I recently posted a review of the SAP Intelligent Spend Management strategy on the blog. The goal was to think through what this new concept might concretely mean for SAP customers. Subsequently, I was lucky enough to sit down with Dr. Marcell Vollmer, Chief Digital Officer at SAP Ariba and SAP Fieldglass, to get more clarity around the strategy. We discussed:
- What it will mean for product development and for organizational changes at SAP.
- How this will impact new and existing customers
- How this change helps organizations set up for the future of procurement.
Enjoy this transcript of the very first episode of the Pure Procurement podcast!
If you prefer listening to audio, you can listen to the episode on the podcast page.
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*The transcript from this interview has been edited for brevity and clarity.
Introduction
J: Welcome to this episode of Pure Procurement. The show where we demystify procurement and show you how it can be a value creator for your business. Today we’ll be diving into the details of SAP’s new intelligent spend management strategy, which they’ve been socializing since early 2019. In a nutshell, this new strategy aims to bring together the SAP Ariba, Fieldglass and Concur product suites and organizations to deliver a simplified, value-add end-to-end spend management suite to clients. To help me in this endeavor, I am lucky enough to be joined by Marcell Vollmer, Chief Digital Officer at SAP Ariba and SAP Fieldglass.
Dr. Vollmer has been involved in organizational transformation initiatives for almost 20 years, dating back to his doctorate work on the development of post-merger integrations. He’s spent the past 14 years at SAP, with about 8 and a half of those being dedicated to the procurement space. Today, as Chief Digital Officer, Dr. Vollmer helps SAP customers define and drive digital transformation strategies and roadmaps.
Marcell, thanks for joining me.
M: You’re very welcome, Joël. It’s a great pleasure being here today.
J: Awesome. Marcell, tell us please, in your words: What is intelligent spend management?
M: Well Joël, I think you summarized it very well. I’m really delighted seeing now that we are bringing together what belongs together. By covering all the source-to-pay processes with the beautiful Ariba, Fieldglass and Concur solutions a company can really do the two most important things in the S2P, source-to-pay, or P2P, procure-to-pay, process. Number one, leveraging the purchasing power to the best extend and, number 2, to bring down the transactional cost by automation. So, that’s fantastic and I’m really happy seeing that the cloud business group, as part of SAP’s overall strategy, is now getting more and tightly integrated in our core product, the intelligent enterprise on S4/HANA. HANA is SAP’s in-memory database. With all these components we can really provide everything that a customer might need with one platform. The database, HANA, as the foundation, the intelligent enterprise with ERP suite, sits on top of that to connect intelligent technologies and then all the applications, intelligent spend but also workforce management, the customer experience, supply chain, manufacturing and, of course, the digital core with our financials and controlling systems. That’s SAP’s Intelligent Enterprise.
Product Development
J: That leads me well into my first set of questions which are around product development. We’ll get into the organization piece of it a bit later on. First, I wanted to understand what the guiding principles are [for the transformation] and you touched a bit on that. Could you elaborate a bit on, since you are putting these three solutions together (Ariba, Fieldglass and Concur) which guiding principles will inform which functionality is privileged going forward when duplication currently exists within the solutions? I’ll give you a concrete example. There is currently invoicing functionality today both in SAP Ariba and in the Concur toolset. So how are you going about deciding where certain things will reside in terms of business processes?
M: Absolutely Joël. That’s a very fair question. I know that to a certain extent you might have some overlap. Overall what is important for the customer is the user experience. What is it really that a customer needs? And by the customer, I mean, of course, the buying center using the set of solutions. But you also need to think about the different user groups and the user experience you want to engage with by deciding [to implement] asolution. This led us to the conclusion that we need to have one offering that makes it simple for our customer to [implement]one set of integrated solutions for source-to-pay and also to have modern user experience for all the related stakeholder groups.
I was [previously] the chief procurement officer at SAP. I was integrating all the procurement sub-functions at SAP and had the pleasure of leading the procurement organization [through the implementation]project for the Ariba, Fieldglass and Concur integration when it came to our own [internal] SAP systems. And when you think of the different stakeholder groups, you need to have the right user experience for suppliers, for employees but you also need to have a flexible and agile platform that can manage all the lines of business you are dealing with. Bringing all of this together is the rationale and [the context which you have to think about] when developing the set of functionalities.
