payable (AP) processes by
reducing invoice processing time and minimizing manual intervention, thus leading to a reduction in
operating expenses. This fact alone has prompted some companies to start e-invoicing projects; it
makes many others look deeper into the e-invoicing conundrum.
However, after a few dormant years, e-invoicing adoption is finally taking off. None of the following
reasons in isolation is enough to warrant continued growth, but all of them together are driving and
will drive more widespread adoption:
Strong user demand, because of the benefits, especially savings
Increasing supply, and an associated increase in the maturity and effectiveness of e-invoicing
solutions; in particular, several banks are promoting e-invoicing in their strategies (especially in
Spain, Scandinavia and Switzerland)
More governments mandating e-invoicing, especially in the EU and South America
Increasing availability of viable (and compelling) e-invoicing references and case studies as
more companies adopt e-invoicing
E-invoicing will grow steadily in the next few years, despite all the difficulties associated with it,
simply because the momentum of the four factors noted above is stronger than the decelerating
force of the difficulties. However, many difficulties are associated with normative functions in
different countries, so we do not expect e-invoicing to reach the Plateau of Productivity before two
to four years.
User Advice: Calculate your current average invoice processing cost, and confirm it with the
business. Focus your initial e-invoicing projects in countries where B2B and invoice exchange are
already happening and maturing, such as Scandinavia, Brazil, Mexico, Spain, Singapore, South
Korea, Germany, Poland, France and the U.K. Be aware of the further constraints and limitations
based on where the countries you do e-invoicing to and from allow e-invoices to be stored.
E-invoicing services are sprawling across the world, especially in Europe and South America, so
make sure the solution you choose addresses internal and multienterprise business processes, IT
infrastructures, laws, and security, and that it's certified by tax auditors for as many countries as
possible, especially those where you have a steady flow of invoices to and from that connect with
other service providers, certified e-invoice networks and banks.
Multicountry e-invoicing projects last years, so don't sell the benefits internally to your company too
quickly. In a large project, if you make 50% of your invoicing traffic electronic in two years, you're
doing great. Never underestimate the consequences of the diversity of regulations across countries;
work with your auditors and process architects, because e-invoicing is cross-functional by nature.
Research and track, on an ongoing basis, the value-added tax (VAT) laws and e-invoice
requirements in each country, or make sure your e-invoicing solution supplier does that.
Implement e-invoicing in conjunction with e-procurement or another procure-to-pay or B2B
infrastructure, if possible, to leverage purchase order information for a higher match rate to the
invoice.
No matter what vertical or financial shape your company is in, start looking for e-invoicing project
savings opportunities now. Don't hold out for regulations and interoperability to get better; you can
reap good benefits from e-invoicing today.
Business Impact: Plan your e-invoicing projects according to how many invoices you can process
automatically in the countries the invoices will progressively touch; plan globally from the start, even
if you are starting to execute locally. The faster you build critical mass, the greater the difference to
your company's bottom line.
Current case studies indicate that you can quantify e-invoicing savings in many ways: the cost per
invoice, the total savings due to reduced number of resources and computing power (60% to 80%,
compared with paper invoice processing), or a percentage of a midsize to large company's turnover
(around 1%). Whichever way you put it, the clear indication from case studies is that the savings for
companies that have to deal with a large volume of invoices (more than 100 per day, inbound and
outbound) are significant (see "Supplier E-Invoicing Networks"), because of the economies of scale
obtained by aligning technical, business and compliance strategies.
Other benefits of e-invoicing, when implemented through e-invoicing networks or as part of a
broader B2B solution with ad hoc applications, include:
Better spending analysis, leading to some spending reduction
Faster processing times and payment cycles
Enhanced contract performance analysis
Better tracking and enforcing of trading partner compliance with commercial terms
Improved dispute handling and avoidance
Opportunity to realize more supplier rebates and discounts
Better auditability of invoices through integrity and authenticity guarantees
Easier availability of data for regulatory compliance (e.g., for supply chain traceability)
Greener approach, big reductions in consumption of paper

The potential for benefits is much greater for the buyer than the supplier/customer, because the
buyer is improving its internal processes for handling invoices, and typically has to process a lot of
them, compounding the benefits (which is why we are seeing a bigger uptake in buyer e-invoicing,
and then customer e-invoicing). However, e-invoicing does provide benefits to senders too, such as
improved customer satisfaction, reduced administrative costs in credit collection, more-effective
capital management and cash flow control (suppliers can see when invoices will be settled, so they
can forecast receipts more effectively), and, above all, lower customer churn. This would also apply
to smaller senders, which would not have the e-invoicing volumes of the suppliers. However, small
and midsize companies are likely to have to send e-invoices to several networks, depending on the
demands of the organizations they supply. This problem can be (slowly) addressed by managed,
service-based solutions, and is a well-known general issue in B2B, certainly not limited to e-
invoicing.
As always in B2B, the key in e-invoicing projects lies with the recognition of the shared benefits that
suppliers and buying organizations alike can realize; this typically implies improved business
processes (with the associated organizational and change management challenges) and technology
additions.
Maturity: Emerging
Sample Vendors: Anachron; b-process; Basware; Comarch; Crossgate; Edicom; GXS; Maventa;
OB10; Tieto; TrustWeaver
Recommended Reading: "Cost Savings Finally Make the (European) E-Invoicing Steamroller Pick
Up Speed"
"Electronic Invoice Presentment and Payment Vendor Landscape"
"Magic Quadrant for Integration Service Providers"
"Supplier E-Invoicing Networks"
Analysis By: Cathy Tornbohm
Definition: Indirect-procurement business process outsourcing (BPO) is the provision by an
external vendor of transaction processing support (including the underlying technology and
associated people) to manage the acquisition of goods and services (such as stationery, travel and
staff augmentation).
Position and Adoption Speed Justification: Fully outsourcing the management of indirect
procurement buying and administration activities (catalog management, vendor relationship
management, strategic sourcing, and transaction processing) is still a relatively early-stage,
immature market. The majority of outsourcing today is transactional support and buying of indirect
goods or services. If an organization does outsource procurement, not just transactional support, it
is more likely to outsource indirect, rather than direct, spending, because direct support is
considered too strategic to outsource.
A number of Tier 1, full-service BPO providers have entered this market, as have India-based
outsourcers and specialist "pure play" (single-process) providers, but the market has been slow to
develop at rates experienced by other BPO areas (such as payroll and finance). However, it is being
aggressively pushed by vendors, especially those that are already performing accounts payable
work and, as such, is expected to rapidly move toward the Peak of Inflated Expectations. In part,
this is because procurement is still not actually taken seriously as a business practice in many
enterprises; therefore, a lack of standardized business best practices has hampered enterprises'
ability to make judgments about the viability and benefits of outsourcing. This is a good reason why
organizations are turning to outsourcing, especially following this recession, to get process clarity
and access to best practices. Therefore, the economic recession has increased interest and
adoption and moved it faster along the hype curve. Some aspects of procurement are increasingly
being outsourced, particularly indirect goods and services (such as stationery and travel). But few
enterprises are comfortable with the notion of externalizing strategic and holistic responsibility for
their procurement activities.
User Advice: Consider using indirect-procurement BPO tactically for small engagements that can
be increased in volume and scope as, and when, a provider proves its ability to deliver value and
cost savings.
Business Impact: Indirect-procurement BPO is a supporting business process that, if managed
well, can streamline an organization's indirect spending; the impact will depend on how well the
process is currently managed.
Maturity: Emerging
Sample Vendors: Accenture; Capgemini; Genpact; Global eProcure; IBM; ICG Commerce; Infosys;
Perfect Commerce; Rearden Commerce; Softtek; VKelly; Wipro; Xchanging
Recommended Reading: "Competitive Landscape: The Source-to-Pay BPO Tide Rises as New
Entrants Flood the Market"
Business Process Networks
Analysis By: Benoit J. Lheureux
Definition: A business process network (BPN) is a process-specific instance of multienterprise
integration among three or more companies (for example, a B2B community usually involving many
companies). A BPN is not a category of IT vendor; it is a bundled IT solution or a type of B2B IT
project something that a wide range of IT vendors offers and a wide range of B2B communities
implements.
BPN can be defined from:
A business process point of view A BPN links the execution of a specific business process,
such as order to cash or claims adjudication, between the applications and IT infrastructure of
two or more companies. A BPN doesn't execute the business process logic per se, because
such process execution occurs within the participating applications and business process
management (BPM) logic (and, at times, partially within a multienterprise application that is
included in the B2B project). The multienterprise integration project can leverage B2B standards
or proprietary specifications. For example, to implement the order-to-cash process, a
community might use industry-standard B2B specifications (such as EDI X12, RosettaNet or
UBL) or, alternatively, a proprietary specification defined solely, for example, by a large
manufacturer or retailer.
A multienterprise community point of view The scope of a BPN can be one to many or many
to many. BPNs that are implemented only between a company and its private external business
partners are one to many (for example, a high-tech manufacturer that implements the
integration tasks associated with a vendor-managed inventory process with its electronic
component suppliers). Many BPNs are implemented to support the interactions of a large
number of companies in a peer-to-peer fashion and are many to many (for example, Ariba,
Global Data Synchronization or Society for Worldwide Interbank Financial Telecommunication
[SWIFT]).
An IT implementation point of view A BPN can be implemented using B2B gateway software,
integration platform as a service (iPaaS) or any form of B2B integration infrastructure (see
"Taxonomy, Definitions and the Vendor Landscape for Application Integration Solutions, 2011").
In addition to, or as an alternative to, such process integration technologies, some BPNs use
BPM technologies (see "Findings: Confusion Remains Regarding BPM Terminology"). BPNs
use business process management technologies (BPMTs), particularly when end-to-end
business process visibility is important to network participants, and when network participants
want business stakeholders to make some changes to process flows, rules and user interfaces,
with minimal IT intervention. BPNs can be operated directly by companies or by a wide range of
IT service providers, including providers of application hosting, IT outsourcing, cloud services
brokerage and software as a service (SaaS). Many offer extensive complementary services for
participant onboarding, participant training and participant help desk.
Position and Adoption Speed Justification: Some BPNs, such as SWIFT, have been available for
decades. However, most bundled IT solutions and B2B projects for specific multiparty business
process integration problems are still emerging or in the early adoption stage. IT end users'
understanding of B2B integration projects is evolving from the notion of "exchanging transaction
data" to the notion of "linking business processes," and the distinctions between these (such as the
implementation of process visibility tools and rule engines in BPNs to drive process improvement) is
increasingly well understand by IT end users.
As the IT industry continues to evolve, and more iPaaS, application platform as a service (aPaaS),
SaaS and other forms of cloud computing become available, awareness and adoption of BPNs will
rapidly proliferate. For example, traditional e-procurement BPNs are increasingly augmented by
cloud computing (e.g., when SaaS functionality from providers such as NetSuite, salesforce.com
and SugarCRM are integrated with e-commerce related BPNs by providers such as Hubspan and
Liaison Technologies).
By virtue of outsourcing their SaaS functionality, IT users will be more predisposed to consuming
integration functionality in packaged form as BPNs, which will help drive the hype around these to
the Peak of Inflated Expectations in the next year or so. Next, we expect there will be a mild slip into
the Trough of Disillusionment as communities of interest discover that, despite their utility, BPNs: (1)
are not as complete as was hoped (e.g., from a predefined process, prebuilt integration and
prenetworked community point of view); (2) will not be flexible enough and cannot evolve fast
enough to meet more rapidly changing business requirements if not implemented using modern
approaches, such as service-oriented architecture and metadata-driven process definitions (e.g.,
via the use of BPMT); and (3) do not easily solve diverse semantic business process differences;
thus, processes will not be easily linked across industries. For example, most BPNs support
substantially unique processes within their communities of interest or industries.
User Advice: Enterprises and B2B communities of all sizes should look for opportunities to license,
operate or participate in BPNs when they offer a preconfigured method of implementing
multienterprise integration for a specific business process as an alternative to a custom, multiparty
business process integration project.
When choosing a BPN, carefully evaluate the degree to which your particular business partners are
(or are not) already on the BPN provider's network. BPN offerings in which most of your community
members have already been provisioned on the network will substantially reduce B2B integration
project deployment time. BPNs with few of your community members on board will increase
deployment time and may require additional business partner onboarding fees.
When choosing a BPN, look for availability of prebuilt integration relevant to your multienterprise
process (e.g., if the process is order to cash, does your BPN provider offer prebuilt adapters and
maps to simplify and accelerate project deployment against the types of applications you are using
in that process?).
When available, consider industry standards (such as cXML, RosettaNet, SWIFT and UBL) as the
basis for BPNs, because these will accelerate time to production (versus coming up with new
integration standards from scratch) and are preferable to proprietary B2B specifications.
When evaluating BPNs, look for evidence that the solution or project leverages a metadata-driven
definition of integration artifacts, including trading partner profiles, maps for translation, process
models, business rules, etc. BPNs that are more metadata-driven are more likely to be easier to
modify when changes are required in complex, multiparty business processes.
Business Impact: Enterprises can implement multiparty business process integration projects with
external business partners faster and for less money when a BPN is available, versus having to
design and implement a set of B2B standards and implement such projects from scratch. BPNs are
available for automating supply chains, making electronic payments, exchanging product
information, sharing foreign exchange calculations and linking a wide range of other multiparty
business processes among enterprises.
Following are some IT scenarios that involve BPNs:
BPNs are often run out of the data center of a prominent host for a community of interest.
Examples are Dell, the U.S. Postal Service and Walmart, which operate their own BPNs to
support their supply chains.
BPNs are operated by business process hubs (formerly called marketplaces), which combine
multienterprise integration and multienterprise applications for specific industries. Examples
include Elemica in petrochemicals, Exostar in aerospace and defense, and Railinc in railroad
transportation.
Procurement networks, a type of BPN tailored to indirect, catalog-based e-procurement, related

