Advantages of Separating Procurement and Spend Management Platforms

My career in software started at the birth of the eProcurement industry, going from paper catalogs and invoices, faxes, emails, and telephone calls to web-accessible platforms to manage the entire procurement process from sourcing to buying. It was revolutionary then and is now a fundamental part of the tech stack in most larger companies. Unfortunately, many SMBs and mid-market companies missed out on the wave of innovation because eprocurement vendors focused on enterprise businesses. Not long after the eProcurement wave, employee expense management (now called spend management) went digital, though solutions for companies of all sizes entered the market and were successful.

Over the last ten years, due to the highly competitive spend management space, more so than eProcurement, spend management platforms have added procurement features to attract more customers. Additionally, integrating procurement and spend management platforms has been a common approach for businesses seeking to streamline their purchasing and financial management processes.

However, while procurement and spend management generally roll up to the CFO, they are very different parts of the organization and value chain. I have selected and used several combined platforms and am typically disappointed. Recent discussions among industry professionals have highlighted several compelling reasons why businesses might benefit from keeping procurement platforms separate from spend management platforms. This article explores these reasons, focusing on the advantages of specialization, enhanced security, and improved scalability and customization.

Specialization Leads to Efficiency

Procurement platforms are designed to handle the complexities of sourcing, negotiating, and purchasing goods and services. They specialize in supplier management, purchase order processing, and contract management. On the other hand, spend management platforms focus on tracking and analyzing company spending, ensuring compliance with budgets, and identifying savings opportunities.

By separating these platforms, businesses can benefit from solutions tailored to each process's specific needs. Specialized platforms often offer more advanced features and functionalities than integrated systems. This can lead to greater efficiency, as each platform can be optimized for its respective tasks, allowing for a more focused and effective approach to procurement and spend management.?

Enhanced Security and Compliance

Keeping procurement and spend management platforms separate can also enhance security and compliance. Different data types are processed and stored on these platforms, each with its regulatory requirements. For instance, procurement platforms may handle sensitive supplier information and contracts, while spend management platforms deal with financial data and employee expenses.

Separate platforms allow for customized security measures tailored to each platform's specific types of data and compliance requirements. This reduces the risk of data breaches and ensures businesses can meet regulatory standards more effectively. Additionally, in a security incident, the impact can be contained to one platform, minimizing the overall risk to the business.

Scalability and Customization

Businesses grow and change over time, and their software needs evolve accordingly. A one-size-fits-all approach to procurement and spend management can become limiting. Separate platforms offer greater scalability, as businesses can upgrade or change one platform without impacting the other. This flexibility allows companies to adapt quickly to changing market conditions and business needs.

Moreover, separate platforms can be customized to fit a business's unique processes and workflows. Customization can lead to improved user adoption and more efficient operations as the software closely aligns with the company's operations. Integrated platforms, by contrast, may offer less flexibility in this regard, as changes to one area could inadvertently affect other processes.

Conclusion

While integrated procurement and spend management platforms may offer convenience, there are significant benefits to keeping these systems separate. Specialization, enhanced security, and greater scalability and customization are vital advantages leading to more efficient, secure, and flexible operations. Businesses should carefully consider their specific needs and the potential benefits of separate platforms when deciding their procurement and spend management software strategies.

Here are some additional resources:

1. Bain & Company: Discusses the strategic role of digital procurement solutions, highlighting how they can improve efficiency and contribute to a company's innovation goals. This insight into digital procurement underscores the complexity and strategic importance of having specialized tools that can adapt to such innovative processes (Bain).
2. Sievo: Explains the importance of spend management, especially in responding to supply chain disruptions and economic uncertainties. It highlights how crucial spend management is for maintaining resilience and competitiveness, which can be better managed with dedicated tools designed for in-depth spend analysis and strategic decision-making (Sievo | Procurement Analytics Software).
3. Order.co: Details the categorization of spending and the importance of a strategic spend management approach to control costs and improve procurement processes. This source emphasizes how a specialized spend management system can help address various types of spend and enhance overall procurement efficiency (Order.co).
4. Procurement Magazine: Offers insights into the benefits of spend management solutions, such as enhanced risk management, better supplier negotiations, and cost reduction levers. It advocates for the proactive aspects of spend management in shaping an organization's procurement strategy (Home of Procurement & Supply Chain News).