To start with that, we want to make it simple for our customers. We want to offer one integrated approach that fits best within the IT landscape a customer has defined. However, that means we need also to be aware that we are talking about cloud solutions – that we are talking about customers with multiple end-to-end systems: ERP systems, SAP and non-SAP, where we also need to think about what the components a customer might need to run the process until a certain level before the data is consolidated in the ERP, the Enterprise Resource Planning. So that’s the balance we need to strike.
You are perfectly right. We have overlaps. Invoice management is a great example of that but we need to ensure that we provide that functionality in the case that someone says: “Hey, I only need a travel booking and a travel reimbursement tool. I don’t need the full suite of Source to Pay functionalities that you have for goods, services, MRO, etc. Therefore, we need to ensure that we still have a set of solutions available which allows the customer to integrate into the ERP system at different points in time.
So, to cut it in different pieces: Number 1, you will see one set of integrated Source to Pay solutions. You will also see that within that set of solutions we have certain functionalities which a customer can decide [to implement or not] and define depending on the scope. [The customer and sales teams need to figure out] how [the customer should] run the set of solutions in the overall ERP system landscape and where the fit and need is. So, Invoice management is one solution where you have currently functionality in Ariba, in Fieldglass and in Concur. We will ensure that we have S4/HANA integration [for the use cases that make sense] but we will have different interfaces for the solutions [to meet different] customer needs.
Note: This is a trend I am seeing with all providers. They are providing a “swiss army knife” and it’s up to the customer, partners and sales teams to determine the best architecture and use of the product in the customer’s context, industry, landscape, etc.
J: Ok awesome. And you mentioned user experience as well so I take it that will be driven mostly by the guided buying interface, at least for the employee user group?
M: Absolutely. It is via our solution ‘Guided Buying’ but it goes beyond that. Guided Buying is basically a solution where you have an interface between the different stakeholder groups. For the employees, this is the catalog functionality. For Lines of Business (LoB), it’s a platform where you can define, for each LoB, how you want to run and engage in the procurement process. What are the approval steps you want to have in the process? What is the LOB allowed to do? For example, starting with an RFI, request for information or an RFP, request for proposal, with a supplier? You might say: “These are steps the LoB are doing, these are steps procurement organization has to do and these are steps where we need to have approval from either the budget holder or the finance controlling organization.” So that’s the set of functionalities that we have. And, you are perfectly right, you need, as I always like to say, an Apple easy and Google fast user experience to be successful. This is now true in general for whatever you implement and innovate in the software space. You need to consider the user experience. This is really at the heart of everything we do and what you should think about when you really drive innovations [in your organization].
System Administration Functionalities
J: It’s interesting you mention that because my second question is around the administrative functionalities. You mentioned user groups, or end user groups, so employees, suppliers, other folks from the LoB. When we think about the IT administrators for the system, is the intention, from a product development perspective, to rationalize that functionality as well? When I think about reporting tools, workflow management tools, master data management tools, user and authorization management; currently each of the solutions (Ariba, Concur, Fieldglass) has their own way of managing those different objects. What the vision in terms of bringing that all together so that it’s easy for the IT, or back office, folks?
M: Joël, that’s another great question. I think you need to streamline the user experience also in operations, in how you work with your own systems. It’s not necessarily that you need to rationalize your IT department, but you need to make it very easy for the people with the right authorizations to define workflows, to add or change something in a workflow process where you don’t necessarily need your typical IT organization and the setup you had in the past.
You need to consider the compliance aspects, no doubt about that. But on the other side, you also need to think about what you need to make it easy for the users to work with the systems. Also, [this needs to be considered] when it comes to questions about the different fields in your solution, what you need. It might be that you need to have an additional field for a special project or something like that. You should not ask now for customization. You should simply think about: “Hey, what is something we can quickly add with a drag and drop approach? How do we make it flexible for users to work with it and have the data available which are needed to perform the business processes?”
J: Right, and today those different tools are duplicated in each tool. Is the vision to create a centralized tool or a single tool to manage these objects through the three solutions?