to e-commerce supplier and buyer value chains, are operated to exchange procure-to-pay
documents and data using a diverse set of B2B specifications, such as cXML, AS2 and flat-file
upload. They are operated by vendors such as Ariba, Rearden Commerce-Ketera Technologies,
Hubwoo, SciQuest and Perfect Commerce (see "The Role of Procurement Networks in EIPP").
Organizations such as SWIFT, GS1 and E4X have implemented financial BPNs to support the
exchange of financial transactions, product information and foreign currency exchange data,
respectively (see "Business Process Networks: How to Evaluate Options in the Investment
Services Industry").
Providers of integration brokerage, such as GXS, Inovis, Hubspan, Liaison Technologies and
Sterling Commerce, also operate private BPNs (for example, to support the supply chains for
specific retailers or manufacturers), and there are public BPNs, such as GS1 Global Data
Synchronization Network (GDSN), so that their customers can publish product information to
regional data pools (see "IBM and Hubspan Deploy IaaS-Based Platform for B2B Project
Outsourcing").
Various e-commerce providers, such as E2open, e-Builder and Wesupply, which, in addition to
stand-alone SaaS and integration functionality and integration brokerage services, also offer
process- or industry-specific bundled solutions for multienterprise integration for specific
business processes (see "Oracle and E2open Deploy BPN to Simplify B2B for Global Transport
Processes").
IT service providers, such as Accenture, Atos Origin, EDS, IBM, Infosys and Wipro, typically
implement private BPNs to support multienterprise projects for their outsourcing customers,
such as the multienterprise integration component of a much larger overall procurement
business process outsourcing project.
Providers of e-invoicing services, such as Basware, OB10 and TrustWeaver, operate BPNs that
are focused on electronic invoicing, particularly in regions such as Europe and Latin America,
where it is increasingly mandated by governing bodies.
Maturity: Adolescent
Sample Vendors: Ariba; Basware; Crossgate; Descartes Systems Group; e-Builder; E2open; E4X;
Elemica; Evenex; Financial Information eXchange; GXS; Hubwoo; IBM; Infosys Technologies; Inovis;
Liaison Technologies; OB10; Perfect Commerce; Quick Connect Computer Services; Railinc;
Rearden Commerce-Ketera Technologies; SciQuest; Society for Worldwide Interbank Financial
Telecommunication; Sterling Commerce; StrikeIron; SupplyOn; TrustWeaver; Wallmedien;
Wesupply; Wipro; Xign
Recommended Reading: "Taxonomy, Definitions and the Vendor Landscape for Application
Integration Solutions, 2011"
"The Role of Procurement Networks in EIPP"
"Business Process Networks: How to Evaluate Options in the Investment Services Industry"
"Oracle and E2open Deploy BPN to Simplify B2B for Global Transport Processes"
"IBM and Hubspan Deploy IaaS-Based Platform for B2B Project Outsourcing"
Procure-to-Pay Solutions
Definition: As its name implies, a procure-to-pay (or purchase-to-pay) system is a fully integrated
solution designed to support an end-to-end process that begins with goods and services
requisitioning and ends with ready-to-pay files for upload into an accounts payable system.
Procure-to-pay solutions use a scan-and-capture service, supplier portal and/or a multienterprise
network to enable suppliers to submit invoices electronically. In addition to core e-procurement
functionality (including e-requisitioning, approval workflow and e-catalog management), procure-to-
pay solutions offer purchase-order-to-invoice matching and processing for invoices that don't
match or when goods are returned.
Position and Adoption Speed Justification: In 2009, we positioned procure-to-pay solutions just
ahead of the Peak of Inflated Expectations, because the vendors were vigorously hyping their
solutions as suitable for eliminating all paper invoices and supporting all spending. However, many
types of spending, such as for-lease payments, business services and software maintenance fees,
are awkward, at best, when supported via purchase orders. Hence, with most clients handling only
a portion of their total spending on purchase orders, accounting often rejects a procurement
solution that addresses only a minority of incoming invoices as not particularly useful. Goods and
services suppliers also frequently rejected these solutions as too cumbersome and expensive,
particularly if they were required to pay fees to submit invoices.
Some procurement solution vendors are adapting their solutions to these realities by partnering with
scan-and-capture services, such as Ariba's agreement with ScanOne, and they are adding
functionality for invoice approval without a purchase order. Hence, when desired, clients do not
have to issue purchase orders to use the system. However, these enhancements are not universal.
Organizational barriers to procure-to-pay adoption result from the expansion of the scope of a
program beyond procurement and into accounts payable. Many organizations investing in
procurement solutions already have scan-and-capture programs internally or through a business
process outsourcing (BPO) provider, and/or an accounts payable automation solution. Thus, they
have no desire to change the provider or the solution. Accounts payable typically reports to the
CFO, and CFOs are often rightly suspicious of procurement vendors trying to play in the financial
applications space. These issues do not have an easy resolution, and they will continue to impair
procure-to-pay technology adoption.
User Advice: Consider procure-to-pay solutions to extend the value of your investment in e-
procurement applications, especially if you don't have an accounts payable automation or scan-
and-capture solution.
Evaluate the matching and invoice processing functionality of any prospective procure-to-pay
solutions provider, because features may not be on par with a specialized accounts payable
automation solution.
Consider the impact of your solution on, and benefits for, your suppliers when choosing a solution.
The supplier experience and, therefore, adoption can vary markedly across the procure-to-pay
vendors.
Unless your organization is legally required to manage all spending on purchase orders, choose a
solution that offers flexibility for non-purchase-order invoice receipt and approval workflow, as well
as scan-and-capture services.
Caution is advised for any prospective buyer of procure-to-pay solutions with plans to implement
outside its home country. A successful procure-to-pay system must comply with local B2B taxation
and electronic invoice regulations, and much work remains for the vendors to ensure compliance.
Business Impact: Procure-to-pay solutions deliver ROI in an e-procurement solution by enabling
suppliers to submit invoices electronically, reducing or eliminating paper invoices, automatically
matching purchase orders to invoices and processing invoices that don't match. These capabilities
can enable organizations to reduce accounts payable head count and improve the ability to take
early payment discounts.
Sample Vendors: Advanced Business Solutions (ABS); Ariba; Basware; Coupa; Oracle; Puridiom;
SAP; Verian Technologies; Wax Digital
Recommended Reading: "EIPP Can Improve Finance and Purchasing Management"
"Decision Framework: Choosing the Right EIPP Technologies"
"E-Procurement Market and Vendor Landscape"
"Cost Savings Finally Make the (European) E-Invoicing Steamroller Pick Up Speed"
Analysis By: French Caldwell
Definition: Vendor risk management (VRM) is the process of ensuring that the use of service
providers and IT suppliers does not create an unacceptable potential for business disruption or a
negative impact on business performance. VRM technology supports enterprises that must assess,
monitor and manage their risk exposure from third-party suppliers (TPSs) that provide IT products
and services, or that have access to enterprise information.
Position and Adoption Speed Justification: The growing reliance by enterprises on third-party
service providers, the large number of major corporate data breaches and the increasing U.S.
regulatory activity on privacy policies of those service providers have accelerated VRM to the peak
of the Hype Cycle. Many businesses, as well as government agencies and other organizations,
increasingly rely on IT vendors and service providers to support core business processes and
provide hardware, software and licenses needed for IT operations. This reliance exposes them to
greater risk of delivery disruption or failure, damage to their reputation and impacts on business
performance. Essentially, it extends the enterprise risk boundaries to include the many business
and IT risks facing their IT suppliers. Challenging economic conditions compound these risks (see
"Vendor Risk Management: Criteria You Can Use to See Whether Your Vendor Is in Trouble").
Furthermore, compliance mandates that require monitoring the risks of TPSs are proliferating, as
are third parties. As an emerging market, the functionality offered by VRM vendors varies
significantly.
User Advice: VRM solutions are emerging to enable the assessment and management of risks from
third-party service providers and IT suppliers. VRM is an important element of enterprise and IT risk
management, and is mandated by a number of privacy and data breach notification regulations,
such as the Gramm-Leach-Bliley Act in the U.S. and the Federal Data Protection Act or
Bundesdatenschutzgesetz (BDSG) in Germany. Business performance can be improved through the
VRM process. As part of a vendor management program, VRM can be a catalyst for improved
vendor performance by identifying risks early and mitigating them through effective controls and
process improvements:
Consider VRM technology solutions that can provide a common system of record for all the
parties involved in that program.
Ensure that the processes and methodologies used in the enterprise's approach to VRM are
supported by the functionality and services offered by the vendor.
While the evaluation of a VRM solution may be led by the enterprise risk management,
procurement, vendor management or IT organization, ensure that all relevant parties are
involved, including strategic vendors.
Business Impact: VRM enables a shared understanding within the enterprise and between the
enterprise and its service provider/IT supplier partners of the full risk exposure. Some industries,
including banking, healthcare and telecom, have industry-specific regulations that mandate
monitoring TPS risk. Most other enterprises face compliance pressures as well to improve VRM
because of PCI, state-level and national data breach notification regulations, and other privacy
regulations. For enterprise risk management purposes, it is important to have a thorough
understanding of the risk to business performance from vendor performance failures and
disruptions. Furthermore, business performance can be improved through VRM, and VRM can be a
catalyst for improved vendor performance by identifying risks early, and mitigating them through
effective controls and process improvements.
Sample Vendors: Agiliance; Avior Computing; BWise; Evantix; Hiperos; MetricStream; Modulo;
OpenPages; RSA (EMC)
Recommended Reading: "Emerging Vendor Risk Management Solutions"
"Outsourcing Lessons Learned: Regularly Assess Vendor Risk"
"Assess and Manage Vendor Risks to Protect Your Business"
"Gartner's Simple Vendor Risk Management Framework"
"Toolkit: Getting Started at Vendor Risk Management"
Definition: A source-to-settle solution is a complete suite of procurement applications that has
been designed to support upfront processes, such as spend analysis, sourcing and contract
management, as well as downstream, transactional procure-to-pay processes, including e-
requisitioning, e-catalog management and e-invoicing.
Position and Adoption Speed Justification: Several procurement technology vendors have been
positioning their suites for years as source-to-settle solutions. Until this year, only Ariba and SAP
have had "good enough" or better products across the suite to qualify as credible, relatively
complete offerings. Many buyers who bought less robust suites now find themselves sorely
disappointed, so this technology type is sliding into the Trough of Disillusionment.
However, prospective buyers have been clamoring for years for complete source-to-settle suites, to
enjoy the benefits of a single data model, platform cohesiveness and the reduced need for
integration. Vendors have been striving to meet this demand by rapidly building out and filling out
their portfolios. This year, many more, such as GEP, Ivalua and SciQuest, have become good
enough to consider for a source-to-settle suite commitment.
We expect rapid suite building and enhancement to continue during the next three to five years,
before fully stabilizing. This activity will push this technology type more quickly than usual to the
Plateau of Productivity.
User Advice: Source-to-settle suites are available, but invest with caution. Most vendors have
uneven suites, with some solutions quite mature, but others relatively new. Vet their portfolios
before you buy by profiling product maturity and client counts for every module.
Business Impact: A unified data model and a cohesive platform is nice, but it is not a necessity.
The integration points between the upfront and downstream processes are fairly minimal, which is
why the market has thus far tolerated point solutions and "suitelets."
Sample Vendors: Ariba; Capgemini; GEP; Hubwoo; Ivalua; Perfect Commerce; Periscope Holdings;
SAP; SciQuest; SynerTrade
Recommended Reading: "Competitive Landscape: The Source-to-Pay BPO Tide Rises as New
Entrants Flood the Market"
Sliding Into the Trough
Definition: A procurement network is a type of business process network: integration as a service
tailored with applications to support one or more procurement processes, such as:
Purchase to pay, with e-catalog management and purchase order document exchange
Supplier information management, with credential document and firmographic data storage
E-sourcing, with opportunity listings for suppliers and support for supplier electronic bid
submission
The defining characteristic of a procurement network is multienterprise integration support that
enables suppliers to view information from and participate in processes with multiple buyers, in the
same account.
Position and Adoption Speed Justification: Procurement networks have been placed much earlier
on the Hype Cycle, compared with our 2009 report, because it has become evident that current
offerings are still evolving in terms of business model, functionality and geographic support. For
example, most procurement network providers predominantly support a single geographic region,
whereas many prospective users want a global network. Also, suppliers chafe at having to pay for
access to a procurement network, because few vendors offer interoperability with other network
vendors, and because the added value of the network functionality often does not meet
expectations. Finally, many of the industry consortiums formed early in the 2000s appear to have
waning businesses. Therefore, we place the procurement network before the Trough of
Disillusionment, because these issues remain unsolved, and will probably take years to resolve, due
to the complexity of the obstacles. It is possible that the procurement network will never reach the
Plateau of Productivity in its current form, but will involve a more flexible, generic multienterprise
business process platform, or be componentized and sourced via cloud service brokers.
User Advice: Leverage a procurement network to facilitate scalable supplier collaboration. Be wary,
however, of a vendor's geographic, scope and business model limitations before making an
investment.
Business Impact: Procurement networks provide substantial value by streamlining and enhancing
procurement-related, multienterprise business processes. Procurement network vendors provide
community management services, such as supplier onboarding and supplier technical support,
which ease collaboration for the buying organization. Although barriers exist to procurement
networks delivering fully on their potential, they do deliver decisive benefits that are not achievable
via other means.
Sample Vendors: Ariba; Basware; BidSync; BirchStreet Systems; Capgemini; Elemica; Fieldglass;
GHX; Hubwoo; IQNavigator; Mediagrif; Oracle; Perfect Commerce; SciQuest; Vortal; Wallmedien
Recommended Reading: "Taxonomy, Definitions and the Vendor Landscape for Application
Integration Solutions, 2011"
"E-Procurement Market and Vendor Landscape"
Supplier Portals
Definition: Supplier portals are one-to-many, specific-purpose Web pages where suppliers can log
in, enter data manually, upload/download files and participate in one or more steps of a process.
Supplier portals are delivered as a feature of a procurement application or suite and, therefore,
come preconfigured with specific functionality, such as supporting purchase-order flip into an
invoice or publishing an RFP. The portal infrastructure allows buying organizations to limit supplier
access to specific features and their own data. For example, a supplier logging into a supplier portal
would typically see only its own scorecard or orders, not everyone else's.
Position and Adoption Speed Justification: Supplier portals have been placed much earlier on
this Hype Cycle, compared with our 2009 report. It has become evident that the limitations of
supplier portals have more of an impact on suppliers than we initially judged. First, portals are not
scalable for suppliers. When a supplier logs into a portal, it supports a single customer. Portals are
fine when only a few clients request interaction through them. It becomes a major problem,
however, when a supplier has dozens or even hundreds of portals to individually log into to support
clients. Secondly, supplier portals are not flexible platforms that support the publication of anything.
Because they are sold as a feature of an application, their functionality is limited to the application
that they extend. For example, a supplier portal configured as an extension of a strategic sourcing
application is usable for supplier invoice submission, unless the vendor preconfigured it otherwise.
Consequently, buying organizations are ending up with multiple supplier portals, one for each major
application covering some element of procurement. This often increases complexity for sellers and
buyers. Finally, many supplier portals are licensed and installed on the buying organization's
premises, and so the buyer takes the often unwanted responsibility of onboarding suppliers,
providing technology to suppliers and managing supplier accounts.
Despite the shortcomings, supplier portals have an important role to play in procurement
transformation. When a buyer and a seller need to exchange unstructured or unique data, and the
data exchanged is not for consumption by the seller's software application, but for consumption by
an individual, portal technology works very well. For example, a supplier development program with
milestones, scorecards and performance reports is best shared through a portal extension of a
supply base management application. Moreover, because they are owned and managed by the
buying organization, supplier portals are typically free of charge to suppliers, which can encourage
participation.
User Advice: Deploying a supplier portal can provide significantly enhanced supplier collaboration
when the status quo is manual interaction. Beware, however, of the limitations of the supplier portal,
whether or not a particular solution will deliver productivity improvements to the supplier and
convey all relevant documents and data. If the data shared can be reduced to a common format,
consider a many-to-many mode, such as a procurement network or an integration service provider.
Business Impact: Supplier portals improve productivity and scalability for the buyer by enabling
not only the timely sharing of information en masse, but also processes, such as reverse auctions.
Collaborating with suppliers via a supplier portal is far more efficient than exchanging information
via email, paper, fax or phone. Supplier portals work best for large organizations that can demand
supplier participation and have the resources to handle onboarding and ongoing supplier support.
Sample Vendors: Emptoris; GEP; Oracle; Puridiom; SAP; Wax Digital
Recommended Reading: "Examining the Embedded Multienterprise Integration Market"
Contingent Workforce Management
Definition: Contingent workforce management applications are procure-to-pay solutions
configured specifically for the unique requirements of contingent workforce requisitioning, hiring
and ongoing management. Typical contingent workforce management application functionality
includes:
Configurable workflow for approving requisitions, work orders and timecards
Maintenance of the list of preferred staffing suppliers and controls to limit requisition publication
to those that are preferred
Maintenance of internal rate cards for frequently staffed positions
Market pay rate intelligence for frequently staffed positions
Automated "match" scoring between the requisition and each candidate
Side-by-side candidate comparison
Candidate interview status tracking
Worker eligibility/certification tracking, including Form 1099 (IRS) validation routing/tracking
Onboarding/offboarding task tracking
Online posting of work instructions for hires to download
Web-based, self-service time cards, with allocations of time and expenses to multiple funding/
billing codes
An interface for integration to timekeeping and/or security systems
Embedded compensation rules, such as overtime payment rates
Online time card approval
Consolidated invoice preparation and presentation
Contingent worker performance tracking
Worker total-tenure tracking across multiple positions and multiple suppliers
Embedded analytics for tracking staffing agency performance and spending

