hype cycle for procurement 2 217670

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G00217670

Hype Cycle for Procurement, 2011Published: 14 November 2011

Analyst(s): Deborah R Wilson

Procurement spans a rich and diverse range of activities. The variety of toolsavailable that supports and enables procurement activities continues toexpand 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, aredelivering step changes in procurement process productivity and effectiveness.

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Innovation continues in procurement technology, as evidenced by the significant number ofsolution types on the initial slope before the Peak of Inflated Expectations. Some of the mostpromising newer technologies include supply base management, multienterprise businessprocess platforms and social collaboration tools.

An increasing number of procurement applications, including strategic sourcing applicationsand Web-to-print solutions, have entered the Plateau of Productivity as they stabilize, matureand gain market traction. However, many technology solution types are first-generation orsecond-generation applications subject to evolving requirements, and so will have gaps infunctionality.

With a few notable exceptions (such as SAP and Oracle), specialty vendors dominate theprocurement solutions market.

The Hype Cycle

The 2011 Procurement Hype Cycle, an update of our 2009 research, reveals a market thatcontinues to offer a rich and diverse set of solutions to support the various processes and activitiesrelated to procurement. We are now roughly midway through what is shaping up to be a 25-yearevolution that is fundamentally changing the way procurement operates. When the evolution iscomplete, procurement professionals across industries, geographies and organization sizes willhave most of the capabilities discussed in this research as a part of their standard applicationportfolio.

Specialty vendors have been the primary drivers of innovation in this market, although some ERPvendors (including SAP and Oracle) have reasonable to very competitive offerings in severalprocurement technologies. The market continues to be geographically fragmented, because ofdifferences in regulations and the make-up of participating supplier communities. Demand forenterprise-level solutions that support shared services is pushing the market toward an inevitableconsolidation, and to global networks.

Notable trends illustrated in this Hype Cycle include:

Innovation: Technology Triggers, such as the improved graphics renderings on mobile devicesand the growing popularity of social websites like Facebook, are likely to facilitate usefulfeatures for procurement solutions, and thus appear early on the Hype Cycle.

Hype: Vendor risk management solutions are the most overhyped offering as buyingorganizations 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 demandwith sometimes scarcely credible claims of how their solutions can help.

Unforeseen barriers to adoption: Trying to leverage the various modes for suppliercollaboration 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 boththe supplier portal and procurement network being moved backward from the Slope of

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Enlightenment to before the Trough of Disillusionment. We also lengthened the anticipated timeto mainstream adoption for these technologies.

Maturing solutions: Meanwhile, the movement of key solutions such as e-procurement andstrategic sourcing applications to at or near the Slope of Enlightenment means thatorganizations have an increasing number of mature solution types to choose from to supportprocurement activities.

Since our last Hype Cycle for Procurement, some technologies have progressed along the adoptioncurve 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 versusstatement-of-work-based agreements) are highly differentiated in terms of process steps andprocess 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' preferencefor more-mature collaboration offerings, such as procurement networks and the complexity ofthe ME-BPPs.

Master data management (MDM) of purchased parts and supplier data inched ahead as difficulteconomic conditions stifled platform architecture-level investments. This issue also incited us todelay the expected time to mainstream adoption for MDM of supplier data.

Procure-to-pay solutions remained stuck near the Peak of Inflated Expectations as buyersdemand and vendors market complete solutions; however, the reality is that buyers purchasescanning and e-invoicing network services, rather than support requisition through payment viaa single tool.

Contract life cycle management (CLM) solutions made slow progress, because of the lack ofhard-dollar ROI, an issue in strained economic times. Also, recent CLM clients have tended tofocus on implementing just the basic functionality, which means vendors don't get the feedbackthey need to hone full solutions.

We lengthened the expected time to mainstream adoption for spending analysis, becausegetting good results is ending up to be more challenging than initially thought (see "SpendAnalysis Best Practices").

E-procurement and travel and expense (TEM) solutions inched toward full maturity as theyentered the mainstream market.

Fast-moving technologies include:

Web-to-print applications, which reached maturity when successfully positioned as a solutionfor printers, rather than for buying organizations.

Supply base management solutions vaulted up the initial slope toward the Peak of InflatedExpectations as many strategic sourcing suite vendors realized that RFI functionality could bepositioned as supplier information management.




Contingent workforce management solutions flew from the Trough of Disillusionment to theSlope of Enlightenment, driven by organizations' use of temporary workers instead ofpermanent employees to reduce the risk of excess head count in these economicallychallenging times.

There were also several changes in the composition of procurement technology profiles coveredsince our 2009 research.

New Profiles:

Telecom expense management was added as a result of procurement having greaterinvolvement in telecom category management. Evidence of this trend is Emptoris' acquisition ofRivermine in January 2011.

Vendor risk management is a newer technology aimed specifically at IT vendor riskmanagement. Vendor risk management can be classified as a special-purpose supply basemanagement solution.

Social procurement was added as a brand new technology for adding Facebook-likecapabilities to procurement solutions.