M: I know the three chief product officers for the different solutions are currently working together to define this – And, not only for intelligent spend management. We also now have the structure and governance in place to look into our overall approach for cloud solutions. I think this is currently the discussion that’s going on. I can only guess right now as to the outcome since it is not yet defined right now. But I know we are working on a simple to use and streamlined version of how to manage this in the different solutions. So, I will not say that this is coming in the next three months but basically this is definitely a key area we are looking into to see how to streamline that.
You might have heard that SAP acquired at the end of last year Qualtrics, one of its largest acquisitions at $8 Billion. And, there’s a bunch of other acquisitions from last year and now the time [has come] to streamline these and simplify the approach of managing and operating IT solutions in the cloud.
System Integration
J: That brings me to another facet of managing in the cloud which is integration. Right now, Ariba’s clearly stated that the Cloud Integration Gateway (CIG) is the way forward to integrate Ariba, Fieldglass and Concur with SAP ECC or S4/HANA. What do you see as the value proposition for implementing CIG, especially for customers that are currently operating with legacy SAP integration tools like SAP PI or PO, or even using non-SAP products altogether like TalenD?
M: Yeah, so I think we need to have one set of solutions in place that nicely integrates to the different back end systems that the customer has. Therefore, the CIG, cloud integration gateway that we have in place is definitely the right one to have [as it has] the highest number of [standard] integration points at this point in time. And, this is basically what we want to leverage to ensure we have a very tight and seamless integration into the different back ends. It needs to be natively integrated into S4/HANA in the future, no doubt about that. But, as I mentioned at the beginning, by extending a little bit how customers are currently, and also in the future, using the different solutions, you need to have very deep integration but you also need to think about the complexity of the integration into different ERP systems, which can be SAP or non-SAP systems. Therefore, you need to ensure you have a set of integration tools available like a toolbox. If it’s only one ERP S4/HANA, well it’s perfect. It’s entirely integrated. If it’s an S4/HANA and probably some legacy SAP systems well, there’s a way in the toolbox that we can make it work. If we have different organizations, or federations, then it comes to a third example where a company is only a minority or even majority stakeholder but doesn’t own 100% of the company and therefore the ERP systems can’t be fully integrated in one instance. Therefore, it needs to be possible to have the integration available to those different systems, which can also be non-SAP systems to make the picture complete.
J: OK. I see the toolbox concept being great here but if I paraphrase, I think you’re saying as well that you want to minimize the amount of work that customers have [to do to integrate]?So, if you have SAP systems talking to each other, CIG has all these standard out-of-the-box integrations that will make it a lot easier to integrate.
M: Yes. And that’s also what Bill McDermott said at SAPPHIRE. We need to work on the integration of our portfolio which is mainly acquired, especially when you look at the SAP cloud portfolio. As of today, there has been $40 Billion of acquisitions with Qualtrics and Concur being the highest [individual transactions] with $8 and $8.3 Billion but basically you can go back to 2007 when it started with the Business Objects acquisition [and trace that back] all the way to today.
Migration Activities for Customers
J: And do you foresee, for those customers that are already on the solutions, whether Ariba, Fieldglass or Concur, any migration activities required for those existing customers as there are shifts in the product suite or consolidation efforts?
M: Basically, we are talking about cloud solutions so with that, if the customer has the solutions already implemented, there is certain integration into the different systems. So now, our job as a software solution provider is to continuously improve and invest in the cloud solution. Now that we’ve made the integration part of that [with CIG], the customer will continue to use the solution and the upgrades will come with a choice of switching them on or deciding continuing with the solution set already in place. But most importantly, it needs to be tightly and nicely integrated for the customer to have one experience across the different solutions because customers and other CPOs like myself are managing all spend categories, period. So, it should not be a different system because you would need to jump between to different experiences, you need to have one user experience. You also need to make it easy when you think about the data integration, you need to have one repository, one single source of truth where you can access all the PO and non-PO spend data. Otherwise, you will never be able to do the demand planning and demand aggregation which is key for category management strategies.
J: Absolutely. Ok, so you are continuing with an “inform and Opt-In” type of approach with customers as you roll out this new functionality and new strategy.
Note:This is the way SAP Ariba currently releases functionality on a quarterly basis.
M: Yes.