Contingent workforce management solutions are available in a variety of configurations, including
as a module of a procure-to-pay suite (for example, Ariba, Oracle E-Business Suite, Oracle
PeopleSoft and SAP); as an element of a services procurement offering (for example, Emptoris); as
an element of an HCM suite (for example, Peoplefluent); as the centerpiece of a pure-play services
procurement suite (for example, IQNavigator, Provade and Fieldglass); and as a full-service
managed service provider (MSP) with its own technology (for example, WorkforceLogic, Beeline,
Covendis Technologies and ProcureStaff Technologies).
Position and Adoption Speed Justification: Contingent workforce management solutions have
bottomed out on the Slope of Disillusionment, and have begun the climb up the Slope of
Enlightenment, because the growing set of customers has validated the benefits and ROI. Adoption
is now broad enough that the vendors generally no longer need to spend most of their sales cycles
explaining why a client needs this sort of solution and how it helps.
User Advice: Companies with significant levels of spending ($30 million or more) for contingent
workforce management should consider using this solution type to streamline their processes,
rationalize their supply bases and enhance contingent staffing productivity. Spending of this amount
or greater is generally required to achieve a payback.
Business Impact: Customer case studies have shown a 10% to 20% reduction in overall spending
on services through the implementation of contingent workforce management solutions, because
they enforce precommitment review, competitive sourcing and negotiated rate compliance.
Moreover, contingent workforce management solutions are often credited with significant process
enhancements in the invoice receipt and matching process by leveraging self-billing (evaluated
receipt settlement). The overall benefit rating is moderate, however, because contingent labor is
only one of many procurement spending categories in an organization.
Sample Vendors: Ariba; Beeline; Covendis Technologies; Emptoris; Fieldglass; IQNavigator;
Oracle; Peoplefluent; ProcureStaff Technologies; Provade; SAP; Skire; WorkforceLogic
Recommended Reading: "Case Study: Jeppesen Gains Agility With Contingent Workforce
Management"
"Cut Indirect Costs Now With E-Procurement"
"One-Size Procurement Transaction Tools Don't Fit All"
"Procurement and the Oracle E-Business Suite"
"Q&A: Top 21 Questions for Evaluating and Implementing E-Procurement"
Contract Life Cycle Management
Analysis By: Nigel Montgomery; Deborah R Wilson
Definition: Contract life cycle management (CLM) is a solution and a process for managing the life
cycle of contracts created and/or administered by, or impacting, the company. These include third-
party contracts, such as outsourcing, procurement, sales, nondisclosure, intellectual property,
lease, facilities management and any other licensing agreements that hold the company under
some contractual obligation now or for the future. CLM includes the provision of a searchable
document repository for contracts, authoring support and approval workflow, clause definition and
usage, terms and conditions, negotiation, change management, obligation/compliance/execution
management, configurable monitors and alerts, e-signature and document assembly support, plus
risk and penalty (liability) management through disposal management and reporting.
Position and Adoption Speed Justification: CLM solutions are moving out of the Trough of
Disillusionment as adoption rates increase and more clients are implementing advanced
functionality, such as redlining, e-signature and automatic order price verification. The pace of
progress toward the Slope of Enlightenment has been slow, however, because CLM solutions
continue to deliver process improvement and control, plus the resulting risk reduction. However,
they do not present overtly tangible and immediate cost savings. They are something of an
insurance policy. This is further exacerbated by the myriad diverse solution approaches available in
the market and their lineage, which have yet to crystallize the market. For example, CLM solutions
can be delivered as: (1) an add-on to a document management system, such as CLM Matrix for the
SharePoint portal; (2) an element of a broader procurement suite, such as the Emptoris or Ariba
offerings; (3) an add-on to salesforce.com, such as with Apttus; or (4) as a stand-alone tool, such as
Novatus.
User Advice: CLM is no-longer a nice-to-have solution. Without a solution, companies are unable
to determine whether or not they are at risk. One of the areas where contracts interlink, and where
the lack of formal systems creates risk exposure, is related to customer contracts, particularly for
consulting work. This can include indemnity, public liability or even motor insurance. In many
contracts, customers require the vendor to provide insurance coverage for their own and the
customer's operatives. If one of the customer's personnel goes out to lunch in one of vendor's cars,
then that person needs to be covered by insurance. Yet, internally, the person responsible for the
vendor's insurance policies is rarely notified about this type of coverage. At any time, the vendor
might be liable, yet it wouldn't know that until it's too late.
There are many forms of solutions with a disparate richness of functionality. Consider investment in
a formal CLM solution when manual methods of requesting, reviewing, approving and managing
contracts are insufficient, or are creating too much overhead or risk. When you are unsure if you are
at risk, you probably need a CLM system. Before seeking external solutions, conduct an inventory
of your current systems to identify if any contain core components required, or if the supplying
vendor can provide any add-on functionality, or add-ons for applications already in use. Unlike
many solution areas aligned to with ERP, stand-alone solutions can provide a tangible answers over
using large suites, so do not rule them out in your search for CLM.
Business Impact: CLM solutions deliver significant benefits to organizations by eliminating the risk
of penalties, lost revenue, lost brand, lost savings or lost opportunity through poorly administered or
even lost contracts. This includes unexpected contract renewal and expiration, or hidden clauses
that leave the company open to liable or to other disadvantages. CLM increases the level of
governance and control over what is signed when, and by whom, and the resulting ramifications of
its existence. Because contracts are used to document a myriad of business arrangements, and,
therefore, contracts are extensively leveraged in nearly all organizations, CLM solutions are
universally appealing; however, each industry can require differing functionality or functionality
emphasis.
Sample Vendors: Apttus; Ariba; CLM Matrix; CobbleStone Systems; Dolphin Software; Ecteon;
Emptoris; Novatus; Prodagio Software; SAP; Upside Software
Recommended Reading: "Enterprise Contract Management Solutions Vendor Guide, 2010"
"Exploiting a Single Contract Life Cycle Management Solution Across the Enterprise"
Analysis By: C. Dwight Klappich; Deborah R Wilson
Definition: Sourcing optimization (SO) enables procurement and transportation organizations to
evaluate high volumes of complex, conditional bids in which the expected outcome is agreements
with multiple suppliers. It is sometimes delivered as a service, with the vendor leveraging an SO
application to construct and run sourcing events on behalf of the company, coupled with consulting
services based on the vendor's deep understanding of one or more spending categories, such as
transportation (lane, mode and capacity), packaging, marketing services and telecommunications.
SO application functionality typically includes the following:
For transportation lane-specific bid responses, plus the ability to combine lanes.
Seasonal demand profiles and capacity/demand commitments.
Support for constraint-based optimization with rules, such as "award no more than 25% of the
business to any single supplier."
Support for conditional supplier proposals, such as "if business requirements for Norway are
included in our award, then take 10% off our proposal." Suppliers can combine elements to
offer lower costs, if they are guaranteed demands for both, such as a carrier bidding for two
lanes of transportation as a group bid. Suppliers can submit "unbundled" bids that is, they
are not forced to bid on many requirements, but they are permitted to bid on only those
requirements that they find suitable.
The construction of "what if" scenarios, such as "calculate the difference in the total award
amount for: (1) giving 30% of the business to the incumbent supplier at its current bid and the
rest to the lowest bidder, versus (2) awarding all my business to the lowest bidder." What-if
scenarios can be saved for later evaluation, audit trail creation and/or reporting.
Support for optimization against multiple constraints, plus automated scoring of elements of
supplier proposals, such as awarding a higher score for longer proposed warranty periods.
Position and Adoption Speed Justification: Specialized SO offerings for transportation truckload
bid optimization have been around for several years, and competition in this specific space is
established. In large part, SO has become a piece of a holistic multimodal transportation
management system (TMS), and there are advantages to having SO integrated with TMSs; however,
some stand-alone solutions remain. SO for other transportation modes, such as less than truckload
(LTL), air, ocean and rail, is less mature, although solutions are evolving to support them. General-
purpose SO offerings are available as solutions or services from specialty vendors such as
CombineNet, Trade Extensions and Emptoris.
Continuing interest in this technology has attracted new competition. The broadened field of players
has helped to more clearly define the value proposition of SO, which has, in turn, aligned market
offerings more closely with buyer expectations. Moreover, managed service providers that
supplement SO tools with services and expertise are helping companies learn and exploit the value
of these types of solutions. The technologies are proven and users are plentiful and growing, but
largely the market has been the domain of more sophisticated organizations with high spending;
thus, overall market penetration remains modest. The net result is that SO has moved past the
Trough of Disillusionment; however, conservative buyers are only now considering these
technologies, although many will favor managed service providers to gain expertise in the use of
advanced SO technologies.
User Advice: Transportation organizations:
Consider truckload SO where you expect to make strategic awards to many carriers. If you are
looking to source other modes, then make this requirement explicit during vendor evaluation to
ensure that you develop the appropriate shortlist of vendors.
Favor vendors that offer deep market knowledge of the spending categories you need to
source, because this kind of expertise can dramatically improve event results.
Consider specialized service providers that will provide SO as a managed service, combining
robust tools with specialized domain expertise.
Other commodities:
Procure SO as a service unless you have the know-how inside your organization to set up and
operate this powerful but complex solution.
Business Impact: The ability to simultaneously evaluate hundreds of unbundled, conditional bids
against dozens or hundreds of business rules or preferences enables large organizations to
effectively leverage multiple sourcing options and to quickly identify the best combination of
sources, even when there are thousands (or more) of individual bids to consider.
Basic freight costs are often locked in during periodic freight-sourcing exercises, so the business
value of freight SO is high. This technology empowers organizations to source in ways that were not
previously possible, which facilitates hard dollar savings.
Maturity: Early mainstream
Sample Vendors: Chainalytics; CombineNet; Elemica; Emptoris; GT Nexus; JDA Software;
LeanLogistics; Manhattan Associates; Oracle; RedPrairie; Trade Extensions
Climbing the Slope
Spending Analysis
Definition: Spending-analysis applications provide organizations with a single, enterprisewide view
of spending. The supported process includes downloading and aggregating transaction data from
multiple heterogeneous systems, including accounts payable systems, procurement applications,
enterprise contract management solutions, travel and expense applications, procurement card
statements and supplier sales order systems. The data is then cleaned and enhanced. Although
most spending-analysis solutions include embedded support for reporting and analytics, customers
sometimes use their own business intelligence (BI) tools instead. The difference between a
spending-analysis solution and a BI application is content. Spending-analysis solutions leverage
external data (such as supplier linkage) and embedded rules (such as "classify all spending from
XYZ company as public relations business services") to make the transaction data as usable as
possible.
Spending analysis can be conducted at three levels:
Supplier-level classification involves identifying duplicate and/or related suppliers and reporting
spending by supplier and/or supplier family. Organizations use the output to determine their
largest suppliers, quantify how much they are spending overall with suppliers, track diversity
spending and track compliance with preferred supplier programs. Spending-analysis solutions
streamline supplier classification with predefined business rules that recognize common
iterations of supplier names, such as "I.B.M. is the same as IBM." External data sources,
including D&B, Experian, Equifax and Bureau van Dijk, provide up-to-date information on
linkage and ownership. Supplier-level classification is the most straightforward to implement
and the most commonly used type of spending analysis.
