Procurement Executive Insight

Study Results Analysis

May 22, 2018

Understanding Integrated Suites:

The Example of E-Sourcing

By Constantine Limberakis, Kurt Albertson and Jeff Gibbons

Executive Summary
Procurement organizations are moving in substantial numbers to implement integrated technology suites in areas like
source-to-contract and purchase-to-pay. A new generation of technology has made it possible for these technologies
to move to the cloud, simplifying maintenance and administration. A recent Hackett Group study analyzed the use
of e-sourcing suites to uncover trends, benefits and drawbacks to unifying these processes in one solution. For
organizations already invested in optimizing sourcing execution efforts, the arguments for moving to an integrated
suite are compelling.

Procurement technology providers today offer cloud-based integrated suites that package
functionality across both upstream (source-to-contract) and downstream (purchase-to-
pay) processes (Fig. 1). This is reminiscent of the way traditional enterprise resource
planning (ERP) platforms historically combined business systems and processes in a
single data model. By providing a common platform framework for system configuration,
data management and process workflows, integrated procurement suites offer a way
for procurement organizations to deploy technology as part of their digital transformation
strategy.1

The trend toward deploying integrated suites is a hot topic in procurement. While most
organizations still rely on an ERP or a hybrid of source-to-contract or purchase-to-pay
solutions, data collected from The Hackett Group’s Integrated Suite vs. Best of Breed
study (2018) reveals that organizations are moving toward a single, integrated suite for
source-to-pay functions (Fig. 2). However, given the differences between upstream
and downstream processes, more organizations appear to be choosing to consolidate
functional areas logically, such as purchase-to-pay or source-to-contract, over moving all
functions to one source-to-pay provider.

1
88% of respondents to our 2018 Key Issues study expect to have one or more cloud-based/SaaS applications
within the next two to three years.

© 2018 The Hackett Group, Inc.; All Rights Reserved. | 6000210 Procurement Executive Insight I The Hackett Group I 1
 FIG. 1 How upstream and downstream processes fit across source-to-pay

Supplier lifecycle management

(Supplier master data, performance and risk)
Track performance, assess and monitor risk, aggregate third-party intelligence on suppliers, maintain master data,
provide real-time insights, integrate to PLM, ERP and suppliers

Automated spend E-sourcing Contract lifecycle E-procurement Services procurement E-invoicing/

analysis management e-payables
• Identify • Define • Create and store • Maintain • Manage requisition • Input/upload invoices
category requirements/ contracts e-catalogs workflow • Match invoices
opportunities aggregate • Maintain standard • Search approved • Benchmark rates • Manage discrepancy
• Aggregate demand templates suppliers • Maintain service resolution
and report • Conduct RFx • Manage negotiation • Punch-out to agreements • Approve payments
on enterprise • Evaluate workflow supplier catalogs • Track time and
spend suppliers • Alert on milestones • Create approval workflow
• Cleanse and • Optimize bids requisitions
rationalize • Conduct
spend data e-auctions
Upstream procurement Downstream procurement

Project Dynamic
Category PLM and Supplier integration
Cognitive, AI, pipeline Robotic process discounting/ ERP
manager planning and onboarding tools
machine learning and savings automation (RPA) supply chain integration
tools integration and services
dashboards financing

Source: The Hackett Group

FIG. 2 Source-to-pay technology approach

Percentage of organizations

Hybrid approach: ERP solution combined with

best-of-breed/modular solutions for either upstream
43%
or downstream functionality
37%

27%
Multiple best-of-breed solutionsapproach for
upstream and downstream
19%

14%
Existing ERP solution for all processes, with
limited exceptions
11%

10%
No strategy
8%

A single provider (i.e. non-ERP) to support 6%

CURRENT
end-to-end processes, with limited exceptions
24%
PLANNED

Source: Integrated Suite vs. Best of Breed study, The Hackett Group, 2018

© 2018 The Hackett Group, Inc.; All Rights Reserved. | 6000210 Procurement Executive Insight I The Hackett Group I 2
 Expanding Traditional E-Sourcing Execution Capabilities
As organizations decide whether they prefer multiple systems or a single-suite solution
to manage procurement, one area where the move to integrated suites is having a
large impact is e-sourcing. For organizations already invested in optimizing sourcing
execution efforts, the rationale for moving to an integrated suite is compelling.