Mobile procurement applications is another new technology and a capability recently beingoffered by some procurement solution vendors.

Procurement e-catalog management solutions were added to highlight an option to supplierportals 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 othersolutions, such as e-procurement and contingent workforce management, rather than a viablestand-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 Plateauof Productivity and are no longer listed on the Hype Cycle.

Other Changes:

Procurement business process outsourcing (BPO) has been split into indirect procurement BPOand source-to-pay BPO, because the characteristics of the offerings are differentiated.

Enterprise contract management has been renamed CLM, the more broadly accepted name inthe market.

Services e-procurement is renamed services procurement to reflect the most common name inthe market.




Global data synchronization is renamed information exchanges and global data synchronizationto 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 toStructure Your Procurement Applications Portfolio."




Figure 1. Hype Cycle for Procurement, 2011

Technology Trigger

Peak ofInflated

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 yearsobsoletebefore plateau

As of November 2011

Services ProcurementSource-to-Pay BPO

MDM of Purchased Parts

MDM of Supplier Data

Multienterprise Business ProcessPlatform

Supply Base Management

E-InvoicingIndirect-Procurement BPOBusiness Process Networks

Procure-to-PaySolutions

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 SynchronizationProcurement E-Catalog Management Solutions

E-Procurement

SaaS Procurement ApplicationsTelecom Expense Management

Travel Expense Management

Social Procurement Tools

Mobile ProcurementApplications

Procurement Networks

Source: Gartner (November 2011)




The Priority Matrix

All organizations buy goods and services to support operations. Technologies that enableprocurement to improve productivity and effectiveness can, therefore, deliver significant benefits interms of cost savings and process improvements.

The procurement technologies that deliver significant benefits are those that can reliably support allor most types of spending. Moderate-benefit technologies are solutions that support a particularcategory of spending or a single mode for supplier collaboration, are too immature at this time todeliver 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 potentiallyimportant contribution to the organization, procurement does not by itself enable a business todramatically alter its overall business proposition.

The time-to-mainstream adoption of the various technologies in the procurement solutions marketis well-distributed during the next 10 years. Although we do expect continued innovation in thismarket through Technology Triggers and improved offerings, it's likely that, during the next five to10 years, many of the procurement solutions in this Hype Cycle will be as commonly deployed asaccounts 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

Sourcing Optimization

Spending Analysis

Strategic Sourcing Suites

Multienterprise Business Process Platform

Procurement Networks


moderate Travel Expense Management

Business Process Networks

Contingent Workforce Management

Online Supplier Directories

Procurement E-Catalog Management Solutions

Source-to-Settle Solutions

Supplier Portals

Vendor Risk Management

Indirect-Procurement BPO

Information Exchanges and Global Data Synchronization


Mobile Procurement Applications

Procure-to-Pay Solutions


Source-to-Pay BPO

low

As of November 2011

Source: Gartner (November 2011)




Off the Hype Cycle

Three procurement technologies that were listed in the 2009 Procurement Hype Cycle are not listedon 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-hostedInternet site that provides product/service catalog content, customer-specific pricing, account-level reporting, support for multiple users and customer branding. Secure Web stores are mostoften 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-Commercesolution 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 establishsources of supply for direct materials, indirect materials and services through online RFIs, RFPsand reverse auctions. These applications also help buyers compare and evaluate the resultingbids, 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 sometimesrefer to as print e-procurement) are a specialized class of e-commerce solutions that supportthe unique and complex specification development and RFP process associated with buyingprinted materials and services. This technology is used by printing companies involved withB2B and retail consumer (business-to-consumer [B2C]) sales. Vendors include EFI's DigitalStoreFront and Bitstream.

Four procurement technologies have been fully mature for some time and, therefore, have notappeared on recent Hype Cycles:

Purchasing applications: the traditional purchasing module of an ERP or financial system thatcreates purchase orders, blanket orders and change orders. Purchasing applications alsogenerally enable receiving. For communicating orders to suppliers, purchasing applicationstypically offer hard-copy printouts, automatic email and/or autofax. Virtually all ERP andfinancial suite vendors include a purchasing application in their offerings.

Procurement cards: special-purpose credit cards that are issued to individuals to makepurchases on behalf of the organization (see "The Role of Procurement Cards in EIPP" and"Turbo- Charge Procurement Value-Add With Consumption Management" [Note: Thisdocument has been archived; some of its content may not reflect current conditions.]). Mostmajor banks offer procurement card programs.

E-notification solutions: applications that allow public-sector organizations to publicly postopportunities for tender (bid) on a central website. The purpose of the technology is to create afair 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. Functionalityincludes building acquisition plans, obtaining and documenting plan approvals, budget




encumbrance, contract assembly, bid solicitation, award documentation, and change ordermanagement. 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 ofprocurement solution users, it has become clear that some social networking features could beuseful in procurement processes. Social procurement tools are procurement application featuresthat 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" thatprovide a chronological listing of events related to a particular topic. Facebook-like walls canprovide a useful place in a sourcing suite for a virtual team to document the activities and teammember comments associated with a particular sourcing project. Another way social functionalitycan 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 procurementapplications, rather than as stand-alone solutions, because they leverage the documents and datain 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 inefficientto replicate and maintain these project artifacts elsewhere.