Category-level spending analysis assigns category codes to transactions. The United Nations
Standard Products and Services Code (UNSPSC) and eClass are the most commonly leveraged
classification schemas; however, many organizations classify to a proprietary code structure or
a hybrid. Organizations use category-level spending analysis primarily to identify opportunities
for cost savings to develop bid lists for sourcing events and to prioritize investments in
procurement transaction automation. For example, an organization with large amounts of
contingent workforce spending should pursue different technology partners versus an
organization that spends heavily on catalog-based scientific supplies. Category-level analysis is
much harder to do than supplier-level analysis, but is the type of spending analysis that adds
the most value.
Part-level spending analysis focuses on identifying purchases for like items and often includes
cleansing/enhancing line-item transaction details. The resulting data is used to monitor price
compliance and measure overall demand for products and/or parts. Part-level spending
analysis can be performed on indirect or direct spending; however, the approach to the two
spending types differs. Part-level analysis is the most difficult to perform and the least common
type of spending analysis. It adds value primarily when multiple buying centers procure the
same thing(s), but refer to those things differently.
Position and Adoption Speed Justification: Spending-analysis solutions have now moved well
past the Trough of Disillusionment, as the mainstream market increasingly recognizes what these
solutions do, how they work and how they add value. Competitive techniques for analyzing
spending, such as "getting all your transactions in one system," building/maintaining your own
classification rules database or expecting master data management to keep data that continually
evolves clean, are increasingly recognized as insufficient and inefficient.
User Advice: Large organizations with $1 billion or more in spending (or $2 billion in revenue)
should invest in spending-analysis solutions as a foundation technology for procurement. Midsize
organizations with $1 billion or less in spending, and a single ERP, should opportunistically evaluate
spending analysis, depending on the degree to which duplicate suppliers and multiple
heterogeneous systems are thwarting more-traditional reporting methods. All prospects should
recognize that implementing spending analysis can be challenging, and may take several iterations
before results are acceptable. Classification accuracy rates will vary based on the quality, type,
structure and geographic dispersion of transaction data.
Business Impact: For companies that spend more than $1 billion annually, managing procurement
without some form of spending analysis is like trying to sail a boat without a rudder. Spending
analysis is a key foundational solution for procurement transformation because it provides a map of
opportunities for cost reduction and supply base rightsizing.
Sample Vendors: Ariba; BIQ; BravoSolution; Emptoris; Global eProcure; Iasta; Ivalua; Ketera
Technologies; Oracle; Rosslyn Analytics; SAP; Spend Radar; SynerTrade; Zycus
Recommended Reading: "Magic Quadrant for Strategic Sourcing Application Suites"
"Understanding Your Top Procurement Processes"
Definition: The strategic sourcing suite is a project-oriented set of applications that facilitates the
process of supplier rationalization and strategic sourcing. The typical elements of the strategic
sourcing suite include strategic sourcing, spend analysis, contract life cycle management and
supply base management applications, all united by a common user interface, a common database
and multiple, native integration points.
Position and Adoption Speed Justification: Organizations rarely buy a strategic sourcing
application by itself; most deals Gartner sees include integrated spend analysis, contract life cycle
management and/or supply base management solutions. Therefore, we place the solution well into
the Slope of Enlightenment, and we estimate that between 5% and 20% of the target market owns
at least two sourcing suite applications from the same vendor. We expect the strategic sourcing
suite to take at least three years to move onto the Plateau of Productivity, however, because most
suites have one or more applications that are fairly new and, thus, are not fully mature as a set.
Clients compensate for this by sticking with specialty solutions for the weak components, and by
selecting vendors that have strength in the solutions they plan to implement first. It will take several
years before 50% or more of the target market owns three or more strategic sourcing suite
applications from the same vendor.
User Advice: Do not invest in a strategic sourcing, contract life cycle management, supply base
management or spend analysis solutions without understanding first what suite, if any, a
prospective vendor offers, and how balanced the maturity and adoption is across the suite.
Choosing a supplier that can provide a suite may be useful for organizations that eventually plan to
invest in multiple applications. Moreover, the native integration, common user interface and
common master data that a suite provides can make individual solutions easier to implement and
maintain.
Business Impact: The impact of strategic sourcing suites is high, because these tools enable
organizations to deliver measurable cost reductions, significant productivity improvements and
greater control, while building a high-performing, low-cost strategic supply base. Larger,
decentralized organizations can save as much as 20% of overall spending by leveraging strategic
sourcing techniques and technology.
Sample Vendors: Ariba; BravoSolution; Curtis Fitch; Emptoris; Fullstep; GEP; Iasta; Ivalua;
Pool4Tool; SAP; SciQuest; SynerTrade; Zycus
Recommended Reading: "Best Practices for Choosing, Implementing and Using E-Sourcing
Solutions"
"Magic Quadrant for Strategic Sourcing Application Suites"
"The Benefits and Drawbacks to Group Purchasing Organizations and Collaborative Sourcing"
Online Supplier Directories
Analysis By: Deborah R Wilson; Nigel Montgomery
Definition: An online supplier directory is a third-party, software-as-as-service-delivered registry of
B2B suppliers. It is an organized, searchable channel where suppliers can advertise their offerings
to attract new customers. Sites that sell products do not qualify as online directories.
Most online supplier directories are oriented to a particular geography, spending category or
industry. Some strategic sourcing suite vendors, such as Ariba and Vortal, bundle access to a
supplier directory into their e-sourcing solutions.
Position and Adoption Speed Justification: Several moderately established to well-established
online supplier directories are available in the market. These sites serve industries that regularly
need new suppliers, like the construction and aerospace industries and the public sector; they also
support spending categories for which enterprise buyers routinely switch suppliers or seek new
sources, such as printing and marketing materials.
Most online directory vendors have had difficulty building a profitable business model, however. As
a result, it's common to see experimentation among the vendors in terms of who pays what and
when to participate. For example, some supplier directories are buyer-funded, meaning that buyers
subscribe to a solution to get access to the directory. But buyers often would rather not pay the
entire bill for access when suppliers may be willing or forced to pay. Other supplier directories are
supplier-funded, and suppliers pay for placement in search results, ads related to keyword search
terms or fees based on the amount of business won on the site. Many supplier-funded directories
have failed, because they have not generated enough business for sellers to make it worthwhile.
Until the business model issues are fully sorted out, this technology will not reach the Plateau of
Productivity.
User Advice: Buyers should carefully screen online supplier directories prior to use by checking
references and evaluating sites for sources of funding, site affiliation and resulting potentials for
bias, geographic appropriateness, category depth and how prospective suppliers are screened. For
example, a directory may or may not vet suppliers for inclusion, and a directory may or may not
determine which suppliers are listed at the top of search results based on how much advertising
money they spent on the website.
Business Impact: For buying organizations: Although most buying organizations spend a small
percentage of their budget on new suppliers, the effort required to locate suitable prospects can
consume considerable time and resources. The availability of reliable, online supplier directories can
enhance organizational efficiency in industries that routinely need to find new suppliers. Online
supplier directories can reduce the time it takes to find suitable suppliers by more than half,
compared with using alternative approaches.
For selling organizations: For larger companies with brand recognition and an established
customer base, the impact of using online supplier registries will be negligible. For small companies
that lack effective sales channels to expand their markets and sell into industries that regularly need
to find new suppliers, the impact will be moderate.
Sample Vendors: Achilles; Alibaba; Ariba; Elance; MFG.com; ThomasNet; Vortal;
www.armedforces.co.uk; Yahoo
Information Exchanges and Global Data Synchronization
Analysis By: Andrew White; John Radcliffe
Definition: Information exchanges and global data synchronization (GDS) supports the need to
synchronize master data between (business-to-business) organizations via the use of some central
shared authority model, rather than a specific direct connection commonly associated with
electronic data interchange.
Many organizations have synchronized data between themselves using technology specifically
focused on this task. Several such exchanges have formed, mostly oriented around specific
industry sectors, based on data and/or process standards and technology. Some of the specific
examples are led more by data and process industry standards support, such as in healthcare with
information exchanges and in consumer goods and retail, where there is a Global Data
Synchronization Network (GDSN).
Others are less standards based and driven by vendors seeking to support the same idea, for
example in the chemicals sector, Elemica hosts product data exchanges for some of its customers.
In healthcare, information exchanges are used to distribute a definition of "patient" to keep the
specifics of a patient consistent across different healthcare providers, services, provisioning
systems, billing and insurance, for example. A specific example is Covisint, that hosts information
exchanges for some of its customers.
In consumer goods and retail, these systems (hosted by 1SYNC, GXS and others) manage and
distribute a single definition of basic product attribute data. This helps to align business process
integrity (focused on promotion management, forecasting and replenishment, for example), via the
GDSN, in support of data standards from the GS1 association.
There are growing links between the two as the GS1 seeks to continue to promote its product
data standards to the healthcare industry in 2011.
Position and Adoption Speed Justification: Information exchanges and global data
synchronization are categorized under one technology, due to their similarities, even though
industry nuances differ.
The GDSN is partly mature in some areas (where basic and core items attribute data
synchronization by region) and immature in others (lack of global implementations or more complex
data types). GDSN is operational and acts as a "stepping stone" to the synchronization of more-
complex data, even if the more valuable use cases remain difficult to perform.
Information exchanges acting as patient registries have been operating for various healthcare value
chains for several years under strict regulatory control (the U.S. Health Insurance Portability and
Accountability Act [HIPAA]). Patient data cannot be physically centralized, so a registry key is
maintained centrally that "points" to where the actual patient data resides across the value chain.
As such, these patient records are not unlike the product records in a GDSN.
The standards body GS1 U.S. is continuing in its efforts to align GDSN with healthcare in terms of
products and services (not patients), as a means to enhance inter- and intra-industry data
synchronization efforts. These technologies are emerging slowly from the Trough of Disillusionment,
because they are relatively old and no longer hyped significantly, although they remain a key part of
industry-level information infrastructures. Starting in 2010 and continuing in 2011, interest and
demand has been picking up.
There are benefits to using information exchange and GDS technology and users have reported on
these. The benefits remain targeted (when the business case is clearly identified as in the case of
healthcare) and elusive (as in the case of GDSN, where benefits have been limited to basic item
data synchronization and not yet elevated to strategic value).
Barriers to success with this technology are many (not least is the issue of critical mass). A
successful network only provides value to those that invest in its set up and management when
sufficient organizations participate. The next few years, through 2013, may be critical.
GDS in consumer/retail markets needs to go global, or increase maturity for mastering and
synchronizing complex product data. Healthcare also needs to integrate further with GDSNs to
reduce integration costs, or some other trigger has to emerge, to reinvigorate the next evolution of
these technologies. Otherwise, they will continue their slow adoption up toward the Plateau of
Productivity.
User Advice:
Connect to regional data pools or information exchanges based on demand/request/mandates