Due to diminishing returns on sourcing activities over time, many who were successful
with e-sourcing in the past now have hit a ceiling on savings from sourcing efforts
related to RFPs or reverse auctions. At the same time, early adopters of e-sourcing are
finding their current solutions are outdated, limiting adoption. The less-desirable user
interface (UI) and user experience (UX) of the older solutions also cannot be properly
integrated with other upstream or downstream areas to improve wider sourcing
execution efforts.2

For years, traditional e-sourcing tools have been transformational for organizations
due to their ability to improve sourcing efficiencies and savings recognition that would
otherwise be conducted on spreadsheets. In this regard, e-sourcing software provides
significant value to the sourcing execution process, with average benefits that include
a 29% increase in the total number sourcing events per year, a 13% reduction in total
cost of sourcing, and a 12% increase of recognized savings (Fig. 3).3

FIG. 3 Benefits of e-sourcing

Reduce total sourcing cycle time by: 30%

Increase the total number of sourcing events per year by: 29%
Increase the percentage of recognized savings by: 12%
Reduce the total cost of sourcing by: 13%
Increase the use of standard templates by: 46%
Reduce data collection errors by: 35%

Source: Sourcing Cycle Time and Cost Measurement study, The Hackett Group, 2017

However, e-sourcing solutions are usually focused on specific sourcing execution

elements such as RFx and e-auctions. 4 Some of the pitfalls of focusing only on sourcing
event creation and bid analysis include:
• Conducting supply base/market analysis takes longer when supplier and contract data
have to come from separate systems.
• There is no ability to go beyond basic supplier management requirements for creating
supplier profiles related to sourcing identification efforts.
• Only contract header information gets pushed to a third-party contract management
system post-award.

2
Procurement Value: Moving Beyond Price Savings Toward Strategic Value Recognition. The Hackett Group,
2018.
3
Sourcing Cycle Time and Cost Measurement study, The Hackett Group, 2017.
4
Due to a perceived lack in capability from traditional e-sourcing providers, niche sourcing planning and
optimization solutions evolved for evaluating large bids and what-if scenarios in direct spend areas such as
transportation and logistics.

© 2018 The Hackett Group, Inc.; All Rights Reserved. | 6000210 Procurement Executive Insight I The Hackett Group I 3
Sourcing execution defined A Shift from E-sourcing to Full Source-to-Contract
The Hackett Group’s process Today, either by way of technology innovation on a native code base or through
taxonomy breaks sourcing execution acquisition of additional technologies in specific upstream functions, e-sourcing has
into two areas: evolved and now encompasses the wider source-to-contract process as part of an
integrated suite.
• Requirements definition and
supplier bidding: The process of FIG. 4 Sourcing execution processes in source-to-contract
identifying, validating and selecting
suppliers for direct materials, Requirements definition and supplier bidding
indirect materials, and capital goods Event creation
Requirements Supplier
and services. (RFx, reverse Bid analysis
definition identification
auction)
• Sourcing execution, negotiation
Negotiation and supplier contract creation
and supplier contract creation:
The process of negotiating terms, Supplier Supplier Contract
Negotiation
delivery, price and quantities with certification selection creation

suppliers.
AREAS TRADITIONALLY EXPANDED FUNCTIONALITY THROUGH
AUTOMATED BY E-SOURCING INTEGRATED SUITE CAPABILITIES

Source: The Hackett Group

In this regard, integrated suites facilitate improved strategic sourcing by better

addressing the supporting activities in the source-to-contract process (Fig. 4), such as:
• Requirements definition: Integrated suites can improve access to internal supply
Supplier discovery technology and third-party market analytics (e.g., category-specific data sets, index data) to profile
improves sourcing execution current demand as part of spend and supply base analysis.
When used by sourcing staff and
internal stakeholders, supplier • Supplier identification: Integrated suites can provide supplier discovery capabilities
discovery technology can reduce for identifying new and potentially untapped supplier sources to meet business
average cycle times for various requests or other corporate requirements (e.g., small business, supplier diversity, risk
parts of the sourcing processes. For or sustainability).
example: • Supplier certification: Integrated suites with supplier lifecycle management (SLM) can
• Identifying system-recommended improve coordination of program-managed supplier certification, risk and qualification
suppliers (based on pre-defined activities for key stakeholders, whether performed before or after sourcing execution
criteria and past preferences): 31% process or downstream as a part of purchase-to-pay.

