11 Jul 2011 Can purchase to pay vendors really add value across the full spectrum?
There are few that would disagree that Ariba sits firmly amongst the best in class procurement vendors. Its heritage goes back to the pioneering days of e-procurement and it has continued to innovate successfully ever since, diversifying its portfolio of solutions across the P2P spectrum. But while its procurement credentials are impeccable – the first P – how credible is Ariba at addressing the second P at the payment end of the spectrum?
Modern day P2P crawled from the muddy swamps of procurement in the 1990s. There was always a purchase to pay process of course but the term didn’t become standard parlance until the standalone procurement tools became more closely integrated with ERP applications. The emergence of tools like Ariba and the development of supplier networks transformed the purchasing process in many industries. The ERP vendors struggled to keep up. Token user interface adjustments were made to their clunky and over complex purchasing modules allowing Ariba to establish a foothold that they retain to this day.
Today, Ariba is one of a few best in class e-invoice providers too but does that make it an effective one stop shop as a purchase to pay vendor? Well, despite the fact that Ariba has a few payables tricks up its sleeve, if you ask AP professionals what they would choose as a P2P solution, Ariba probably isn’t even on the radar.
The problem is that, viewed from the purchasing side of the fence, AP looks straightforward, even trivial. The reality is that it’s complex – very complex. There’s more to the second P than e-invoicing and dynamic discounting and supply chain finance can be a minefield. GRNI may be off the purchasing agenda but it’s a key measure of P2P health for the finance team.
I’m not picking on Ariba here. Ariba probably has the strongest claim – outside of the ERP vendors – to offer a true end-to-end purchase to pay solution – or “source to settle” as they would call it – but it’s not a P2P solution – and it shouldn’t try to be. Payables and the associated accounting and reporting processes operate deep within the world of general and sub-ledgers, accruals and journals, amortization and depreciation. It’s as alien to purchasing people as a Kraljic matrix is to an accountant.
Joining up all of the business process from purchasing through to payment and accounting requires a very diverse skill set and today at least, there’s no such thing as a purchase to pay solution.