and the degree of partner data aggregation and location specific to your industry needs.
Evaluate your internal capability to publish and/or consume high-quality master and enriched
data and introduce an appropriately implemented master data management program as a
prerequisite to achieving a "single view" of such master data in your enterprise and among your
supply chain partners.
Evaluate the ROI if not mandated to participate as part of a larger value chain.
Note that some vendors offer technology that is used behind a firewall to gather data and
prepare for synchronization; some vendors actually move the data between organizations and
other vendors provide services to support the effort.
Business Impact: Information exchange programs meet many and different value propositions,
depending on the industry, climate and business goals. For example, GDS will reduce "out of stock"
instances by aligning data and processes and reduce lost time to manually cope with mismatched
data and processes, including: retail and supply chain partners, settlement queries, lead times, new
product introductions, planning and replenishment cycle times and economic transaction costs, by
eliminating data re-entry and streamlining semantics across the value chain.
GDS will also synchronize multichannel integration, enable business-to-business synchronization
and enhance revenue.
Sample Vendors: 1SYNC; Covisint; Elemica; GHX; GS1; GS1 UK; GXS
Recommended Reading: "Best Practices: Checklist for Issues to Consider in Multienterprise
Collaboration"
"Gain Value Sooner With a Clear Understanding of the Global Data Synchronization Road Map"
"Information Commons: Emerging Online Centers of Gravity and the Impact on Business Strategy
and Enterprise Architecture"
Procurement E-Catalog Management Solutions
Definition: Procurement e-catalog management solutions are stand-alone applications used by
buying organizations to present and manage catalog content for commercial, off-the-shelf, indirect
goods and services in one or more e-procurement solutions. Functionality includes catalog content
upload staging, content update evaluation tools, content normalization services and catalog search
tools. Solutions are typically offered by MDM of product data vendors or by specialist vendors with
intelligent agents that download data from online, e-commerce websites.
Position and Adoption Speed Justification: Procurement e-catalog management solutions have
been in use for nearly 10 years by organizations with e-procurement solutions that lacked robust e-
catalog management functionality, and by organizations desiring a best-in-class, shared-e-catalog
solution to complement multiple ERP systems. This solution is near the Plateau of Productivity,
because user requirements are well-defined and its technology capability has, for the majority of
users, matured sufficiency to meet the majority of requirements.
User Advice: When exploring options for provisioning one or more e-procurement solutions with
catalog content, consider the procurement e-catalog content solution as a viable alternative to the
supplier portal and procurement network for indirect materials and services.
Business Impact: Procurement e-catalog management solutions add value by providing e-
procurement systems with content, and by making it easy for requisitioners to buy goods and
services from preferred suppliers at prenegotiated, discounted prices. The procurement e-catalog
management solution has been marginalized over the past few years, however, by the more broadly
scoped, multienterprise-enabled procurement network, which can deploy catalog content uploaded
once to support multiple buyers, and provide community management services, such as support for
supplier self-service catalog upload assistance. Today, procurement e-catalog management
solutions appeal most to larger organizations that have the bandwidth to manage catalog content
themselves.
Sample Vendors: Heiler Software; jCatalog; Netsol Technologies; Science Warehouse; Vinimaya
Recommended Reading: "E-Procurement Market and Vendor Landscape"
Entering the Plateau
E-Procurement
Definition: E-procurement applications support indirect spending by giving casual users (i.e.,
employees who are not procurement professionals) a self-service solution for requisitioning and
ordering goods and services. Although e-procurement solutions are geared toward indirect
spending management by enabling individuals to initiate the requisition process and select
purchases, they are occasionally configured for direct materials procurement, when plan-driven
inventory replenishment isn't practical.
E-procurement applications deliver functionality beyond the traditional purchasing modules of
financial suites and ERP systems with an intuitive user interface (UI) for non-procurement-
professional users, approval workflow, support for internally stored catalog content and a means for
accessing external content via XML-based standards, such as commerce XML (cXML), XML
Common Business Library (xCBL) and SAP's Open Catalog Interface (OCI). Most e-procurement
solutions provide multiple means, including email, auto-fax, a portal and XML for communicating
orders to suppliers. Packaged integration and an open application programming interface (API) are
the standard functionality for connecting to one or more ERP systems. Buyers can use the
embedded catalog management capabilities of their e-procurement solution, or opt for an e-catalog
specialist vendor (such as Vinimaya, Heiler or jCatalog) for content and community management.
Position and Adoption Speed Justification: E-procurement solutions have been adopted by a
diverse range of organizations, driven by the economic necessity to drive down costs. This broad
adoption has led to an increasingly true understanding of the technology's applicability, risks and
benefits. Moreover, e-procurement solutions are widely available from niche procurement
applications vendors; some ERP vendors offer competitive solutions. The net result of this broad
adoption is that e-procurement technology is now approaching the Plateau of Productivity.
User Advice: Deploy an e-procurement solution when you need improved control over spending or
better access to procurement information, such as preferred vendors and contract pricing. E-
procurement deployments deliver the most value when a variety of strategic supply agreements are
already in place, and when the organization is culturally able to mandate usage.
Business Impact: E-procurement solutions deliver value through compliance in three ways: by
ensuring compliance with budget; by helping individual requisitioners readily identify preferred
vendors and contract prices at the right time, and by giving organizations the means to slow down
and redirect spending. The financial impact of improved compliance can deliver significant savings.
E-procurement solutions also improve productivity by empowering individuals to place and track
orders themselves.
Sample Vendors: Advanced Business Solutions (ABS); Ariba; b-pack; Basware; BirchStreet
Systems; Capgemini IBX; Coupa; Elcom; Evenex; GEP; Heiler Software; Hubwoo; Ivalua; jCatalog;
Mercado Eletronico; Oracle; Paperless Business Systems; Perfect Commerce; Periscope Holdings;
Proactis Group; Puridiom; SAP; SciQuest; SynerTrade; Verian Technologies; Vinimaya; Visma;
Wallmedien; Wax Digital
Recommended Reading: "E-Procurement Market and Vendor Landscape"
"Cut Indirect Costs Now With E-Procurement"
"Turbo-Charge Procurement Value-Add With Consumption Management"
SaaS Procurement Applications
Definition: Procurement applications are solutions that make processes related to buying more
effective and efficient. Some solutions support supplier selection and supplier management
processes (see "Magic Quadrant for Strategic Sourcing Application Suites"). The primary focus of
other procurement applications is transaction enablement (see "Critical Capabilities for Best-of-
Breed E-Procurement Vendors" and "Critical Capabilities for ERP-Based E-Procurement
Solutions").
Procurement applications are natural candidates for delivery via software as a service (SaaS),
because they are multienterprise in nature, and because integration between cloud-delivered
procurement applications and related on-premises solutions is maturing and increasingly
commonplace.
Position and Adoption Speed Justification: Since their introduction in the early 2000s, SaaS
applications have steadily gained traction in procurement. As a set, they have entered the Plateau of
Productivity. For example, in our current work to update purchase-to-pay vendor ratings, 83% of all
references that have used their system for two years or less have chosen SaaS delivery. Forty-three
percent of respondents use a hosted, single-tenant solution; and 43% have deployed a multitenant
SaaS application. The delivery mode breakdown from "Magic Quadrant for Strategic Sourcing
Application Suites" from 2010 is similar; 71% indicated some form of SaaS delivery. Clearly, SaaS is
the delivery mode of choice for procurement applications.
Three primary drivers account for mainstream acceptance:
SaaS procurement vendors thrive by marketing their subscription-based solutions directly to