SAP Ariba & SAP Fieldglass Organizational Transformation
Go-to-Market Approach
J: Ok. So, let me shift gears a little bit and move away from the product suite to talk more about the organization. There have been announcements stating that Fieldglass and Ariba are merging underneath the same leadership. This is similar for Concur: not necessarily in the same format yet, but we do see a trend developing. So, having that in mind, I’m wondering how or if the go-to-market approach will change with the new ISM organization. Can customers expect to have a single point of contact for all commercial discussion related to Ariba, Fieldglass and Concur vs. today where it’s really a single rep per product? Are you aiming to simplify the process for customers who want to purchase any part of the ISM suite?
M: Absolutely Joël. And you just mentioned it, we need to simplify the customer experience also when it comes to sales. The teams are already working to integrate Ariba and Fieldglass. This is already announced. For Concur, it’s a little bit too early so give the team a little bit more time but you definitely can expect a much different sales experience when it comes to the end-to-end Intelligent Spend Management solutions. We need to provide this because running sales forces in parallel doesn’t make much sense, does it? So, the integration will definitely happen and we will continue to focus on what our customers really need and want.
We also need to ensure that we have the technical expertise and right level of expertise available. It is also a big change to tell someone: “Hey, listen, you need to have the expertise for everything a customer might need.” You need to have specialized experts for the different functionalities available to run through a use case to really show and demonstrate the user experience while going through the different spend categories. And buying travel is different from buying materials or buying services. So that’s something that you need to acknowledge. But from the customer side, the sales process and how we engage and interact with the customer needs to be much simpler in the future.
J: Right. I think you make a great point in saying that there’s a lot of complexity there because just looking at the sales force for SAP Ariba standalone today, there’s a whole lot of product to cover to be able to be a master salesperson. So, what are now complex sales will now become “complexer sales”, I imagine?
M: Yeah…
Licensing Model
J: Ok, so that’s the sales front. But when we look at the licensing models, do you know if there’s any changes planned on that piece to match the new strategy?
M: I think it’s a bit too early now to say how the licensing model will [change, if at all]. I think that we are now at the stage of organizational integration. When we have clarity about what this will look like, it will be the right time after that to inform customers about how we will do the licensing part. And, for licensing, I think you know we are talking about SaaS solutions and subscription model. So, this overall model will definitely continue.
Alignment Across the Product Portfolio
J: Ok. The other thing I’m wondering about is integration with the SAP or S4/HANA team. We are seeing organizational change to create the intelligent spend group, comprised of Ariba, Fieldglass and Concur, but there are procurement functionalities in S4/HANA that are still standalone within the SAP S4/HANA group. I’m wondering what mechanisms are in place to ensure that the development of S4/HANA procurement functionalities are coherent with the ISM roadmap? How are you making sure there’s no cannibalization going on there?
M: There’s definitely no cannibalization going on between the teams. First of all, they are talking on a regular basis. If you attended SAP Ariba Live in Barcelona last week you could see that the heads of the organizations, were on stage sharing their insights on how they see the future, how they work as an integrated team and how they will attack all the topics we discussed: data, user experience, the integration layer, etc. We need to look at two sides. Number 1, when you look at our core product, S4/HANA, that customers are using as their core, we know what customers are using as of today. We also know that not all customers will decide to go for intelligent spend management from SAP using Ariba, Fieldglass or Concur. We will have a certain mix. Therefore, we need to ensure that our platform is really “intelligent” and also allows with the defined interfaces to connect to the different systems and give customers a choice.
We are by far the market leader for business applications so we have an obligation to have a standard system in place which allows you, with interfaces, to use different solutions, whatever a customer decides. This adds complexity, and yes Joël, this is not the simplest way for us as SAP to do the development of our core product but, on the other side we need to have variances and allow customers to make decisions. We also have competitors in the market and need to think about the interfaces needed for that.
Therefore, this is what the S4/HANA procurement team is looking into. We also need to think about the complexity of the material master, or master data, in general. We need to ensure that you define the data objects, that we really know: “Ok, how do you run your supply chain? What are the different steps in your process that you have to integrate with your different solutions like Integrated Business Planning (IBP)? Do you have all the data available for inventory or warehouse management or transportation management?” So therefore, and I’m only naming a couple of examples, you need to consider this when you are talking about the S4 world and the intelligent enterprise.
