In this first article of a two-part series, Andrew Daley reviews what’s happening right now in the Procurement Technology sector and how solution vendors and their clients are coping with the demands and opportunities that the digital procurement revolution presents.
The start of 2019 has seen a marked increase in demand for interim resource with specific experience of implementation projects for P2P and S2C solutions like SAP Ariba, Coupa and Jaggaer.
But what’s caused this and why now?
Well, the wider interim professional market is relatively flat, as is the full-time job market, largely because of the uncertainty created by the political situation around Brexit.
In fact, in a recent report by recruitment professional body APSCo John Nurthen, Staffing Industry Analysts’ Executive Director of Global Research commented: ” With both permanent and temporary/contractor vacancies declining by 4% in January compared to 12 months earlier it is difficult to view the market through a lens that isn’t obscured by Brexit uncertainty.”
So what we are seeing in procurement tech’ goes against a wider trend in the employment market and to understand why we need to look at what has caused this and why it’s the start of an ongoing trend.
The first thing to note is that many of the software vendors are thriving as sales of their solutions increase on the back of the digital procurement revolution. Here are a few examples:
- Ariba is clearly reaping the benefits of SAP’s investment in solutions and people
- Coupa’s share price is outperforming market expectations
- Jaggaer’s takeover of Bravo Solutions is now complete and given them a strong market position
- Ivalua is investing heavily in the UK market
- Proactis has grown through a series of acquisitions
With Basware and Tradeshift now clear to pursue their own growth strategies following the aborted merger, and several best of breed solutions enjoying good results, it’s a growing market, offering end users a great deal of choice.
We’ve actually been predicting that the increase in demand for specialist interims will happen since October 2017 as evidenced in our Insider Procurement & Spend Management Report. We expected it to happen before now simply because of the availability of these skills in the market (or lack of them), but companies adopting these solutions have largely found other ways to approach the challenge.
Many end user organisations have used the implementation teams of the software providers themselves (particularly common with SAP Ariba, Jaggaer, Proactis and several mid-tier players), whilst others have used specialist consultants, particularly Coupa clients, to drive adoption of their new systems. In fact the big consultancies have built their growing digital procurement practices on the back the transformation work associated with the latest generation of spend management software.
The consultancies have aspirations to further grow their specialist teams in this area, but they are constrained by the availability of these skills themselves and that is stretching their capacity and in some cases impacting on client satisfaction. There is also demand for very similar skill sets from the software vendors, particularly SAP Ariba with their heavy investment in their customer success, implementation and value engineering teams. Ivalua has hired more solution consultants in the past year whilst others have fought hard to keep their teams intact as competitors and the consultancies seek to tempt their best people.
So we’ve got high demand outstripping supply in the full time market which is constraining delivery focused resources, and several additional factors that appear to be pushing organisations down the interim route including:
- The cost of employing consultants, particularly from the top tier consultancies
- Some frustrations with the output of the consultants as mentioned above
- The desire to have greater control and ownership of the process internally
- Pressure for results from senior management driving greater urgency
So we are now seeing greater demand for specialist contractors who can lead P2P implementation projects, manage internal and external teams and relationships and deliver the outcomes that clients signed up for when they invested in their preferred solution.
And why not when you can hire a highly experienced practitioner for £600-£800 a day and even when you add in a recruiter’s margin, that is still much more cost effective than hiring someone less experienced from a consultancy or software vendor at c.£2000 a day!
Add in supporting roles like business analysts, business process specialists, supplier adoption specialists plus program and project managers and you start to see a meaningful change in market conditions.
But there is a problem with this model. The availability of these skills is still constrained so with a simple supply-demand equation there will be an increase in cost (i.e. day rates) over the course of this year and next. This will only be exacerbated by the changes in IR35 legislation affecting private sector companies next year (more on that below) but ultimately the big winners here are the contractors who can offer these skills.
The challenge for companies who want to hire them is that they are competing for people who aren’t driven by the classic career goals or necessarily that bothered about how exciting a project is because life as an interim is about finding the most lucrative projects to work on, usually in 6-12 month cycles.
To get the best talent into your business you’ve got to have the budget to pay competitive rates and be able to move quickly when the right skills are available before someone beats you to it. But how do you ensure that you’re in pole position to land the right people at the right time?
In Andrew’s second article on the subject, he shares his knowledge and experience about how you can be prepared if you have a digital transformation project on your agenda and how specialist recruitment expertise can help.