Procurement is an essential part of business operations. Every organization must purchase or requisition materials and services from the outside world, in order to deliver products and services of their own. Over the last 4 decades, SAP built a comprehensive suite of on premise software products and tools to support a huge array of procurement processes, roles, and scenarios. From Sourcing, Contract Management, Content Management, Shopping Cart/Requisitions, Analytics, even to Supplier Self Service, SAP provides an on premise solution.
The main challenge with on premise procurement solutions, is when it comes time to interact with suppliers. Suppliers are running different systems and processes outside of a user’s firewall. Even careful coordination of IT and Business could not manage to fully integrate or support collaborative procurement processes with suppliers in on premise procurement. Exchanging documents in point-to-point interactions was oftentimes the best these environments could muster. To implement much of this, customers and SAP would embark on a voyage that originated and ended in IT. “Originated”, because the systems and software all had to be architected to work in the customer’s IT environment, before the business users fully engaged to define the requirements. “Ended”, because many of these projects added suppliers as an afterthought, taking more of the Field of Dreams “Build it and they will come” approach rather than any kind of inclusionary strategy to engage and onboard suppliers. Or in plainer English, the thinking went “if they want to do business with us, they’ll have to get with this new system”. Projects usually had enough on their hands trying to manage the IT and Business requirement aspects of the project. Supplier enablement was an afterthought – supplier onboarding was handled by the customer as they were also handling internal change management and onboarding internal users. The system was built, would go live with Business and IT high-fiving after months of preparation and effort, and be supported by IT, hoping the internal users and the suppliers would embrace using what had just been built.
Sometimes, this strategy of “hope” didn’t quite have a Hollywood ending. Suppliers, forced to integrate in a point-to-point manner with processes and systems of the customer, if they had pricing power, would pass on the costs/pains of this exercise in their pricing to the customer. If not, they would typically grit their teeth and bear yet another hit to their margins, hopefully realizing some of the promised efficiencies.
To be fair, limitations at a system level precluded much of supplier focus anyhow, as suppliers could not punch through a firewall into a customer’s core ERP environment for the most part, simply to conduct business transactions or collaborate. Protocols and network structures had to be established to enable even one-off interactions, and these usually proved too laborious for all but the more trusted suppliers. Marketplaces were not much help in this regard, as they typically provided a generic, well, marketplace in which to conduct transactions, omitting much of the customer procurement processes and scenarios required in the run up to the transaction.
The advent of Cloud computing represents a powerful opportunity for procurement processes and systems. In addition to the cost savings of embracing a hosted infrastructure and more standard processes driven in a true multi-tenant environment, a customer can bridge more of the disconnect with suppliers and leverage existing supplier connections already established in the Cloud or a Network, rather than point-to-point. Suddenly, true supplier collaboration doesn’t look so cost prohibitive.
SAP has stacked through considerable cost and effort, a mirroring portfolio of procurement solutions in the cloud. With the acquisitions of SAP Ariba and SAP Fieldglass, SAP has an end-to-end offering of Cloud solutions for procurement, covering all of the significant scenarios and procurement roles. Seeing the depth and breadth of this offering and listening to all of the Cloud “marketecture” discussions, can easily create the impression that all you have to do to join the new era of Cloud computing is sign up and log on, “lift and shift” your processes to the cloud, and voila…done. Fortunately, there is still a project, just not so much an IT one, as a Business- and Supplier-centric one to navigate. “Fortunately”, because you would not want to bring over every one of your processes into the Cloud, or activate every process and role on offer, without a thorough review of the functionality, application, and what your goals are for this journey.
IT has enabled over the years, a plethora of efficiencies that business and consumers cannot live without. However, IT limitations have also driven unnatural behaviors and trade-offs. Analytics and transaction processing were separated at the inception of computing to support speeds and feeds, at the cost of real time analysis capabilities and reactions. Suppliers and customers were separated into their own walled IT gardens, with occasional crawlers strewn over the walls to conduct business, or DMZ zones where bare-bones transactions could be conducted and then shuttled safely back across the moat and drawbridge. The Cloud changes this, when rolled out correctly. If you want to look at approaches for making this happen, check out the resources on services.sap.com and help.sap.com, keywords SAP Activate, Fieldglass, Ariba, and S/4 HANA Sourcing and Procurement, as well as SAP Press titles, such as the one we recently released: SAP Ariba and SAP Fieldglass – Functionality and Implementation.