Position and Adoption Speed Justification: Procurement technology vendors will continue tofocus primarily on stabilizing customer requirements and refining the functionality of the solutionsthat help organizations accomplish such tasks as placing orders and managing contracts. Becauseof this focus and the moderate value that social features offer in procurement, we expect themovement of this technology along the Hype Cycle to be relatively slow.

User Advice: Organizations should look to their procurement solution vendors for social technologyto enhance the procurement experience for casual users and professionals. Expect most solutionvendors to eventually add such capabilities as team spaces, extended user profiles and simpleratings to their procurement suites.

Business Impact: Social procurement tools promise the benefit of helping virtual teams get toknow each other better and work more efficiently. The reasonable hope of this technology is thatgreater familiarity and easier access to what's going on will improve the efficiency and effectivenessof these virtual teams. Social features such as user ratings can improve procurement effectivenessby 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 devicessuch as the iPhone, BlackBerry, Droid or iPad. These applications can use HTML5 applications thatsupport multiple mobile devices, or they could be native applications for a specific device, such asiOS solutions for Apple products.

Position and Adoption Speed Justification: Mobile devices are playing an increasingly significantrole 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 forprocurement solutions, and for e-procurement applications in particular, by enabling managers toreview and approve requisitions through email. Seventy-one percent of the 32 vendors profiled inour recent report "E-Procurement Market and Vendor Landscape" said that approvals can be donedirectly 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. Forexample, in the same study, only 28% of the vendors said they currently have a native applicationfor a mobile device, and telecom expense management solution vendors have been slow to launchmobile clients.

Gartner expects native mobile applications for procurement to progress steadily along the HypeCycle curve because user demand for native applications is strong, and providing elegant nativePDA clients can provide meaningful differentiation. Advances will occur in waves. First-generationsolutions 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 locationcapabilities. 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 ofProductivity, because in the next few years mobile devices may evolve to the point where they areno longer distinct offerings from the PC.

User Advice: Procurement solution users tend to be heavy users of mobile technologies, androbust mobile procurement applications may improve user experience and adoption rates. Chooseprocurement solution vendors that acknowledge this trend, and that make appropriate investmentsin native or HTML5 mobile procurement applications.




Business Impact: Procurement applications are often viewed as clunky, difficult-to-use solutionsthat sometimes impede, rather than enhance, productivity. The rich and compelling graphics anduser experience offered by mobile applications have the potential to make interactions withenterprise applications more appealing and impactful, which may improve user adoption. Mobileapplications 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 therequisitioning and purchase of all services, including legal, consulting, construction, contingentworker services and maintenance payments. Services procurement solutions are often delivered asan element of a broader e-procurement suite.

Position and Adoption Speed Justification: Most specialized services procurement solutions inthe market today were originally created eight to 10 years ago, but have attracted only a few dozenclients. The problem is that services are not a homogeneous spend type in terms of requisition andpayment profile. Services can be payable by the hour, milestone or annual fee; requisitions mustoften include special information, such as work instructions or a job description; and actual pricesfor services rendered often vary significantly from estimated costs. These characteristics have madeit 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 haveadded 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, haveprovided 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 procurementsolution has been marginalized and as a separate solution and no longer attracts many newcustomers.

User Advice: Services procurement solutions have not proved robust enough to deliver realbenefits to organizations' buying services. To improve and support services procurementprocesses, look to e-procurement, purchasing and contingent workforce solutions to deliver results.




Business Impact: Specialty services procurement solutions are struggling to deliver ROI. Wepredict that vendors with services procurement solutions will eventually deliver servicesprocurement functionality as a feature of other applications, such as e-procurement and contingentworkforce 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 theprovision of the full end-to-end outsourced service of sourcing of direct or indirect goods, theadministration of purchasing services, and accounts payable services. In BPO, the focus for serviceofferings is shifting from departmental boundaries toward end-to-end processes. The end-to-endprocess of S2P BPO, therefore, incorporates sourcing goods and services, procuring them, andproviding accounts payable services that prepare the invoice for payment.

The word "procurement" has assumed a new dual meaning. Although it can still mean the entirepurchasing department where goods and services are bought, BPO providers are increasingly usingit as a term for which procurement is defined as the activity that follows sourcing of actually buyinggoods 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 asubcomponent of the procurement department. Therefore, as BPO providers increase their scopeof 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." Thesourcing definition is for strategic and tactical buying, but the word procurement now typicallymeans only the administration related to the purchase order.

Position and Adoption Speed Justification: Sourcing and procurement BPO services have hadrelatively 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 mostlybeen outsourced. Direct goods and materials are the sourced items in the supply chain, and theseare rarely outsourced. However, the administration of the accounts payable may already beoutsourced because the finance and accounting (F&A) aspect of this activity has been outsourcedto 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. Becausethe 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 andoffshore delivery centers.

