The Argument for eProcurement Plus ERP

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Arguement for Eprocurement Plus ERP Banner

These formerly competing -platforms now offer new synergies for procurement and the entire organization.

Almost two decades ago, a wide range of technology solutions started emerging in support of public and private sector procurement functions. The pros and cons of each were frequently debated, but only two platform designs warranted serious consideration: Enterprise resource planning (ERP) procurement modules that could be implemented with a consistent look and feel across all departments and a collection of more user- and functionality-focused best-of-breed systems. 

Fast forward to today and you’ll see this very same best-of-breed vs. ERP debate still very much alive – especially among public sector and higher education organizations wanting to follow private sector procurement models. But, today, we’re operating in a world rife with software as a service (SaaS) solutions. Business system interoperability is now available on a broader scale so best-of-breed platforms no longer have to operate exclusive of ERP systems. 

Rethinking Expectations

Today ERP and best-of-breed solutions can work cohesively in complement of one another as department needs dictate. At the same time, the purpose of procurement technologies is evolving. These factors are driving organizations to rethink overall technology strategies and re-prioritize the factors influencing procurement system selections. They have to consider whether or not a single end-to-end ERP system really offers any greater benefit than best-of-breed SaaS options – or whether it has any greater limitations. Despite 20 years of market experience, ERP’s strengths have not been equally demonstrated across all departments.

Perhaps that’s why Gartner’s 2015 Strategic Road Map for Postmodern ERP predicts that “by 2020, less than 20 percent of multinational organizations will continue to plan and adopt an ERP strategy based on a single instance megasuite.” ERP suites just aren’t as flexible as Best-of-Breed solutions in today’s SaaS environment, and most ERP renovations result in complete platform replacement because they can’t: 

  • Provide organization-wide visibility into procurement functions.
  • Support every process requirement throughout the entire contract lifecycle. 
  • Offer a high degree of compatibility with other organizational systems without requiring extensive back-office overhauls with each platform version upgrade or feature turn-on.
  • Align with overall organizational processes, compliance standards, and industry-wide procurement processes and standards.

In fact, Gartner, in a 2015 report on user adoption of procurement and sourcing tools, noted that over the past decade, organizations that selected indirect P2P solutions such as ERP for eProcurement, accounts payable automation, and e-invoicing couldn’t “motivate requisitioner adoption, and many implementations handle less than 20 percent of the overall indirect spend.” Poor ease of use, high operating costs, and lack of access to innovation are still characteristic of ERP e-procurement modules. As a result, lengthy timelines and cost challenges associated with an ERP-only approach still remain, not to mention functionality compromises.

Deconstructing ERP

Today’s CIOs and IT decision makers must give more weight to the cost and performance benefits of best-of-breed SaaS procurement platforms (which check all the right criteria boxes) over the perceived advantages of implementing a single organization-wide ERP system (which are still restrictive).

“Upgrading” procurement capabilities with a limited-function ERP module isn’t as cost efficient as integrating a full-function eProcurement software solution into an ERP today. The return on investment (ROI) is much greater long term with eProcurement solutions that increase customized feature selection and process integrations. 

Plus, best-of-breed solutions don’t require organizations to abandon ERP systems in their entirety. It’s no longer “one or the other.” They just have to abandon the single-vendor strategies of old and be willing to deconstruct their monolithic ERP into “loosely coupled applications” that remove the architectural rigor that have long restricted operational efficiency. In doing so, ROI for a single department’s technology application can have greater, more positive, implications across the entire organization. The upgrading of domain suites or smaller footprint applications can be “prioritized by functional need and agility” in the coming years, as Gartner noted. Specialist vendors can deliver a deeper domain solution than the ERP framework offers in its most complete form. 

Shifting the Debate

End-to-end suites can rarely deliver the complete capabilities needed in today’s fast-evolving business environment. Organizations opting for a pure ERP system up front will likely end up purchasing additional SaaS solution components to supplement the ERP’s lack of functionality at some point. That’s why hybrid solutions comprising highly flexible, highly scalable and widely compatible specialized applications – such as eProcurement software platforms – are the new standard. 

So let’s shift from debating best-of-breed vs. ERP to determining how best to integrate the strengths of both in clearly defined roles within the organization. Fortunately, regardless of how we move forward, the consistent popularity of both solutions for 20-plus years means that we have the advantage of past experience to guide current decisions.

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Calculations are based on documented Periscope Holdings customer savings and research from Aberdeen.