Transcript of a discussion on how technology innovators and new services from such suppliers as Tradeshift are translating advances in procurement and finance into business impacts.
ChainLink Analyst on How Cloud-Enabled Supply Chain Networks Drive Companies to Better Manage Finances, Procurement
1. ChainLink Analyst on How Cloud-Enabled Supply Chain
Networks Drive Companies to Better Manage Finances,
Procurement
Transcript of a discussion on how technology innovators and new services from such suppliers
as Tradeshift are translating advances in procurement and finance into business impacts.
Listen to the podcast. Find it on iTunes. Get the mobile app. Sponsor: Tradeshift.
Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you're
listening to BriefingsDirect.
Our next business innovation thought leadership discussion focuses on how companies are
exploiting advances in procurement and finance services to produce new types of productivity
benefits. This business-process innovation exchange comes to you in
conjunction with the Tradeshift Innovation Day held in New York on June
22, 2016.
We'll now hear from a leading industry analyst on how more data, process
integration, and analysis efficiencies of cloud computing are helping
companies to better manage their finances in tighter collaboration with
procurement and supply-chain networks.
To learn more about how new trends are driving innovation into invoicing and spend
management, please join me now in welcoming Bill McBeath, Chief Research Officer at
ChainLink Research in Newton, Massachusetts. Welcome, Bill.
Bill McBeath: Great to be here. Thanks.
Gardner: Tell me what's going on in terms of disruption across organizations that are looking to
do better things with their pay-to-procure processes. What is it that's going on, that's focusing
them more on this? Why is the status quo no longer acceptable?
McBeath: There are a couple things. There is this longer-term trends towards digitization,
moving away from paper and manual processes. That's nothing
new, but having said that, when we do research we always see
these huge percentage of companies that are still either on paper
or even more common is a mix. They have some portion of their
stuff on paper and another portion that's automated. That's foundational and still in the process.
A big part of that is getting the long tail of suppliers on board. The large suppliers have the
internal resources and that they can get hooked up with these networks and systems to get
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Gardner
2. automated. Smaller suppliers, we think about people that may have less than a hundred people or
even mid-sized suppliers, have no dedicated IT resources. They may have a very limited ability
to do these things.
That's where the challenge is and that's where we see some of the innovations in helping lower
the barriers for them. It's helping get a company that's trying to automate all of their invoices or
other things -- that can be a mix of paper, fax, e-mail, and EDI documents -- and then gradually
move that customer base over to some sort of automation, whether it's through a portal or starting
to directly integrate their systems.
So that ability to get that long tail into, so that everything comes in digitally ultimately, is one of
the things we're seeing.
Common denominator
Gardner: In order to get digital, as you put it, Bill, it seems like we need a common-
denominator environment that all the players -- the suppliers, the buyers, the partners -- can play
in. It can't be too confining, but it can be too loosey-goosey and unsecure either. Have we yet
found that balance between the right level of platform that's suitable for these processes but that
doesn't stifle innovation and doesn't push people away because of rigid rules.
McBeath: I want to make a couple points on that. One is about the network approach, versus the
portal approach. They are distinctive approaches. In the portal approach, each buyer will set up
their own portal and that's how they'll try to get that long tail in. The problem
for the suppliers is that if they have dozens or hundreds of customers, they now
have dozens or hundreds of portals to deal with.
The network is supposed to solve that problem with a network of buyers and
suppliers. If you have a supplier who has multiple buyers on the network, they
just have to integrate once to the network. That's the theory, and it helps, but
the problem there is that there are also lots of networks.
No one has cracked the nut yet, from the supplier’s point of view, on how not to deal with all
these multiple technologies. There are a couple companies out there that are trying to build this f
supplier capability to just integrate once into one network and then it goes out and gets all the
other networks. So, people are trying to solve that problem.
Gardner: And we have seen this before with Salesforce.com for example. We have an
environment to develop on, trying to provide services that people would use in the customer
relationship management (CRM) space, for example. We saw just this week that Tradeshift has
come out with an app store. Is this what you are getting at? Do you think that app store model
with a development element to it is an important step in the right direction?
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McBeath
3. McBeath: I mentioned there were two points. The network point was one point, and the second
one is exactly what you're talking about, which is that you may have a network, but it's still
constrained to just that solution provider's functionality.
The salesforce.com or Tradeshift approach is different. It's not just a set of APIs to integrate to
their application; it's really a full development kit, so that you can build applications on top of
that.
There's a bit of a fuzzy line there, but there are definitely things you can point to. There are
enough APIs that you can write an application from scratch. That's question number one. Does
that include UI integration? That would be the second question I would ask, so that when you
develop using their UI APIs and UI guidelines, it actually looks as fully integrated as if it was
one application.