Clearly evaluate what strengths the providers of this service have. The different backgrounds, eitherproviders of F&A BPO services or others from a sourcing specialism both have gaps in theirofferings from an end-to-end perspective. Providers of F&A BPO have spent the past few yearsslowly providing more procurement support, especially the services of procurement datamanagement and indirect sourcing services. This is exemplified by the recent acquisition of Ariba'ssourcing services business by Accenture, Capgemini's acquisition of IBX, and IBM's acquisition ofKey MRO. Sourcing specialists are also extending consultancy services to longer-term outsourcingrelationships and partnering with F&A BPO providers, as seen with ICG Commerce's partnershipwith Genpact.

Business Impact: Many providers have specialized in sourcing and procurement outsourcingservices with a range of business models, from services that are heavily consultancy-based tobusiness marketplaces. The clearly delineated lines that have long separated sourcing/procurementfrom accounts payable outsourcing have rapidly blurred in a logical if less-mature market ofmultidomain S2P BPO. Few businesses have a clear view of their end-to-end process, and BPOcan be a way to support attaining this visibility and control. This would allow organizations toaddress the issue that they are not designed or organized to optimally manage the end-to-endprocess, from sourcing and procurement, through to accounts payable. Typically, no single buyer orservice owner is apparent; therefore, engaging a service provider for the whole service helps clarifywhat steps are really necessary in the end-to-end process.



Maturity: Emerging

Sample Vendors: Accenture; Capgemini; Genpact; HP; IBM; ICG Commerce; Infosys; TataConsultancy 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-ServiceOrganization 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 intotwo pieces: MDM of purchased parts and MDM of supplier data. This reflects the fact that the usecases, 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 andmanaging a system of record founded on a database, typically by the ERP system, procurement orPLM 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 andfabricated components and subassemblies, facilitates an organization's ability to leverage partsnumbers across product lines, inventory assets, distribution and service inventory, and it facilitatesparts reuse strategies in new product designs for economies of scale. These benefits are rarelysought together and are often only tackled opportunistically and separately. This helps explain whythis technology is both splintered from core MDM and also (the now-revised) slow to mature/adoptalong the MDM Hype Cycle.

MDM of purchased parts is a specialized case of MDM and is relevant to industries that maintainitem 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 publishand/or coordinate data across ERP solutions, product life cycle management applications,procurement, inventory, installation/service and other applications. Retailers and wholesalers usespecialized applications, often offered as a part of a merchandising or private-label sourcingsolution. (These are not covered here.) Most MDM of purchased parts solutions use third-partycontent to cleanse, normalize and validate descriptions.

Position and Adoption Speed Justification: Procurement is typically a center-led organization thatis closely tied to the local supply chain and accounting systems of the divisions, operating units orlocations, and is further disaggregated by many active decades of acquisition and divestiture. Thishas left most larger organizations with multiple item parts masters, which stifle the ability topromote reuse in design, substitute parts and source purchased parts by leveraging volume at theenterprise level. The economic downturn of the past few years has moved more companies to SKUrationalization exercises, which have forced the consolidation of products, parts numbers andinventory. This, in turn, forces them to look at what items are required for current products, sunsetproducts and new products. It requires more visibility for purchased parts in terms of new productdesign, where to buy, how to buy and from whom. Purchased parts MDM solutions facilitate thisprocess by establishing a means to coordinate design and leverage parts numbers, commoditytypes 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. MDMtechniques offer clearer and stronger return on investment (ROI), when applied to customer andproduct data. Because this use can grow top-line revenue, most MDM activity has focused therefirst. However, this has started to change with the SKU rationalization activities of the past fewyears. Governance issues related to who owns the purchased parts record (engineering, operationsor procurement) have been an obstacle, but this has subsided because of the economic importanceand benefit for organizations. MDM of purchased parts solutions can help organizations identifysimilar or like parts in other divisions or locations; improve working capital with substitute like orsimilar parts (use current inventory/avoid a purchase); consolidate multiple manufacturers' catalogparts numbers into one brand owner part; consolidate duplicate brand owner parts numbers andsupply contracts; and pinpoint opportunities for rationalization. The economies of scale andcollaborative visibility are the reasons to make MDM of purchased parts mandatory, and enablebottom-line contribution.

User Advice: This technology is applicable to organizations with:

Multiple divisions buying similar items and/or sharing common inventory across multiplelocations

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, butshould also expect to serve as early-stage adopters of this technology. Users should compare andcontrast a domain-specific effort like this versus the broader effort and greater value from amultidomain MDM program. Thus, you should include concrete plans in your project forcollaboration on like and similar purchased parts, and link these to internal parts numbers toimprove visibility in parts selection and inventory across the enterprise.

