Category:
Vendor Relationship Management

Why Procurement Software Doesn’t Solve Vendor Relationship Management Challenges

April 28, 2022
Al Giocondi
Co-Founder & Head of Sales
There has never been a more pressing time to evaluate how you manage your strategic vendors.

Digital transformation has been a hot trend for several years now, powering cloud adoption and driving reliance on 3rd party vendors through the roof.  Managed properly, vendors like Microsoft, AWS, and Salesforce can enable your strategic goals and success.  Manage them poorly and it can feel like you’re riding runaway spend with marginal increases to capabilities and results.


The best vendor management programs are cross-functional and span multiple organizational departments.  Here’s why - at medium to large enterprises, core functions operate in silos and each department has their own platform and platform champion. 


Finance ERP
Procurement P2P
Legal CLM
Sales CRM


Each of these platforms contains valuable data related to your vendors.  The problem is they were purpose built for specific department functions who own and act as organizational gatekeepers to the systems.  


You may ask: with all this siloed data living in department-specific software, how do organizations centralize and gather insights to make smart decisions?


They don’t.  We are still in a world of spreadsheet gluing, SharePoint hunting and BI dashboards that look like kindergarten finger painting projects.  


What’s even worse than working in spreadsheets is trying to standardize your VM function in a non-VM platform.  Let’s take a P2P platform like Coupa for example.  As we’ve been on our journey to build the world’s first VRM platform, we’ve had countless skeptics ask, “Why do large enterprises need a VRM? They already use Coupa for procure-to-pay functions, so why wouldn’t they just use Coupa for vendor management?” This is the voice of someone who hasn’t been having frequent conversations with corporate leaders lately.  


In our conversations, we’re finding a growing number of Fortune 500 leaders are looking for improved organizational performance through vendor portfolio optimization.  Today, leaders want to see their teams empowered with more data, better ways of working and more collaboration with key stakeholders. These relationships fuel better organizational performance.  Executives suspect that millions and possibly billions of dollars wasted annually, excess cost, outdated products, expired agreements, misalignment of goals, inefficient workflows, siloed data, and hidden risks are dragging down their own performance.  (If you’re still thinking “Coupa”, you haven’t really used Coupa lately…) 

Unfortunately, customers don’t find out Coupa VM shortcomings until it is deployed.  Many enterprises wasted time and money learning the hard way and realized the need for additional solutions. 


Contract Management is Not Contract Intelligence


SAP Ariba and Coupa have contract repositories just like SharePoint/OneDrive. In managing over 100 enterprise customers in my career at IBM and Oracle, I never came across one using Coupa for Contract Intelligence.   Instead, they used Coupa for what it was built for – P2P.  Unfortunately, for the line professionals, contracts are either stored in a legal repository or they are spread across the organization on hard drives and email.  Failing to properly handle contracts as a valuable central data store from which valuable metadata and insights may be drawn is a costly mistake.  


To create intelligence a vendor management platform needs to deliver automation, efficiency, accuracy, data centralization and cross functional workflows and collaboration.  The best solutions feature OCR / AI tools to automate contract and metadata processing to drive insights.  In 2022 leaders need to know:


  • Who are my strategic vendors?
  • How are my contracts structured? (Contract and agreement hierarchies)
  • When do my contracts expire? Do any auto-renew?
  • What are my contract values?  What am I spending in each contract?
  • How can I take action quickly and collaborate with the right stakeholders?
  • How can I visualize my portfolio and future demand?
  • Am I in compliance with my contracts?


These questions either require a great deal of manual work or go altogether unanswered in almost organizations…


Collaboration is Mandatory


Your people are the glue between data and process. You need to rely on the stakeholders to execute internally and externally. Stakeholder mapping and collaboration is another missing component inside procurement tools like Coupa.


Deloitte said the #1 priority for procurement leaders should be to “put stakeholder management at the center of their strategy” 


With strategic suppliers like Microsoft, Accenture and AWS, stakeholders are critical to the relationship and to performance. I haven’t seen any enterprises manage their Accenture account teams with Coupa...because you can't. 


A vendor management platform needs to cater to IT, Finance, Legal and obviously Procurement.  It needs to be purpose built for all departments to get value from one source of truth.  Unfortunately, companies will never buy licenses of P2P’s to have IT and Finance collaborate.


Therefore a “Salesforce for the Buyer” like Terzo, is needed.  We allow the intelligent management of your contracts, spend, portfolio and people.  With all the components in one place collaboration comes naturally