• Filtering and searching supplier • Contract creation: Expanding capabilities in contract creation (to accommodate
list by specific product/service contract and compliance management that includes full creation of greenfield contract
requirements: 25% language) allows for significant negotiations and modifications in contract language,
and management against government and regulatory oversight.
• Viewing buyer organization rankings
and feedback on suppliers: 22%
Expanding to Support Wider Upstream and Downstream Capabilities
Source: Sourcing Cycle Time and Cost Measurement The development of integrated suites on cloud-based platforms also brings the promise
study, The Hackett Group, 2017
of reducing wider data and process-related operational challenges in managing wider
upstream processes related to supply base management, operations and compliance
requirements (Fig. 5). For instance, an integrated suite offers a common framework
for system configuration that facilitates linkage between data management, process
workflows, sourcing, supplier management and contract management data processes.
Using standard, administrator-led configuration as part of the suite provides the potential
to enable more complex workflows based on interrelated data, metadata and supply-
base documents.

© 2018 The Hackett Group, Inc.; All Rights Reserved. | 6000210 Procurement Executive Insight I The Hackett Group I 4
 FIG. 5 Potential upstream procurement process expanded with integrated suites

Sourcing and supply base strategy Operations and compliance

Sourcing and Sourcing execution Sourcing execution Supply data management Supply data management
supply base analysis (Requirements and (Negotiation and (Supplier master mgmt.) (Contract master mgmt.)
supplier bidding) contract creation)
Requirements Contract template
Spend analysis Supplier certification Supplier setup
definition management
Internal requirement Supplier identification Supplier master Contract master file,
analysis and notification Negotiation file maintenance store and retrieval
Supply base/ RFx creation Internal compliance
Market analysis and distribution Contract master
management maintenance
Internal data Supplier selection
Reverse auctions Contract compliance
(e.g., bills of materials)
External compliance
Demand management management
External data RFx bid analysis Contract creation
compliance
Regulatory/
Total cost/ Internal audit support Government
Value analysis Source-to-contract compliance
Sourcing and strategy Supplier management and development Policies and procedures Non-government
plan development compliance compliance
Supplier integration and enablement
Supplier segmentation analysis
Supplier performance management EXPANDED PROCESS AREAS OF FUNCTIONALITY
IN UPSTREAM PROCUREMENT WITH
Supply base risk management
INTEGRATED SUITES

Source: The Hackett Group

Further, integrated suites offer the potential to improve management of master data
related to supplier, contract, item and article masters. Use of MDM is traditionally
accompanied by both inaccuracies and inefficiencies in areas like supply analysis,
supplier certification and onboarding, contract authoring and negotiation, and compliance
management, due to use of internal data silos or “lakes, and other barriers to
collaboration, efficiency and visibility. By using a common data model, integrated suites
provide an impetus to harmonize information that was traditionally spread out across
systems (MRP, ERP, spreadsheets) and departments.

Capabilities enabled by an integrated suite approach across wider upstream procurement

areas include:
• Advance notice of certifications or requirements that may expire prior to a sourcing
event.
• Improved efficiency and reliability in vetting suppliers invited to a sourcing event (like
an RFx) or by linking supplier performance and risk scores to a supplier profile.
• Establishing sourcing-award criteria such as supplier bidding details, and supporting
documentation that integrates and is linked to contract information in the system
during contract creation.

The development of cloud platforms as part of open integration architecture, combined

with improvements in supporting capabilities around supply analytics, market analytics
and emerging technologies (e.g., AI, RPA), is incentivizing the expanded use of integrated
suites (Fig. 6). While procurement technologies that enable source-to-contract and
purchase-to-pay processes have evolved separately, integrated suites provide a basis
for improving decision-making by making it possible to add capabilities applicable to the
wider source-to-pay process. This can happen either by integrating different suites or by
providing all source-to-pay functionality in a single solution suite.

© 2018 The Hackett Group, Inc.; All Rights Reserved. | 6000210 Procurement Executive Insight I The Hackett Group I 5
 FIG. 6 Integrated suites and supporting technologies (illustrative)

Core source-to-pay infrastructure Support tools

Market intelligence/
Supplier portal/network
research

Supplier information/performance/risk management E-invoicing Expense Reporting and analytical

(Lifecycle management) management
E-procurement Supplier discovery/
E-payables/
Spot-buy marketplaces
Contract/ Purchase SCF
E-catalogs
E-sourcing compliance order system P-card Cognitive/AI/
management Services Chat bots/blockchain
procurement Self-service

Partner systems
Spend analysis

Product lifecycle mgmt.

MDM
(master data management) Supplier Item Contract Order BOM*
Supply chain

* Bill of materials

CORE UPSTREAM CORE DOWNSTREAM SUPPORTING

(SOURCE-TO-CONTRACT) (PURCHASE-TO-PAY) TECHNOLOGIES
Source: The Hackett Group

Benefits of Integrated Suites for Upstream Procurement

Based on improvements made using cloud-based technology, upstream procurement
is benefiting today from the integrated suite approach. To better understand the value
drivers of integrated suite technology, The Hackett Group’s Integrated Suite vs. Best of
Breed study looked at the benefits most frequently claimed by respondents.