Business Impact: The business impact of MDM of purchased parts is significant whenorganizations consider its use for commodity-sourcing leverage and in SKU rationalization, andmoderate for current center-led organizations with multiple divisions or locations designing withand/or buying the same or similar parts. If there has been lots of M&A activity, then the value of thisprogram may increase due to the fragmented nature of the data. Organizations have started tounderstand that MDM of purchased parts can assist with working capital initiatives and suppliercollaboration activities. Once the vendors in this market connect the dots to SKU rationalizationactivities, working capital initiatives and supply chain partner collaboration, the products will gain indemand. However, the vendors in this market need to innovate to provide additional applicationfunctionality and services that connect supplier collaboration information to brand owner forecastsand 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 inwhich business and IT work together to ensure the uniformity, accuracy, stewardship, semanticconsistency 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/orvalidating 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 ofsupplier 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 organizationstackle MDM of product and customer data first. The worldwide economic recession of 2009 to 2010stymied 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 renewedinterested 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 awider, multidomain MDM strategy (for example, encompassing customer, product, employee,location, asset and financial master data). Begin an MDM of supplier data program by cleaning upcurrent files and implementing strong supplier master file governance and control policies. Explorespending 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 anERP implementation or an ERP consolidation project. This type of MDM program is most commonlyachieved with business consulting services, rather than purely an investment in technology.




MDM of supplier data is increasingly contemplated, however, to enhance the organization's abilityto analyze spending, to enforce compliance with contractual terms and conditions (such aspayment terms across multiple business units), and/or to maintain cleaned-up master data frombeing recorrupted. These use cases involve implementing a solution, but have proved somewhatproblematic for delivering business impact, because the expense of these systems often outweighthe benefits, and because the solutions available have not provided an effective means to keepever-changing supplier data up to date.

A newer technology is altering these dynamics. Supplier information management (SIM) is a newclass of applications that enables suppliers to maintain their own business data, as well as updatecontent such as equipment lists, insurance certificates and signed codes of conduct. Puttingsuppliers in charge of keeping their data up-to-date simultaneously reduces the burden of datamanagement on the buyer and keeps information current enough to be more useful. Some SIMvendors are building and/or leveraging shared databases and document repositories, so supplierscan update multiple customers at once, which can further reduce costs. Data collected andupdated in an SIM solution can be published to an MDM solution, or, in some cases, the SIMsolution can serve as an MDM solution. As a result of this development in the market, we areincreasing 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-levelconceptual model of a multistakeholder environment, where multiple businesses' operationalprocesses that model multienterprise business processes are governed. The ME-BPP is acombined set of shared IT and shared solutions and services that enables multienterprise processdesign, modeling, improvement, composition, execution and management. The business servicesrepository (BSR) portion of an ME-BPP exposes automated business functionality as reusablesoftware services to be used in complex multienterprise process compositions. This differs from aBPP, which focuses on governance of information and application assets for enterprise-centricbusiness processes.




When participating in an ME-BPP, the following technologies and assets will be governed in ashared fashion: B2B data and application integration technologies and a range of packagedbusiness application solutions, coupled with technology services related to (supply chain) visibility,business intelligence, analytics, performance management, workflow, business processmanagement technology, multienterprise master data management, multienterprise security andgovernance, supplier community management services and portals. A BSR will be used andimplemented in a shared environment, where reusable services are exposed to support compositionand integration.

An ME-BPP supports the consumption of packaged business processes as well as packagedintegration, along with the ability to design and implement custom integration and businessapplications for specific business processes. The delivery (or access) of an ME-BPP is always via anon-demand and software as a service model, so it lends itself to a cloud-based approach, thoughdoes not require it. An ME-BPP is not a technology, but is more a commitment by an organizationto govern the many tools, applications and data services it uses for all its B2B interactions withexternal parties, through a single lens, in order to rationalize and simplify the previously manymoving 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 technologyproviders: "Why do I have so many different vendors to support all my different interactions with mytrading community?" These users are looking to rationalize their investments into a fewer number ofmoving parts. The focus on the cloud in 2011, however, is not yet providing a new answer to thisquestion; 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 commercialrallying point and just the level of flexibility needed by organizations to make an ME-BPP more likelyand sustainable. Regardless, ME-BPP has emerged as a result of the inherent complexity ofimplementing complex multienterprise processes, and almost with exasperation users have soughta suitable approach to addressing the requirement. However, no single vendor supports a completeME-BPP, yet. Since 2009, however, numerous vendors have been emerging and/or evolving acrossmany fronts, toward the same general direction of an ME-BPP, perhaps oriented around atransaction type or business process category, industry or set of similar services. There are somebusiness process hubs (BPHs) and business process networks (BPNs) with a combination oftechnology and methodologies in varying stages of evolution (notably Ariba, E2open,iTradeNetwork, Perfect Commerce, Elemica, Hubwoo, GHX and e-Builder, which are convergingtoward an ME-BPP). More recently, the formation of CSBs (from some of the same providers, aswell as system integrators and other IT services organizations) seems to provide a more flexible wayfor 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) andothers on multienterprise business applications (BPHs). None has unified BPN and BPH technologywith metadata-driven process modeling and service-oriented architecture, and the sufficientcommunity management and performance management infrastructure needed to fully qualify assupporting the needs of an ME-BPP. Due to the poor economic climate, adoption of this technologyhas 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 andinvestment in long-term initiatives such as ME-BPP.

