Is SAP Ariba Still "King of the Hill"?

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Hi readers,

Wow… Those are 2 killer questions to start aren’t they? 😅

I don’t typically bring specific tech into the conversation but I had to make an exception… But don’t worry, I’m not planning on getting into a fight tonight…

Besides, this article has a bunch of charts and diagrams. Who goes to a fight with a PowerPoint presentation? Not me! (at least not intentionally…😵)

I just want to have a civil conversation about what procurement technology your team should be buying this year…

Onwards!

📰 In this week’s edition:

• 📋 5 procurement jobs that caught my eye

• 🏆 The Road to the ProcureTech Cup : Episode 20

• 🌙 Is SAP Ariba Still “King of the Hill”? Does it Matter?

Tap the poll at the bottom of this email after reading.
It helps me ensure I haven’t yet turned into a mad scientist…

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👀 In Case You Missed It…
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The Journey Continues…

This Friday Craft comes on the show to demo their Supply Chain Resilience platform.

Craft empowers businesses to strengthen their supplier networks and supply chains with comprehensive data and an advanced risk mitigation engine.

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MESH Works was on the show last Friday to demo their Source-to-Contract and Supplier Relationship Management capabilites.

Their database of direct manufacturers was impressive!

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Is SAP Ariba Still “King of the Hill”? Does it Matter?

For about a year now, I’ve been saying 3 things pretty consistently:

• The ProcureTech market is at an inflexion point. The “procurement technology answers” of yonder are no longer appropriate going forward (“Just implement a Source-to-Pay Suite and you’re good to go” 👍) → We’ve seen this demonstrated with the recent attention the Intake & Orchestration category has gotten.

• The ProcureTech market still has lots of room to grow. Procurement organizations are hungry for digital, value producing capabilities. Focused vendors who adopt an “abundance mindset” (those with a clear value proposition, who partner with others and have open architectures) are poised to win going forward.

• Procurement’s digital literacy & ability to execute on a digital roadmap is always the “long pole in the tent.” If we address this point, everyone in the ecosystem wins. Procurement generates more value for their business. ProcureTech firms get more sales and grow. I get more readers 😅

However, I always like keeping tabs on myself…

So this week, I set out to prove myself wrong for the 3 points above with publicly available data… There are 3 working hypotheses for this experiment:

1. Source-to-Pay Suites remain the gold standard; there is no inflexion point… Only unjustified buzz.

2. The ProcureTech market is at maturity. Innovation is over.

3. Procurement is more than capable of executing on digitalization initiatives.

Do you think I was able to prove my alter ego right? What are the implications for you as a digitally-minded procurement professional? Let’s find out…

Hypothesis #1

Source-to-Pay Suites Remain the Gold Standard

In 2023, the ProcureTech software market was estimated at $5.9 billion. Out of that sum, “the top 10 vendors commanded a significant 52.6% market share, with SAP leading at 25.4%”

If you look at the top 10, you have… Surprise, surprise… ERP and Source-to-Pay Suite vendors.

(So yes, it would seem that SAP Ariba is still “king of the hill” in ProcureTech by this specific metric…😅)

I suspect the “Other” part of the pie gained steam in 2024… I’ll anxiously be waiting for the 2024 reports to validate that hypothesis.

So, with this single data point, we could say hypothesis #1 confirmed! S2P is still the gold standard.

Hypothesis #2

The ProcureTech Market is at Maturity

In 2024, PWC released their Digital Procurement Survey results (n = 1000). In it, we learn that:

• The use of Source-to-Pay solutions is now the norm, with 94% of survey respondents reporting that they use such platforms.

• Only 5% of companies reported that they don't use any solutions. This percentage was halved from 2022 to 20244, for all types of companies.

Hypothesis #2 is confirmed! Everyone has all the ProcureTech they need!

Hypothesis #3

Procurement is more than capable of executing on digitalization initiatives.

Ok… This one was impossible to prove even with explicit confirmation bias… 😂

In Deloitte’s 2023 CPO Survey, 8 of the top 12 barriers to improvement in digitalization were “people” related (n = 350).

And when we go back to Jaggaer’s 2017 (n = 168) & 2019 (n =321) digital procurement studies, we see the same trends:

• “Only 32% [of organizations] have a digital transformation strategy; and even fewer report having the right resources and competencies in place today.”

• “The procurement profession is evenly split – almost 50-50 – between those who claim to be up to date on digital technology trends and those who think their knowledge falls short of what is required.”

Nobody really argues over this point so I’ll let it be… Hypothesis refuted… If your teams are not “digitally literate”, you don’t have great changes at success in digital transformation.

I guess that does it… I was wrong… Everyone has already implemented all the ProcureTech they need. All that’s left to do is for the remaining laggards to get a competent team, implement a S2P Suite and it’s game over… Right?

Hey Wait A Minute…

You didn’t think I was going to leave it there did you…?