There's also a philosophy point of view. More and more large-solution providers are kind of in
the “light bulb is going out” [stage] and they can't necessarily build it all. Everyone has had
partners. So, there's nothing new about partnering and having ISV partners and integrating, but
it's a wholesale shift to building a whole toolkit, promoting it, and making it easy, and then trying
to get others to build those pieces. That's a different kind of approach.
Gardner: So clearly, a critical mass is necessary to attract enough suppliers that then attracts the
buyers, that then attracts more development, and so on. What's an important element to bring to
that critical mass capability? I'm thinking about data analytics as one, mobile enablement, and
security. What's the short list of critical factors that you think these network and platform
approaches need to have in order to reach critical mass?
Critical mass
McBeath: I would separate it into technology and industry-focused things, and I'll cover the
second one first. Supplier communities, especially for direct materials, tend to cluster around
industries. What I see for these networks is that they can potentially meet critical mass within a
specific industry by focusing on the industry. So, you get more buyers in the industry, more
suppliers in the industry, and now it becomes almost the de facto way to do business within that
industry.
Related to that, there are sometimes very industry-specific capabilities that are needed on the
platform. It could be regulated industries like pharma or chemical that have certain things they
have to do that are different from other industries. Or it could be aerospace defense, which has
super-high security requirements. They may look for all of these robust identity-management
capabilities.
That would be one aspect of building up a critical mass within an industry. Indirect is a little
more of a horizontal play; indirect suppliers tend to go more across industries. In that case, it can
be just the aggregate size of the marketplace, but it can also be the capabilities that are built in.
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4. One interesting part of this is the supplier’s perspective, and for some of these networks, what
they offer to suppliers is basically a platform to get noticed and to transact. But some companies
are trying to provide more value to suppliers, not just in terms of how they market themselves,
but then also outward-facing supply-chain and logistics capabilities. They're building rich
capabilities that suppliers might actually be willing to pay for, instead of just paying for the
honor of transaction on a platform.
Gardner: Suffice to say things are changing rapidly in the pay-to-procure space. What advice
would you give both buyers and sellers, suppliers, when it comes to looking at the landscape and
trying to make evaluations and making good decisions about being on the leading edge of
disruption, taking advantage of it, rather than being perhaps injured or negatively impacted by it?
McBeath: That can be a challenging question. Eventually, the winners become quite obvious
when it comes to network space, because certain networks, as I mentioned, will dominate within
an industry. Then, it becomes somewhat easy decision.
Before that happens, you're trying to figure out if you're going to bet on the right horse. Part of
that is looking at the kind of capabilities on the platform. One of them that's important, going
back to this API extensibility thing, is that it's very difficult for one platform to do it all.
So, you'd look at whether they can do 80 percent of what you need. But then, do they also
provide the tools for the other 20 percent, especially if that 20 percent, even though it may be a
small amount of functionality, it may be very critical functionality for your business that you
really can't live without or get high value from? If it has the ability for you to build that yourself,
so that you can really get the value, that's always a good thing.
Gardner: It sounds like it would be a good idea to try a lot of things on, see what you can do in
terms of that innovation at the platform level, look at the portal approach, and see what works
best for you. We've heard many times that each company is, in fact, quite different, and each
business grouping and ecosystem is different.
Getting the long tail
McBeath: There's a supplier perspective, and there is a buyer perspective. Besides your
trading partners on the platform, from a buyer’s perspective, one of the things we talked about is
getting that long tail.
Buyers should be looking at, and interested in, what level of effort it takes to onboard a new
supplier, how automated can that be, and then how attractive is it to the supplier. You can ask or
tell your suppliers to get on board. But if it's really hard to do, if it's expensive for them, if it
takes a lot of time, then it’s going to be like pulling teeth. Whereas, if there are benefits for the
suppliers, it’s easy to do, and it’s actually helping them, this becomes much easier to get that long
tail of suppliers onboard.
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5. Gardner: Well great. I'm afraid we will have to leave it there. You've been listening to a
BriefingsDirect thought leadership podcast discussion on how companies are exploiting advances
in procurement and financial services. We've heard how technology innovators and new services
from such suppliers as Tradeshift are translating these into business impacts.
So, please join me in thanking our guest. We've been here with Bill McBeath, Chief Research
Officer at ChainLink Research in Newton, Massachusetts. Thank you, Bill.
McBeath: Thanks a lot.
Gardner: And a big thank you as well to our audience for joining this Tradeshift-sponsored
business innovation thought leadership discussion. I'm Dana Gardner, Principal Analyst at
Interarbor Solutions, your host and moderator. Thanks again for listening, and come back next
time.
Listen to the podcast. Find it on iTunes. Get the mobile app. Sponsor: Tradeshift.
Transcript of a discussion on how technology innovators and new services from such suppliers
as Tradeshift are translating advances in procurement and finance into business impacts.
Copyright Interarbor Solutions, LLC, 2005-2016. All rights reserved.
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