Users will have to continue to look opportunistically for ME-BPP-like offerings among the multitudeof BPHs, BPNs and CSBs offered in the market. The barriers that are slowing the adoption anddevelopment 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 (currentinvestment plans have a return on investment target that still has to be met). ME-BPPs are lesshyped (so far) than the enterprise "version," BPP, which matured as a discipline earlier, since it isolder in concept and pertinent to every enterprise. It is quite likely that the hype related to ME-BPPwill always be less than its enterprise-oriented version.

User Advice: To gain a good understanding of their multienterprise processes, clients should createa multienterprise process architecture that identifies needs for differentiating multienterpriseprocesses; needs for standardized, enterprise-oriented business processes would be governedinternally with a BPP, not via a shared ME-BPP. Business process analysts should focus ondesigning the differentiating multienterprise processes for change, and on working with their ownand partner IT organizations to implement the first iteration of such processes, including a strategyand plan for ongoing changes to keep them differentiating, or to move them gradually into the coreas competitors catch on and copy their approach. Users there might conclude that they need tosimplify their overall B2B complexity, but you won't be able to deploy an ME-BPP without thenecessary leadership, investment and organizational maturity to drive adoption of something asforward-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 andpart application infrastructure design concept, with methodologies to support a multistakeholder-governed infrastructure. An ME-BPP supports a business strategy enabled by technology thatinvolves communities of interest (business relationships), communities of trust, shared infrastructure(including integration as a service), and shared or multienterprise business applications. Develop amultienterprise 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 oneinfrastructure; incorporate your B2B integration strategy into your business application strategy, andestablish 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-partylogistics, distributed order fulfillment, procure to pay and multienterprise collaboration. In the longerterm, we expect to see more adoption across widespread deployed business processes, such asthose found in application domains, such as CRM, ERP, procurement, product life cyclemanagement 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 FromMultienterprise 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 procurementorganizations to proactively and effectively manage supplier performance, information and risk byproviding a means and a place to assemble, organize and leverage enterprise supplier data, such asperformance scorecards, capability summaries, risk assessments and credential documents. Datasources 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 andcredential 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, andcan 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 ideasprograms. The SBM application unites this information to create a single, enterprise record forsuppliers, and it enables organizations to track their responses to that data. For example, an SBMapplication will map risks to remediations and track action plans to address performance issues.SBM solutions are a superset of supplier information management (SIM), supplier performancemanagement (SPM), vendor risk management (VRM), and supplier risk model map and tracksolutions.

Position and Adoption Speed Justification: As a result of significant market growth last year, andbecause the hype surrounding these solutions has greatly increased, the SBM solution hasprogressed 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 beenacquired, because larger suite vendors do not want to be left behind in this hot market by newerbest-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 managementpoint solutions. These subtypes are rapidly converging in the market. Invest cautiously in thismarket segment; however, because requirements are still evolving, applications are new and thesolutions are likely to have gaps in functionality. Don't expect solutions to provide a completepicture 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 theirsuppliers and leverage their data to achieve a best-in-class supply base will significantly outperformorganizations that don't.



Maturity: Emerging

Sample Vendors: Aravo Solutions; Archer (EMC/RSA); Ariba; BravoSolution; Curtis Fitch; CVMSolutions; 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 VendorLandscape"

"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 ofknowledge (spanning business, regulations and IT) and involves a lot of complexity. A gooddefinition of e-invoicing is "the interchange and storage of legally valid invoices in electronic formatonly among trading partners." See "Cost Savings Finally Make the (European) E-InvoicingSteamroller Pick Up Speed" for more details.

The interchange does not use or require paper-based invoices. E-invoices have legal validity, andcan be used to prove compliance or as tax originals. In general, most considerations for e-invoicingapply 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, andexecute payment.




Both the seller and the buyer (or a third party on their behalf) must store the readable andauthentic invoice (this comes with a lot of added strong security) for a period of time, and mustmake 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, anda lot of the IT infrastructure that supports all that. Several studies and surveys are available on thecurrent 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; insome 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-addedtax in the EU" for all member states. A core theme of the directive was to promote the efficientcross-border creation, transmission, acceptance, storage and retrieval of invoices. To allow fortechnological differences among all member states, and to stay technology-neutral, the directiveenabled several ways of meeting conditions for e-invoicing. For example, the requirements toensure authenticity and integrity can be met either through advanced or qualified electronicsignatures, or through electronic data interchange (EDI) with contractual security measures.Unfortunately, this technological flexibility has led member states to adopt state-specific versions ofthe directive that have disparate requirements for meeting the functional objectives. Theserequirements, in turn, have led to more-stringent or less-stringent controls, depending on themember state. Several governments in Europe (and other governments around the world, especiallyin South America) mandate the use of e-invoicing for government agencies, and more are likely tofollow suit in the next year or two.

