Executive Briefings

Maturity Coming to the Procure-to-Pay Cloud

Analyst Insight: The market's understanding of cloud solutions is maturing. We are steadily - and correctly - moving away from what the cloud is to focus on what it can mean for our businesses. For many, what it means now is an opportunity to reduce capital expenditures and free up IT resources. This will change as we look less at whether cloud solutions can do the same things as on-premises and focus on what they can do differently. - Scott Pezza, Principal Analyst at Blue Hill Research

Maturity Coming to the Procure-to-Pay Cloud

While the conversation is improving, we are still in the early days of adoption. In the Institute of Financial Operations 2014 AP Automation Study, less than one-quarter of responding companies had (8 percent) or planned to adopt (14 percent) a cloud-based solution. Those that are embracing cloud technologies do so for the expected reasons, mentioned above. Those who have no plans to move away from on-premises installations share concerns about loss of control, lack of customization, difficulties with ERP integration, data security, and reliability of bandwidth, connectivity or downtime.

This is the first step, of course. In order to replace existing systems, the new choice must, at very least, match the functionality and reliability of the old system. We cannot take a step backward in the name of technological innovation. For the time being, then, cloud is simply an alternative approach to deployment that offers a preferable financial cost model.

Business networks have been making headway, especially here in the procure-to-pay arena. This is because they facilitate communications between trading partners. Unlike moving an on-premises solution outside of your business, which creates a new integration need, networks aim to ease the burden of making connections that you’re already making – potentially offering to move from paper-based to electronic communications in the process. 

Yes, EDI has been doing this for years and, yes, over a VAN it has helped mitigate the proliferation of one-to-one connections. However, this hasn’t traditionally been an approach that is accessible for everyone, especially the SMB market. Many—thought not all—of today’s business networks only charge buy-side participants, easing the SMB migration path. That allows higher adoption, and far broader coverage of a given buyer’s supply base.

With more partners connected, these network-based providers have added functionality. Some facilitate early payment discount programs, some handle invoice submission and dispute resolution, and some support exchanges beyond simple invoices for things like purchase orders, advance shipment notices, and payments. And this is where the cloud can really begin to shine: when it is less about distributed and scalable computing power, and more about facilitation of critical business functions and introduction of new capabilities that were not found in on-premises systems. 

                                                     The Outlook

Look for 2015 to bring new acquisitions and partnerships between cloud-based service providers as they seek to broaden their portfolios and address through pre-integration the concerns many companies have with stitching together multiple solutions. Expect more solutions that build on the value of connecting trading partners – through greater visibility, additional financial opportunities, and cross-functionality linking groups like finance and supply chain. Also, expect slow adoption growth. This is a long-term evolution, not a short-term switch.

While the conversation is improving, we are still in the early days of adoption. In the Institute of Financial Operations 2014 AP Automation Study, less than one-quarter of responding companies had (8 percent) or planned to adopt (14 percent) a cloud-based solution. Those that are embracing cloud technologies do so for the expected reasons, mentioned above. Those who have no plans to move away from on-premises installations share concerns about loss of control, lack of customization, difficulties with ERP integration, data security, and reliability of bandwidth, connectivity or downtime.

This is the first step, of course. In order to replace existing systems, the new choice must, at very least, match the functionality and reliability of the old system. We cannot take a step backward in the name of technological innovation. For the time being, then, cloud is simply an alternative approach to deployment that offers a preferable financial cost model.

Business networks have been making headway, especially here in the procure-to-pay arena. This is because they facilitate communications between trading partners. Unlike moving an on-premises solution outside of your business, which creates a new integration need, networks aim to ease the burden of making connections that you’re already making – potentially offering to move from paper-based to electronic communications in the process. 

Yes, EDI has been doing this for years and, yes, over a VAN it has helped mitigate the proliferation of one-to-one connections. However, this hasn’t traditionally been an approach that is accessible for everyone, especially the SMB market. Many—thought not all—of today’s business networks only charge buy-side participants, easing the SMB migration path. That allows higher adoption, and far broader coverage of a given buyer’s supply base.

With more partners connected, these network-based providers have added functionality. Some facilitate early payment discount programs, some handle invoice submission and dispute resolution, and some support exchanges beyond simple invoices for things like purchase orders, advance shipment notices, and payments. And this is where the cloud can really begin to shine: when it is less about distributed and scalable computing power, and more about facilitation of critical business functions and introduction of new capabilities that were not found in on-premises systems. 

                                                     The Outlook

Look for 2015 to bring new acquisitions and partnerships between cloud-based service providers as they seek to broaden their portfolios and address through pre-integration the concerns many companies have with stitching together multiple solutions. Expect more solutions that build on the value of connecting trading partners – through greater visibility, additional financial opportunities, and cross-functionality linking groups like finance and supply chain. Also, expect slow adoption growth. This is a long-term evolution, not a short-term switch.

Maturity Coming to the Procure-to-Pay Cloud