the procurement department as quicker-to-implement, operating-budget-friendly alternatives to
on-premises offerings. This approach works well when the need for integration with other
solutions is well-defined or not needed.
The SaaS delivery model enables buyers to access innovation quicker than traditional software
licenses, because, with SaaS, customization is often discouraged or even prohibited in
procurement application markets, solutions are architected for configurability, and the vendor
assumes the burden of upgrades. In rapidly innovating markets, the ability for the solution to
evolve on a real-time basis is valuable. For example, in the supply base management market,
we see rapid innovation provided in SaaS-delivered solutions, because requirements are being
understood and addressed on a real-time basis.
SaaS has proved to be an economical delivery mechanism for multienterprise solutions. For
example, catalog hosting services are offered almost exclusively via SaaS, because this model
enables buyers and suppliers to leverage established third-party communities of trading
partners.
User Advice: Consider SaaS procurement solutions when IT resources and/or your capital budget
is constrained, when the proposed application can be used successfully without customization,
when you want to avoid supplier onboarding/community management work by leveraging an
established, SaaS-delivered procurement network, and/or when you want relatively painless access
to vendor innovation. Mitigate the risks of SaaS-delivered solutions by clearly establishing upfront
with your vendor how the risks of data and/or solution loss will be addressed (see "Develop a
Framework for SaaS Application Business Continuity Risk Mitigation").
Business Impact: SaaS options can significantly improve the value of certain types of procurement
applications by reducing the need for IT resources for data center management, avoiding the need
for capital expenditure funding and facilitating access to innovation. The benefit rating is high for
multienterprise SaaS applications because, in this case, the delivery mode enables organizations to
leverage online communities in ways they could not before (such as running live, reverse auctions).
Sample Vendors: Aravo; Ariba; BirchStreet Systems; BravoSolution; Coupa; DocuSign; EchoSign;
Emptoris; Fieldglass; GEP; Hiperos; Hubwoo; Iasta; IQNavigator; Rearden Commerce-Ketera
Technologies; SAP; SciQuest; Verian Technologies
Recommended Reading: "Magic Quadrant for Strategic Sourcing Application Suites"
"SaaS Impact on Procurement Applications"
"Develop a Framework for SaaS Application Business Continuity Risk Mitigation"
Telecom Expense Management
Analysis By: Phillip Redman
Definition: Telecommunications expense management (TEM) includes the management of fixed
and mobile communication services and hardware. It may also include professional services that
support sourcing, auditing and strategy. TEM employs offerings ranging from an on-premises and
software-as-a-service (SaaS)-based application, to a managed service scenario to full business
process outsourcing (BPO) offerings for managing telecom spending. Eventually, stand-alone TEM
offerings disappear, and managed mobility services, which incorporate TEM and mobile device
management (MDM), emerges as a wider outsourcing offering.
Position and Adoption Speed Justification: TEM has been stabilized in service offerings during
the past four years and is considered mature in North America. However, on a global basis, TEM
offerings are still developing, often transforming from software to a managed service, which is a
standard offering in North America. During the past year, there was significant consolidation of
major TEM vendors, which is expected to continue for the next 12 to 24 months. TEM continues to
be adopted mainly as a managed service, though full business process offerings are maturing and
being adopted. Fully managed BPO continues to be a fast-growing area, as companies look to fill in
missing resources by outsourcing the service management components, such as rate plan
optimization, invoice management and bill payment. The number of market entries continues to
expand, as does the number of regions that have TEM providers, although the majority are still in
North America. Global TEM is still a main interest, but it lags behind domestic TEM services in terms
of maturity.
User Advice: Many companies are already on their second or more TEM provider. Most report
continued value from their TEM experience in relation to management and efficiency, if not dollar
savings. TEM continues to provide excellent management capabilities that can help companies
identify and control areas of spending. TEM outsourcing has grown as a way to help fill in services
that the enterprise no longer has resources to manage. Identify key areas that go beyond the
enterprise core competency, and that have growing usage and increasing costs for outsourcing,
including global management, policy, procurement and mobile device management. Enterprises
need to include fixed and mobile TEM as part of their outsourcing strategies for cellular, data, long
distance, Wi-Fi hot spots, dial-up and other remote-access services. Enterprises must create a list
of expectations about how TEM will change the way telecom services are sourced and managed
regarding key elements, such as expected return on investment, responsibilities and impact on
head count. Consider benchmarking current hard and soft costs, to understand the full impact of
TEM services.
Business Impact: TEM reduces external network service provider costs and internal service
management costs. TEM reduces the costs of telecom services by providing rate plan optimization
and invoice management (error reduction dispute management). TEM provides management and
resources for service. Although support is just growing, this capability is required to be provided
globally to allow a global view of telecom service expenses when needed. In addition, depending on
the current level of governance, a continued savings of 10% to 35% of total spending may be
achieved, though first-year savings will be higher than concurrent years, with a relative investment
of 0.25% to 3% of service spending (the range depends on the amount of the total telecom
spending). TEM provides deeper insight into total telecom spending across multiple providers and
geographies, and provides better service for procurement.
Maturity: Mature mainstream
Sample Vendors: ProfitLine; Quickcomm; Rivermine; Symphony Services; Tangoe
Recommended Reading: "Magic Quadrant for Telecom Expense Management"
"Toolkit: Best-Practice Terms and Conditions for TEM Services"
"Toolkit: Telecom Expense Management SLA Guidelines"
Travel Expense Management
Analysis By: John E. Van Decker
Definition: Travel expense management (TEM) solutions address the automation requirements of
employee-submitted expense reports, as well as the coordination of the approval, accounting and
reimbursement activities across the business process. Today, many TEM offerings can be viewed
as commodities, as there are no material differences among them. A typical ERP-based TEM
solution is similar to ERP-based solutions from other vendors, as is the case with software-as-a-
service (SaaS)-based solutions. TEM functionality includes:
Integration with corporate travel card companies for receipts
Integration with time-capture processes
Linkage to company projects and project accounting
Complex policy/rule processing for expense management
Web-based processing with disconnected user capability (the ability to enter expense reports
without being online)
The ability to pay first and approve or audit afterward
Email-based approval processes
Analytic purchasing reports by vendors to enable contract optimization
Exception processing
Ease of configuration and ongoing maintenance
Multilanguage/multicurrency processing
Per-diem alternative reimbursement
Value-added tax
Local legal and tax regulation support
Integration with accounts payable, payroll or general ledger
Integration with HR data for reporting and authorization levels