Many intricacies are associated with cross-country e-invoicing projects (supplier e-invoicing andgeneric e-invoicing projects with all business partners in one country are considerably easier). Thereare several axes of variance for e-invoicing requirements (internal and multienterprise businessprocesses, IT infrastructures, and law and security, to name a few), and they cause manydifferences from the seller's and the buyer's perspectives; frequently, for example, different lawsapply to buyers and to sellers. This is, by far, the most common source of difficulties in e-invoicingprojects, and is compounded by continuously evolving regulations and general requirements.Another complication is that most requirements, in practice, are not properly published by memberstates, 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 apaper invoice across Europe to be around 30. It also determined that, by using e-invoicing, an80% cost savings is possible. Confirming that data, initial case studies also indicate that e-invoicinghas been proved to reduce the cost of processing a single invoice to less than 7. E-invoicing offersa range of potential benefits, including improvements in accounts payable (AP) processes byreducing invoice processing time and minimizing manual intervention, thus leading to a reduction inoperating expenses. This fact alone has prompted some companies to start e-invoicing projects; itmakes 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 followingreasons in isolation is enough to warrant continued growth, but all of them together are driving andwill 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-invoicingsolutions; in particular, several banks are promoting e-invoicing in their strategies (especially inSpain, 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 asmore 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 deceleratingforce of the difficulties. However, many difficulties are associated with normative functions indifferent countries, so we do not expect e-invoicing to reach the Plateau of Productivity before twoto four years.

User Advice: Calculate your current average invoice processing cost, and confirm it with thebusiness. Focus your initial e-invoicing projects in countries where B2B and invoice exchange arealready happening and maturing, such as Scandinavia, Brazil, Mexico, Spain, Singapore, SouthKorea, Germany, Poland, France and the U.K. Be aware of the further constraints and limitationsbased 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, somake sure the solution you choose addresses internal and multienterprise business processes, ITinfrastructures, laws, and security, and that it's certified by tax auditors for as many countries aspossible, especially those where you have a steady flow of invoices to and from that connect withother service providers, certified e-invoice networks and banks.

Multicountry e-invoicing projects last years, so don't sell the benefits internally to your company tooquickly. In a large project, if you make 50% of your invoicing traffic electronic in two years, you'redoing 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-invoicerequirements 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 B2Binfrastructure, if possible, to leverage purchase order information for a higher match rate to theinvoice.

No matter what vertical or financial shape your company is in, start looking for e-invoicing projectsavings opportunities now. Don't hold out for regulations and interoperability to get better; you canreap good benefits from e-invoicing today.




Business Impact: Plan your e-invoicing projects according to how many invoices you can processautomatically in the countries the invoices will progressively touch; plan globally from the start, evenif you are starting to execute locally. The faster you build critical mass, the greater the difference toyour company's bottom line.

Current case studies indicate that you can quantify e-invoicing savings in many ways: the cost perinvoice, 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 forcompanies that have to deal with a large volume of invoices (more than 100 per day, inbound andoutbound) are significant (see "Supplier E-Invoicing Networks"), because of the economies of scaleobtained by aligning technical, business and compliance strategies.

Other benefits of e-invoicing, when implemented through e-invoicing networks or as part of abroader 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 thebuyer is improving its internal processes for handling invoices, and typically has to process a lot ofthem, 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 asimproved customer satisfaction, reduced administrative costs in credit collection, more-effectivecapital management and cash flow control (suppliers can see when invoices will be settled, so theycan forecast receipts more effectively), and, above all, lower customer churn. This would also applyto smaller senders, which would not have the e-invoicing volumes of the suppliers. However, smalland midsize companies are likely to have to send e-invoices to several networks, depending on thedemands 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 thatsuppliers and buying organizations alike can realize; this typically implies improved business




processes (with the associated organizational and change management challenges) and technologyadditions.



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 PickUp Speed"

"Electronic Invoice Presentment and Payment Vendor Landscape"

"Magic Quadrant for Integration Service Providers"

"Supplier E-Invoicing Networks"

Indirect-Procurement BPO

Analysis By: Cathy Tornbohm

Definition: Indirect-procurement business process outsourcing (BPO) is the provision by anexternal vendor of transaction processing support (including the underlying technology andassociated people) to manage the acquisition of goods and services (such as stationery, travel andstaff augmentation).

Position and Adoption Speed Justification: Fully outsourcing the management of indirectprocurement buying and administration activities (catalog management, vendor relationshipmanagement, strategic sourcing, and transaction processing) is still a relatively early-stage,immature market. The majority of outsourcing today is transactional support and buying of indirectgoods or services. If an organization does outsource procurement, not just transactional support, itis more likely to outsource indirect, rather than direct, spending, because direct support isconsidered too strategic to outsource.