Over 50% of the respondents credit integrated suites with helping them improve spend
under management/influence (71%), along with increased sourcing productivity (68%),
process efficiency across spend categories (62%), improved contract compliance (59%),
improved third-party management (57%) and integrated master data across systems
(53%) (Fig. 7). Moreover, respondents using only one provider for source-to-contract
achieved an average of 22% improvement in efficiency in sourcing execution process
cycle time.

FIG. 7 Benefits of using a single provider for source-to-pay processes

Percentage of organizations

Improved spend under management 50% 21% 71%

Increased sourcing productivity 54% 14% 69%

Process efficiency across spend categories 51% 11% 63%

Improved contract compliance 47% 15% 62%

Improved supplier selection/third-party management 48% 9% 58%

Integrated master data across systems 41% 12% 53%

Managing complexity of supplier selection/qualification 43% 9% 51%

Better pricing and forecasting 38% 9% 47%

AGREE STRONGLY AGREE

Source: Integrated Suite vs. Best of Breed study, The Hackett Group, 2018

© 2018 The Hackett Group, Inc.; All Rights Reserved. | 6000210 Procurement Executive Insight I The Hackett Group I 6
 Current State of Integrated Suites
To better understand the strategy and use of integrated upstream suites, we asked how
procurement organizations are addressing integrated suites in their broader technology
strategy. While integrated suite providers offer several solutions with a common user
interface and solution platform, not all technologies provided in the solution suite are
used (Fig. 8).

FIG. 8 Upstream solution areas by approach

E-sourcing (event management, auctions,

category management, optimization) 49% 15% 23% 87%

Contract lifecycle mgmt. (repository, authoring,

compliance management) 33% 13% 43% 89%

Supplier information management (SIM) 21% 48% 12% 81%

Supply analytics (market, supplier,

category intelligence) 19% 7% 56% 82%

Supplier performance and risk management 18% 32% 32% 82%

Spend analytics 18% 28% 42% 88%

Internal scorecards, dashboards and

performance management 10% 23% 49% 82%

Supply master data management

(supplier, item, catalog, contract) 4% 57% 17% 78%

PART OF SOURCE-TO-CONTRACT ERP STANDALONE

SUITE

Source: Integrated Suites vs. Best-of-Breed, The Hackett Group, 2018

When organizations choose not to use all the solutions in a suite, it may be due to
alternative options with better functionality or the lack of mandate to use one solution
for every process area. Or, the integrated suite provider may have given the organization
a new module, e.g., supplier management or contract management, at no cost as a
marketing hook. This is possibly why 49% of e-sourcing solutions in use are part of
an upstream suite. This exceeds contract lifecycle management (CLM), where a large
percentage of solutions are standalone. Since CLM may cover both buy-side and sell-side
contracts as part of an enterprise solution, it also has one of highest rates of usage as a
standalone solution.5 Spend analysis and supply analysis, also widely used in standalone
configurations, are often part of wider enterprise deployments for business intelligence
(BI). Furthermore, data-intensive areas related to supplier information and supply-master
data management frequently use ERP as the MDM backbone.

User Perspective on Integrated Suites

In an increasingly competitive global marketplace, procurement organizations face
more pressure to identify new sources of savings, ensure compliance and mitigate risk.
To help, sourcing and procurement professionals are looking for sourcing technology
that goes beyond traditional e-sourcing capabilities. They want a unified, end-to-end
technology suite that incorporates fresh, forward-looking UI/UX approaches that
extend into wider source-to-contract areas for improving supplier discovery or contract
compliance. As more technology moves to the cloud, an integrated suite strategy lets
organizations take advantage of the latest capabilities and enhancements in ease of use,
integration and technology innovation.6

5
Buy-side contracts are created as part of supply management or source-to-pay activities. Sell-side contracts
are created as part of revenue management or order-to-cash activities.
6
Key Issues study, The Hackett Group, 2018.

© 2018 The Hackett Group, Inc.; All Rights Reserved. | 6000210 Procurement Executive Insight I The Hackett Group I 7
 However, integrated suites should be considered within the broader context of how
the business will be affected by the transformation associated with the technology
(Fig. 9). Procurement organizations are rightly wary about how well new source-to-pay
technology will accommodate digital transformation requirements. Further, 60% have
doubts about whether they will be able to seamlessly integrate these suites with the
company’s ERP. While concerns over ERP integrations exist, integrated suites still offer
more potential for innovation than traditional ERP solutions.