Increasingly, travel booking is being considered along with TEM to provide a more holistic approach
to managing travel spending, as well as providing lower levels of detail for hotel and car rental bills
through the integration of the two functions within a single suite. This demand is mostly due to
vendors that offer suites of travel planning functionality, including Concur and Ariba.
Important ancillary functionality that will add value to the TEM implementation includes:
Imaging to automate the paper flow and reduce the need for organizing reports and receipt
copies in a central location
An embedded analytics tool to understand compliance issues and what is being spent with
each vendor
Control of monitoring solutions, such as an access control list, that can help analyze trends in
TEM and provide additional postreport analysis to understand potential compliance issues
Payment via central payment processes with credit card vendors and direct deposit for out-of-
pocket expenses, which are important options
Position and Adoption Speed Justification: Early expense management attempts were typically
centered on Excel, where a fixed-format spreadsheet was used to accumulate expense information
and route it for approval. Many organizations have replaced, or are in the process of replacing,
these solutions with commercially available software. Those that have implemented multiple
solutions, either by unit or geography, are now seeking to consolidate their approaches into a global
financial management process. In some companies, travel management reports are merged into
purchasing or HR, but the same global process requirement is at play.
The majority of software selection in the TEM market is ERP-based or SaaS offerings. During the
next two years, 95% of companies selecting TEM solutions will choose an ERP vendor, a large
SaaS vendor (such as Concur and IBM), or a solution integrated with a procurement suite (such as
Ariba). The market has favored ERP and large SaaS vendors. If there is a standard ERP preference
for TEM transactions, then an ERP solution, such as SAP or Oracle, will be selected over a SaaS
solution. If other factors are at play, then most of the current selections seem to be around Concur
and IBM, with Concur getting the bulk. This has increased Concur's penetration during the past
year, and it will most likely be mainstream in 2011.
User Advice: First and foremost, take a commodity approach to TEM, implementing solutions with
minimal, if any, customization. Leverage best practices inherent with the business application, using
standard configuration capabilities, rather than customization. When choosing a technology, favor
ERP and SaaS offerings. If there is a standard ERP in place, consider the solution from the ERP
vendor. However, if there is a multi-ERP environment, or even a common ERP with different
releases/instances deployed, look to a SaaS vendor for a common global TEM process. Best-of-
breed, license-based solutions are rarely pursued, because cost models for SaaS offerings are
increasingly attractive for most organizations.
Although this list is not exhaustive, we recommend that SaaS solutions be considered in situations
where organizations:
View TEM as a commodity solution and see no value to keeping the software in-house.
Want to enter the SaaS world. TEM represents a good candidate for this initial foray, due to its
relatively uncomplicated functionality and compartmentalized processes. SaaS may eventually
lead to business process outsourcing arrangements, such as IBM and Concur (via its Gelco
acquisition), if the organization also wants to consider outsourcing the corresponding auditing,
payment and document management functions.
Have a heterogeneous ERP environment (that is, multiple ERP solutions such as SAP,
Lawson and Oracle are used in the same company), but want a consistent, global process
and solution in place for TEM. This is often seen in companies that have grown through mergers
and acquisitions, and want common solutions for this process.
Have a single ERP application, but with multiple instances, and do not plan on moving to a
common platform in the near future.
Use legacy applications such as Lotus Notes-based tools, client/server and Excel-based
solutions that need to be replaced quickly due to end-user dissatisfaction or broken
processes.
Want to stay current with industry best practices and operate globally on one version of the
software. For SaaS solutions, particularly where there is a multitenancy model in place (for
example, Concur) and the vendor operates on a single instance of the software, it is easier for
that vendor to keep up with industry best practices and leading functionality. This is also the
case for legal and statutory compliance requirements.
Want an easier-to-use graphical user interface for travel expense report entry.
Want a rapid, low-cost deployment not requiring any IT involvement or internal hardware/
infrastructure with little or no customization.
Business Impact: Businesses can achieve cost reductions, legal and statutory compliance, and
fraud management and have happier employees (through faster reimbursements) by implementing a
Web-based travel reimbursement product. TEM solutions provide an important opportunity to drive
costs out of expense report processing, and the upgrade to Web-based technologies has been a
natural progression, delivering improved access and facilitating global deployment. After salaries,
travel and expense is the second-largest controllable expense for many enterprises, and project
initiatives in this area are often led by the finance office. TEM license-based, on-premises and SaaS
applications have enabled companies to reduce processing costs, check/bank fees and cash
advances (via quicker reimbursement), and to have focused spending with key suppliers (by
employing stricter travel policy enforcement).
The mere introduction of an automated expense reporting tool will provide benefits and may be the
right first step toward improving TEM. To maximize business value and effectively integrate
technology with business processes, organizations desiring more control over rising travel costs will
ensure that implementation effectively embeds current best practices in travel procurement, travel
policy compliance, spending analytics, expense processing and regulatory compliance.
Market Penetration: More than 50% of target audience
Maturity: Mature mainstream
Sample Vendors: Ariba; Concur; CyberShift; IBM; Infor; Oracle; SAP
Recommended Reading: "Q&A for Travel Expense Management Software Selection and
Implementation"
"Travel Expense Management: Best Practices Yield Success"
Appendixes
Hype Cycle Phases, Benefit Ratings and Maturity Levels
Table 1. Hype Cycle Phases
Phase Definition
Technology Trigger A breakthrough, public demonstration, product launch or other event generates
significant press and industry interest.
Peak of Inflated
Expectations
During this phase of overenthusiasm and unrealistic projections, a flurry of well-
publicized activity by technology leaders results in some successes, but more
failures, as the technology is pushed to its limits. The only enterprises making
money are conference organizers and magazine publishers.
Trough of
Disillusionment
Because the technology does not live up to its overinflated expectations, it rapidly
becomes unfashionable. Media interest wanes, except for a few cautionary tales.
Slope of
Enlightenment
Focused experimentation and solid hard work by an increasingly diverse range of
organizations lead to a true understanding of the technology's applicability, risks
and benefits. Commercial off-the-shelf methodologies and tools ease the
development process.
Plateau of
Productivity
The real-world benefits of the technology are demonstrated and accepted. Tools
and methodologies are increasingly stable as they enter their second and third
generations. Growing numbers of organizations feel comfortable with the reduced
level of risk; the rapid growth phase of adoption begins. Approximately 20% of
the technology's target audience has adopted or is adopting the technology as it
enters this phase.
Years to Mainstream
Adoption
The time required for the technology to reach the Plateau of Productivity.
Table 2. Benefit Ratings
Benefit Rating Definition
Transformational Enables new ways of doing business across industries that will result in major shifts in
industry dynamics
High Enables new ways of performing horizontal or vertical processes that will result in
significantly increased revenue or cost savings for an enterprise
Moderate Provides incremental improvements to established processes that will result in
increased revenue or cost savings for an enterprise
Low Slightly improves processes (for example, improved user experience) that will be
difficult to translate into increased revenue or cost savings
Table 3. Maturity Levels
Maturity Level Status Products/Vendors
Embryonic