A number of Tier 1, full-service BPO providers have entered this market, as have India-basedoutsourcers and specialist "pure play" (single-process) providers, but the market has been slow todevelop at rates experienced by other BPO areas (such as payroll and finance). However, it is beingaggressively pushed by vendors, especially those that are already performing accounts payablework 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 manyenterprises; 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 whyorganizations are turning to outsourcing, especially following this recession, to get process clarityand 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 increasinglybeing outsourced, particularly indirect goods and services (such as stationery and travel). But fewenterprises are comfortable with the notion of externalizing strategic and holistic responsibility fortheir procurement activities.

User Advice: Consider using indirect-procurement BPO tactically for small engagements that canbe increased in volume and scope as, and when, a provider proves its ability to deliver value andcost savings.

Business Impact: Indirect-procurement BPO is a supporting business process that, if managedwell, can streamline an organization's indirect spending; the impact will depend on how well theprocess 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 NewEntrants Flood the Market"

Business Process Networks

Analysis By: Benoit J. Lheureux

Definition: A business process network (BPN) is a process-specific instance of multienterpriseintegration among three or more companies (for example, a B2B community usually involving manycompanies). A BPN is not a category of IT vendor; it is a bundled IT solution or a type of B2B ITproject something that a wide range of IT vendors offers and a wide range of B2B communitiesimplements.

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 oftwo or more companies. A BPN doesn't execute the business process logic per se, becausesuch process execution occurs within the participating applications and business processmanagement (BPM) logic (and, at times, partially within a multienterprise application that isincluded in the B2B project). The multienterprise integration project can leverage B2B standardsor proprietary specifications. For example, to implement the order-to-cash process, acommunity might use industry-standard B2B specifications (such as EDI X12, RosettaNet orUBL) or, alternatively, a proprietary specification defined solely, for example, by a largemanufacturer or retailer.




A multienterprise community point of view The scope of a BPN can be one to many or manyto many. BPNs that are implemented only between a company and its private external businesspartners are one to many (for example, a high-tech manufacturer that implements theintegration tasks associated with a vendor-managed inventory process with its electroniccomponent suppliers). Many BPNs are implemented to support the interactions of a largenumber 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 useBPM technologies (see "Findings: Confusion Remains Regarding BPM Terminology"). BPNsuse business process management technologies (BPMTs), particularly when end-to-endbusiness process visibility is important to network participants, and when network participantswant 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 ofIT service providers, including providers of application hosting, IT outsourcing, cloud servicesbrokerage and software as a service (SaaS). Many offer extensive complementary services forparticipant onboarding, participant training and participant help desk.

Position and Adoption Speed Justification: Some BPNs, such as SWIFT, have been available fordecades. However, most bundled IT solutions and B2B projects for specific multiparty businessprocess 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 transactiondata" to the notion of "linking business processes," and the distinctions between these (such as theimplementation of process visibility tools and rule engines in BPNs to drive process improvement) isincreasingly 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 willrapidly proliferate. For example, traditional e-procurement BPNs are increasingly augmented bycloud computing (e.g., when SaaS functionality from providers such as NetSuite, salesforce.comand SugarCRM are integrated with e-commerce related BPNs by providers such as Hubspan andLiaison Technologies).

By virtue of outsourcing their SaaS functionality, IT users will be more predisposed to consumingintegration functionality in packaged form as BPNs, which will help drive the hype around these tothe Peak of Inflated Expectations in the next year or so. Next, we expect there will be a mild slip intothe 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 andprenetworked community point of view); (2) will not be flexible enough and cannot evolve fastenough to meet more rapidly changing business requirements if not implemented using modernapproaches, 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 supportsubstantially 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 implementingmultienterprise integration for a specific business process as an alternative to a custom, multipartybusiness 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 communitymembers have already been provisioned on the network will substantially reduce B2B integrationproject deployment time. BPNs with few of your community members on board will increasedeployment time and may require additional business partner onboarding fees.

When choosing a BPN, look for availability of prebuilt integration relevant to your multienterpriseprocess (e.g., if the process is order to cash, does your BPN provider offer prebuilt adapters andmaps to simplify and accelerate project deployment against the types of applications you are usingin that process?).

When available, consider industry standards (such as cXML, RosettaNet, SWIFT and UBL) as thebasis for BPNs, because these will accelerate time to production (versus coming up with newintegration standards from scratch) and are preferable to proprietary B2B specifications.

When evaluating BPNs, look for evidence that the solution or project leverages a metadata-drivendefinition of integration artifacts, including trading partner profiles, maps for translation, processmodels, business rules, etc. BPNs that are more metadata-driven are more likely to be easier tomodify when changes are required in complex, multiparty business processes.

Business Impact: Enterprises can implement multiparty business process integration projects withexternal business partners faster and for less money when a BPN is available, versus having todesign and implement a set of B2B standards and implement such projects from scratch. BPNs areavailable for automating supply chains, making electronic payments, exchanging productinformation, sharing foreign exchange calculations and linking a wide range of other multipartybusiness 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 t

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