End to end or best-in-class? It’s an age-old discussion in IT and became an issue in procurement – an issue which Greg Holt can resolve.
I have been working in the IT industry for a good 20 years and one of the recurring themes continues to be the “end-to-end” versus “best-in-class” saga. Like the central characters in a long-running soap opera, these two adversaries may fade into the background now and again, but they always return, even from the dead. As is the case with soap characters, fans tend to take one side and denigrate the other. You either loved JR Ewing and hated Bobby Ewing, or vice versa. You could not love both.
End-to-end versus best-in-class is an argument that lately came to the fore in procurement, where end-to-end solution means a complete source-to-pay or source-to-settle solution. That is to say, you invest in a software suite or platform that supports everything you do in procurement from finding the suppliers to rewarding them. A solution that combines both upstream and downstream sets of processes. The alternative is to select and invest in the best software (sometimes referred to as a “point” solution) to do each particular task or process on the continuum, and string them all together to build a world-class solution.
So, allow me to share what I’ve learned from my own experience and from my colleagues about selecting software so that you can make the best decision between point solutions and end-to-end software suites for your company.
The first and most obvious remark is that procurement software is a major investment, and you will need to work with your IT department and possibly an external consultant to help you to make the right choice, which will take into account what you have now (your legacy systems) and upcoming investments in other areas and functions of the business. You will need to carry out a cost-benefit analysis of the various approaches to business transformation, including the payback period, and where you want to be in five or ten years. Consider the total cost of ownership, not just the upfront investment.
That said, let’s return to our specific question.
When to go for best-in-class
The main benefit of a best-in-class software solution is the depth of its functionality. Think of it as a yard wide and a mile deep. Because best-in-class software is hyper-focused on one area it offers robust capabilities and features to address specialised needs. That means it is absolutely essential that it should be capable of easy integration with other systems. The best best-in-class software solutions easily sync with other systems that focus on other areas.
The promise of vendors of best-in-class software solutions is that you can custom-build a software suite with exactly the solutions each area of your business needs, with focused functionality in every area. This is why they are often loved by end users. What they see is what they want. “I work in sourcing, so I want a sourcing solution. Period.” On the other hand, depending on your organization and your industry, it is likely that your sourcing needs are limited, in which case you may end up paying for mile-deep functionality when you only need to dive down a few fathoms.
A further argument in favor of best-in-class is that you can expand capabilities on your own terms. They are scalable so you can start with the software that addresses your most pressing area of need and then add additional capabilities when the time is right. For example, once you have sorted out sourcing, you look for the best specialist provider of contract management software. On the face of it, this is also the low risk path of least resistance. Rather than buying everything up front, you can incorporate other best-in-class solutions as your business’s needs change and your budget allows. It’s a gradualist approach. Or “evolution not revolution” as the cliché runs.
On the other hand, integration is in practice more of an issue because each best-in-class system has its own data dictionaries, data formats and other sources of incompatibility that can make even a bilateral integration difficult. And when it comes to several systems, the problems multiply. It is likely that you will need to employ a specialist firm of systems integrators to make it work, and even then, the solution may be unstable, processes may not be streamlined, and visibility across all systems rather limited.
When to go for end-to-end
An end-to-end solution can fulfill every operational need for a specific business function, in this case procurement. Companies that choose end-to-end solutions should pay attention to overlap in what the full-service solution offers compared to the solutions they already use. For example, ERP systems may already offer some limited procurement functionality that can be shifted to a source-to-pay implementation.
A further advantage of an end-to-end solution is the avoidance of disputes between various point system vendors when things break down or go wrong, perhaps because there is no clean transfer of data between the contracts management system and the procurement system. With a source-to-pay implementation you only have to deal with one support desk. There is just “one throat to choke”, as the saying goes.
End-to-end software solutions should therefore be used when there is an obvious solution that can streamline processes and provide global visibility through the use of shared data. And that is increasingly the case these days as organizations seek to manage source-to-pay functionality holistically and seek to gain insights through spend analytics software to enable continuous improvements.
End-to-end solutions can also be useful even when there is functionality overlap with existing solutions when the end-to-end software adds more value than existing point solutions or legacy systems like ERP. On the other hand, the following considerations may deter you from choosing an end-to-end solution:
1. Your business need or process can easily be broken into separate parts
2. You have already invested substantially in a legacy system
3. The end-to-end solutions on the market have serious weaknesses in terms of the specific processes that are most important to your business
4. You do not want to be “locked in” to a particular vendor
5. The vendors you have seen who claim to be end-to-end are in fact only strong in certain areas; at some points in the value chain the functionality is limited, to put it mildly
6. The end-to-end solution does not integrate easily with other systems
On this final point: a source-to-pay solution overcomes most of the integration issues that arise when taking the “best-in-class” approach, but you still need to consider integration with other software such as ERP or accounting systems.
Having your cake and eating it
Since the advent and development of SaaS (software as a service) suites, it does not have to be a straight choice between the two extremes. If you are not yet ready for the whole shebang, look for an end-to-end, source-to-pay but modular software solution, and invest in the modules that best suit your immediate needs. You will be able to expand your system horizontally, from the same supplier, so there are no integration issues. Some vendors, including JAGGAER, offer strong functionality and depth of expertise across the entire source-to-pay spectrum.
A SaaS system means you benefit from system enhancements and extensions as they happen, and the cost is shared across multiple participants in the “multi-tenant” implementation.
You can review your contract at any time and if you are dissatisfied, it is relatively easy to move to another supplier – you are not “locked in” as was the case with on-premise end-to-end systems.
Soap operas will run and run with unresolved plots and dozens of loose ends, but this is one storyline that seems to be reaching a final resolution! I’d love to hear your thoughts on this debate in the comments below.