Global Market Outlook on Digital Procurement Systems

eProcurement, Contract Lifecycle Management and Spend Analytics modules are witnessing highest growth within the S2P market.

Service Provider Revenues by S2P modules

  • The global Source to pay (S2P)market measured has grown by approximately 11% from 2016 to 2017. Most of this growth would occur outside the core transactional apps for eProcurement, esourcing, and eInvoicing and in the complementary apps for spend analysis, Contract Lifecycle Management
  • Companies who are in the preliminary stage of migration to etools opt for eProcurement and eInvoicing apps for automating these repetitive processes, to start with
  • For companies who are currently using the transactional apps (in P2P process) and is looking to add the complementary and more strategic apps for sourcing, spend analysis, Contract Lifecycle Management, etc., the negotiating environment will be more challenging. Most vendors are seeing good enough demand that they would not reduce prices to close deals, especially for SaaS products

Growth Drivers & Constraints

Key Market Drivers 

Low Cost of Procurement Process

  • Source-to-Pay solution would reduce the overall cost of procurement process
  • There would be a reduction in time also, with improved efficiency, reduced error in the process

Strategic value

  • The strategic benefits of S2P automation include: fewer errors; decreased warehouse charges; decreased SGA costs; better cash position; reduced borrowing; more competitive pricing; improved supplier and customer satisfaction; higher sales; increased revenue; increased gross margin; increased net margin and higher earnings per share

Mobility of S2P

  • The need for Finance and Procurement executives to have data on the go would see rapid growth of electronic sourcing, procurement, invoicing and payments to meet these demands
  • The trends such as (Bring Your Own Device) BYOD and cloud based initiatives have given rise to these demands

Key Market Constraints

Supplier Resistance to on-board in the automated process

  • Majority of the implementation fail due to lack of supplier interest. Suppliers either face a problem of extra back-end work done or involvement of extra fee in the process
  • Such issues pose a problem for the deployment of electronic initiatives

High deployment cost and time

  • S2P solutions still have a high implementation cost, with a significant support and maintenance cost. The time required also high
  • Moreover, the ROI depends upon faster and efficient deployment of the solution

 Interoperability problems with other systems

  • Although service providers take care of launching standard solutions, instances of Interoperability problems with other systems cannot be ruled out
  • Hence, finding the right mix of solutions for the entire S2P is challenging

Market dynamics and Trends

  • Pharmaceutical companies are the top adopters along with the companies in the BFSI industry for eProcurement solutions
  • The trend is expected to remain strong given the fact that companies are maturing in terms of procurement and technology adoption year-on-year
  • Adoption in SMEs is increasing and they will continue to opt for SaaS functionalities, often proves to be cost-effective
  • The market is moving towards better and closer integration between the modules
  • North America and Western Europe are the largest adopters of electronic procurement solutions given that procurement organizations are matured compared to other regions
  • The APAC market is maturing wherein the end-users are gradually showing increasing interest towards eProcurement

Mergers & Acquisitions, Market Innovations

Source-to-pay market has witnessed few major Mergers and Acquisition post the SAP-Ariba-Fieldglass Acquisition. Service providers are constantly on their toes to improve every little bit of their offering. With the changing user demands, extra importance is being given to issues such as Integration, data security, ease of use.