FIG. 9 Procurement organizations’ perspectives on source-to-pay suite technology

Percentage of organizations

Technology is much more than simply source-to-pay 52% 33% 85%

or source-to-settle automation

Even if we have a single spend suite tool,

we still need to integrate to the ERP 52% 8% 60%
and that doesn’t work as well as expected
Spend suites are still too slow to innovate,
ERP being even slower 35% 18% 53%

AGREE STRONGLY AGREE

Source: Integrated Suite vs. Best of Breed study, The Hackett Group, 2018

Conclusion and Recommendations

Our experience with clients and technology providers has uncovered success stories
but also failures from moving too fast to adopt new procurement platforms. Overall,
the advantages of moving ahead over holding back include having a single provider and
potential reductions in the cost of maintaining and managing the technology. Particularly as
it relates to cloud solutions, organizations are relieved of the need to make costly updates
as new versions become available. However, if the solution chosen does not match
procurement’s requirements, functionality may be restricted. For source-to-contract, this
may limit sourcing optimization potential; further contract management functionality for
authoring or managing deeper industry/compliance requirements may suffer.

As procurement organizations consider replacing their existing systems with newer,

cloud-based platforms (as part of their functional digital transformation), they must
decide how much functionality can be consolidated safely and effectively onto fewer
platforms, or even a single platform. These decisions need to be made within the wider
context of the enterprise’s overall digital transformation goals. Procurement must also
consider the strength of its working relationship with the IT organization when it comes
to integrating new technologies.

Related Hackett Group Research

Procurement Value: Moving Beyond Price Savings Toward Strategic Value Recognition,
February 2018

The CPO Agenda in 2018: Expanding Procurement’s Influence Through Change and
Innovation, January 2018

Six Critical Skills for Procurement to Succeed in a Digital World, September 2017

Digital Transformation Reduces Strategic Sourcing Costs and Cycle Times by 30%,
April 2017

© 2018 The Hackett Group, Inc.; All Rights Reserved. | 6000210 Procurement Executive Insight I The Hackett Group I 8
 The Hackett Group (NASDAQ: HCKT) is
an intellectual property-based strategic
About the Advisors consultancy and leading enterprise
benchmarking and best practices digital
Constantine Limberakis transformation firm to global companies,
Senior Research Director, Procurement Executive Advisory Program offering digital transformation including
robotic process automation and enterprise
In his current role, Mr. Limberakis leads the development of intellectual cloud application implementation. Services
property and research relating to procurement and supply chain. He has include business transformation, enterprise
over 15 years of experience in supply management, having worked in a analytics, working capital management
variety of consulting, product development and market research jobs. and global business services. The Hackett
Mr. Limberakis was recognized by Supply & Demand Chain Executive Group also provides dedicated expertise
magazine as one of its “Pros to Know” in 2013 and 2015. Areas of in business strategy, operations, finance,
procurement-related expertise include strategic sourcing, contract management and human capital management, strategic
supplier management. sourcing, procurement and information
technology, including its award-winning
Oracle and SAP practices.
Kurt Albertson
Principal & North American Procurement Advisory Practice Leader The Hackett Group has completed more
than 15,000 benchmarking studies with
In his current role, Mr. Albertson advises leaders of Global 1000 major corporations and government
organizations on procurement and purchase-to-pay strategy, process, agencies, including 97% of the Dow Jones
technology and organizational issues, conducts research to promote Industrials, 89% of the Fortune 100, 87%
thought leadership, and leads client events promoting world-class of the DAX 30 and 59% of the FTSE 100.
performances, best practices and peer-to-peer learning. He offers a blend These studies drive its Best Practice
of consulting and industry experience, having served a wide variety of Intelligence Center™ which includes the
clients across many industries. firm’s benchmarking metrics, best practices
repository and best practice configuration
guides and process flows, which enable
Jeff Gibbons The Hackett Group’s clients and partners to
Principal, Strategy & Operations Practice achieve world-class performance.

Mr. Gibbons has nearly 15 years of consulting experience, during which

he has specialized in helping clients identify and implement measurable
operational improvements. He has led engagements in procurement
transformation, business process reengineering, e-procurement tool
selection and implementation, organizational design, spend analytics,
supplier relationship management and strategic sourcing.
Email: info@thehackettgroup.com
www.thehackettgroup.com

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This publication has been prepared for general guidance on the matters addressed herein. It does not constitute professional advice.
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