In labs

None
Emerging

Commercialization by vendors
Pilots and deployments by industry leaders
First generation
High price
Much customization
Adolescent

Maturing technology capabilities and process
understanding
Uptake beyond early adopters
Second generation
Less customization
Early mainstream

Proven technology
Vendors, technology and adoption rapidly
evolving
Third generation
More out of box
Methodologies
Mature
mainstream
Robust technology
Not much evolution in vendors or technology
Several dominant vendors

Legacy

Not appropriate for new developments
Cost of migration constrains replacement
Maintenance revenue focus

Obsolete

Rarely used

Used/resale market only
Recommended Reading
Some documents may not be available as part of your current Gartner subscription.
"Understanding Gartner's Hype Cycles, 2011"
"Understanding Your Top Procurement Practices"
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This research note is restricted to the personal use of mark.robichaux@itc.hctx.

Innovation continues in procurement technology, as evidenced by the significant number of

An increasing number of procurement applications, including strategic sourcing applications

Multienterprise business process platforms (ME-BPPs), due to buying organizations' preference

Web-to-print applications, which reached maturity when successfully positioned as a solution

Telecom expense management was added as a result of procurement having greater

Vendor risk management is a newer technology aimed specifically at IT vendor risk

Procurement e-catalog management solutions were added to highlight an option to supplier

Strategic sourcing applications: Strategic sourcing applications enable buyers to establish

Web-to-print applications: Web-to-print applications (which technology providers sometimes

E-notification solutions: applications that allow public-sector organizations to publicly post

Acquisition management: specialized solutions for U.S. federal-level procurement. Functionality

ERP consolidation efforts looking to develop a centralized procurement function

Local procurement processes with global manufacturing processes

E-forms for requesting a new supplier

Workflow for new and updated data gathering and approval

A data repository for storing the master data

A means to receive and publish the appropriate data to subscribing systems

Strong user demand, because of the benefits, especially savings

More governments mandating e-invoicing, especially in the EU and South America

Better spending analysis, leading to some spending reduction

Faster processing times and payment cycles

Enhanced contract performance analysis

Improved dispute handling and avoidance

Opportunity to realize more supplier rebates and discounts

Better auditability of invoices through integrity and authenticity guarantees

Greener approach, big reductions in consumption of paper

Procurement networks, a type of BPN tailored to indirect, catalog-based e-procurement, related

Configurable workflow for approving requisitions, work orders and timecards

Maintenance of internal rate cards for frequently staffed positions

Market pay rate intelligence for frequently staffed positions

Automated "match" scoring between the requisition and each candidate

Side-by-side candidate comparison

Candidate interview status tracking

Worker eligibility/certification tracking, including Form 1099 (IRS) validation routing/tracking

Onboarding/offboarding task tracking

Online posting of work instructions for hires to download

An interface for integration to timekeeping and/or security systems

Embedded compensation rules, such as overtime payment rates

Online time card approval

Consolidated invoice preparation and presentation

Contingent worker performance tracking

Worker total-tenure tracking across multiple positions and multiple suppliers

Embedded analytics for tracking staffing agency performance and spending

Seasonal demand profiles and capacity/demand commitments.

Connect to regional data pools or information exchanges based on demand/request/mandates

SaaS procurement vendors thrive by marketing their subscription-based solutions directly to

Integration with corporate travel card companies for receipts

Integration with time-capture processes

Linkage to company projects and project accounting

Complex policy/rule processing for expense management

The ability to pay first and approve or audit afterward

Email-based approval processes

Analytic purchasing reports by vendors to enable contract optimization

Ease of configuration and ongoing maintenance

Per-diem alternative reimbursement

Local legal and tax regulation support

Integration with accounts payable, payroll or general ledger

Integration with HR data for reporting and authorization levels

Several dominant vendors

Maintenance revenue focus

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