Our first clue that something is very wrong is our conclusion for hypothesis #3…

If hypothesis #1 and #2 are correct, why are 8 of the top 12 barriers to digitalization improvement related to people? Why are digitalization projects constantly failing?

Well, we need to read the full reports and stop cherry picking our data!

Counter hypothesis #1 → The ProcureTech market is at an inflexion point

In PWC’s 2024 study, there’s a very interesting table…

1000 organizations surveyed report that only 40% of current processes are digitalized… 😯

But I thought Source-to-Pay Suites were the gold standard?!

If 94% of organizations are using S2P suites but these only cover 40% of procurement processes, that would mean there’s still a gap to fill!

I don’t think we will ever get to 100% (or even that this is desirable) but 40% sounds very low to me… We’re missing a few dozen percentages to reach market maturity.

A few other tidbits from the PWC report stuck with me as well:

• “Procurement departments set very ambitious digitalization objectives for 2027, with an average target of 70% digitalization.”

• “There was stagnation in the actual digitalization rate between 2022 and 2024.”

So… Let me get this straight…

1. Procurement has ambitious digitalization goals (because there is business value to unlock)

2. Has been unable to reach them with existing tech and skill levels for over a decade

3. But they will increase digitalization of current processes by 75% in 1 year? (going from 40% to 70% in 12 months)

4. With 94% of them having already deployed Source-to-Pay Suites?

5. By deploying… Source-to-Pay Suites?

I don’t think so…

I think this illustrates why there is an explosion of new ProcureTech vendors on the market (600+ procurement technology vendors in operation as of this writing).

Procurement is looking for new solutions to old problems.

We are at an inflection point.

Counter Hypothesis #2 → The ProcureTech market still has lots of room to grow.

If I am to believe public projections, the ProcureTech market should grow anywhere from 2-9% annually until 2032:

Any way you slice it, that’s a lot of new ProcureTech.

The problem for vendors isn’t fighting over a limited set of available projects. It’s keeping up with, and capturing, a portion of all the available opportunities.

That’s why I am betting that vendors who are focused on being the very best in a specific domain, building “open” solutions that can be leveraged easily by clients, consulting firms and other vendors alike are poised to win the market (and, yes, I assume everyone is leveraging AI…).

Everyone I know in this ecosystem wants solutions that be deployed, scaled and updated/modified in their landscape with as little vendor involvement as possible…

#TheDream

As to which type/category of ProcureTech vendor “wins” the biggest piece of that pie? I have no clue…

Source-to-Pay Suites could very well innovate quickly enough to keep challengers (like Intake & Orchestration providers) at bay. The opposite could be true as well. We could also see a new “Native Agentic AI Suite” pop up out of nowhere to steal the show.

But one thing is clear to me… The market still has lots of room to grow.

So What?

So this is all very interesting but what’s the takeaway for you, the digitally-minded procurement professional, today?

• If you’re currently being sold a Source-to-Pay Suite as the answer to all your problems, your advisor is living in the past (It doesn’t matter how well a solution has sold in the past → You’re working on the future! Learn from the past instead of repeating it).

  Depending on your organizational context (industry, number of ERPs, budgets, existing IT architecture, etc.), a Source-to-Pay suite may be necessary, but it surely isn’t sufficient to be a leading procurement organization in 2024 (at least not in their current form).

• If you’re looking at Intake & Orchestration or Best-of-Breed solutions as the answers to problems (in addition to an existing S2P suite or in lieu of it), there’s lots of promising tech out there.

  However, the tech itself won’t solve your problems, regardless of how shiny it is… You still need a strong, digitally literate team that can collaborate tightly with IT, understand the full picture and execute on deployments if you are to be successful with ProcureTech.

• As much as we would all like a “Procurement Innovation Garage” to test dozens of different technologies before going ahead with the ones that work for us, most CPOs don’t have “unlimited bullets in their ProcureTech guns.” Every function is vying for business investments to improve performance. Procurement is but one of them!

  Doing the work to understand the “art of the possible” in ProcureTech, crafting a realistic roadmap and being clear on your “value levers” before pulling the trigger on ProcureTech purchases is essential for success. You don’t get to start over infinitely. Measure twice, cut once.

I’ll leave you with this quote from the 2023 Deloitte CPO survey that essentially summarizes everything I’ve been trying to tell you:

Translation? Leading procurement organizations are bringing various different ProcureTech pieces together based on the capabilities they need to deliver business outcomes.

There is no “one-size-fits-all”, easy answer to procurement technology. Anyone giving you advice without asking you tons of questions about your context first is just trying to sell you something 😅

As to whether SAP Ariba & the “S2P Suites gang” stay atop the ProcureTech market? That largely depends on who is able to fill the “40% gap” first… The incumbents, the challengers or something that doesn’t exist yet?

Your guess is as good as mine…. But S2P certainly starts with the biggest war chest…

And that’s what should inform your procurement technology procurement strategy going forward (yes, I am being meta on purpose!)

Have a great week.

Further discussion needed? Let me know in the comments 👇

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