On the other side, you need to consider experience management. I mentioned Qualtrics already, so we also need to make sure that we focus on [experience management]. Besides mastering the operational data (where SAP is very well known), the challenge is really how to interpret that data. How can you go to the next steps of using descriptive data for predictive or even prescriptive analysis? This is something you will be able do in the future by combining [operational data] with experience management data that you capture. So, what is the reason? Well, you don’t have maximal value when you just see: “OK, my sales are declining.” You might be very interested in the reasons for that… You might have changed the product. You might have changed material or quality. You might have changed also the service cycle of your product. We have seen multiple examples of where products started and where they are today. That’s really when we combine operational data and experience management data.
And if you now look into the cloud world, in the cloud solutions, you need to do the same. You also have operational data and experience data and we need to think about how we can ensure that we provide [experience management functionality] for a customer using intelligent spend management as one solution. What is it really that the customer needs to have a seamless experience in the most complete set of cloud solutions in the market for Source to Pay? This is also something that we need to do.
If you ask about in a strict way: “Hey Marcell, is there any overlap?”, then yes, there is a purchase requisition which starts in S4/HANA. There’s also a purchase requisition which starts in the Ariba system and the Fieldglass system. This is true. And this is due to the fact that you talk about two different worlds. By having S4/HANA and the intelligent enterprise on the one side and you can plug and play with Ariba, Fieldglass and Concur combined as intelligent spend management suite. However, you can also decide that you run Intelligent Spend Management as your master system connected with different ERP systems [as backends] when you, for example, don’t have only one S4/HANA system, or you have one S4/HANA but you have also multiple SAP and non-SAP systems.
Sorry Joël I know that this explanation is taking a bit longer but I hope I am answering your question very well. Hopefully, whoever listens or reads the outcome of our conversation understands that this is a very complex topic. We are talking about different platforms with a different set of functionalities where you have and will also have in the future a certain spectre of defined functionalities which you simply need in both systems. And you need then to define how you are going to integrate it to ensure you can really meet your requirements and also deal with the complexity you have as a company with a “one to many” [relationship with] ERP systems.
J: Right. And I think it comes back to what you were saying earlier around having a toolbox. To use your example again, you may be able to create purchase requisitions in S4, in Ariba, in Fieldglass but these all serve a different purpose. And all depending on your architecture, you might want to have that requisition in Ariba or not. So, to your point, I think it is a very complex discussion but one that is needed as you go through the journey of deciding what your future state architecture is going to be. You shouldn’t necessarily decide to put those purchase requisitions everywhere simply because they are available. You need to know the “why” behind having a requisition in a certain system.
M: Absolutely. I see Joël you are an expert as well so you know exactly what the story is about. I appreciate talking with you…
J: Well, thank you… I just want your perspective as well. As someone outside SAP implementing the system, I have my own perspective but it’s always good to align and get the perspective from the solution provider as well.
Supporting the Solution
Ok – Last question because I want to be respectful of your time. From a support model perspective, today if I want support for the different solutions (Ariba, Fieldglass, Concur, S4) each solution has their own support portal. I’m wondering if you can speak to the vision of how the support of the intelligent spend management suite will happen going forward. Perhaps it touches a bit upon what you were saying earlier which is that you need to look at the whole SAP organization and not just the intelligent spend management suite. In any case, I’d be interested in hearing your thoughts.
M: Joël, I definitely understand the question and I can tell you that the overall vision is that we need to have an integrated approach [to support] on an integrated intelligent spend management solution in place but we are now just after the announcement of the organizational integration. [This is similar to the answer around] sales force integration. We need to simplify the process of how a customer can buy our solutions in the future but not losing the technical expertise which is needed also to understand and review the use cases applicable. But now we need to think about how can we provide the needed support.
This is dependent on the integration side of the solutions because when you [have a good picture of the application end state] and what you will offer to your customers, the next step is looking into the integration of the customer support. And yes, you can trust me that this is a very sensitive topic and we are definitely aware that customers are asking here for simplifying our approach. We [look very closely at] our NPS, Net Promoter Score, from customers using the solutions. Ensuring the user experience is great [is essential] because otherwise its not only the NPS which might go down but there is also the risk that they will no longer continue the cloud subscription. Basically, a cloud software company only makes money by having happy customers that continue using [the solution] and continue the subscription contract. This is why we need to ensure we have an integrated approach to our support model in the future.
Conclusion
J: Ok, great. To conclude, are there any important points concerning the intelligent spend management strategy that we haven’t covered today that you’d like to mention?
M: Oh yes! I think that, Joël, a good topic is also talking about intelligence. In Barcelona last week at SAP Ariba Live, we saw how we have integrated machine learning and artificial intelligence [into the suite]. As we are at the end of the time for this interview today, it’s a bit too long to go through all the different solutions and the possibilities to add intelligence [to the procurement process]. However, let’s keep in mind, and let me conclude by saying that, if we are to have an integrated, intelligent spend management procurement approach, with all the different solutions to run source-to-pay, you need to have open APIs and the interfaces available to add the intelligence which you either provide yourself, which you might acquire or use from what SAP can provide, like SAP Leonardo (which is what the intelligent spend management group is using [to develop new functionalities]) so that you can access and enhance your systems.
The future procurement organization will be powered by data but driven by people. That’s exactly what I believe. You need to have a platform providing you the opportunities to integrate intelligence into your systems so that you can generate value for your organization. That should be the purpose of any procurement organization. That’s exactly what will make procurement successful in the future: continuing to provide value by driving strategic procurement and leveraging purchasing power as well as benefiting from the high automation of transactional operational processes so employees can be leveraged in more meaningful activities. This will lead to seeing data scientists or data architects or programmers for algorithms as a typical piece of your procurement organization. The question might become then: “well how much is it really a procurement function reporting to a chief procurement officer?” He might turn into a chief value officer or a chief collaboration officer. [It’s really interesting to] think about the direction in which this vision could lead by leveraging and benefiting from and integrated intelligent spend management set of solutions.
J: For sure, that’s exciting. I think this tells us it’s an exciting time to be in the procurement space because there’s so much happening and so much potential, right?
M: It absolutely is Joël. And I want to invite everyone to get involved. It’s the most beautiful function. I learned this being a chief procurement officer. You get a fantastic overview about the business model of your company. You can also really establish a talent pool, leveraging the capabilities that you have in your own organization, attracting talent, retaining talent but also releasing talent to provide the next career opportunity for them [within the business] and allowing other business functions to benefit from the experience.
J: Yeah, I think this discussion was more product and organization focused but it might be interesting to have you on for a round 2 to talk more about the future of procurement at some point. Where can people find you, Marcell, if they want to have more exposure to what you’re saying or different projects you’re working on?
M: The best would be to connect with me, Marcell Vollmer, on LinkedIn, or if you’re interested on Twitter, @mvollmer1, where I also share the latest insights on future technologies, disruptive technologies as well as engage with the community to discuss what it means. I also like [to discuss] relevant and recent topics, for example the latest one on: “What is the impact of taxes with the current state right now? What does it mean now for to have additional trade tariffs? What does SAP have in place now for China or also, the new tariffs for Mexico?”. So that’s also where I try to keep the community updated. I would love to connect with everyone to share experience but also to share the benefits of the intelligence of a broader group of really interested professionals [I follow] by looking into the topics and discussing the future.
J: Awesome, thank you. And finally, is there anything that you want to ask of my audience, either specifically on the topics we discussed or anything else?
M: So, my advice is, and it’s also part of my role as Chief Digital Officer, think about creating your own future. I think it was Niels Bohr who said „It‘s tough to make predictions, especially about the future!“ I believe that the best way of predicting the future is to create it. We all have now to look into how we can create impact and value for our organizations. I invite everyone to start with that and start today.
J: Awesome. Well thanks again for joining me today Marcell. It was great to get your perspective on where the SAP Ariba and intelligent spend group strategy is going. I’m excited to see the product suite evolve over the next couple years. Hopefully we can chat again soon.
M: I look forward to that. Joël, it was really excellent talking to you. Many thanks for your time and great questions. Highly appreciated. Thanks, and have a great day.
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What are your thoughts on SAP Intelligent Spend Management? What points do you think are most important if SAP is to be succesful in implementation? What excites you about the future of procurement? Let me know in the comments.
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Last Updated on January 7, 2021 by Joël Collin-Demers
