Making Leaders Successful Every Day Forrester Research, Inc. Reproduction Prohibited

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1 Making Leaders Successful Every Day

2 epurchasing Market Overview for 2014 and 2015 The ecommerce Landscape of Solution Providers in 2014 Andrew Bartels, Vice President, Principal Analyst September 8, 2014

3 Key ecommerce themes for 2014 and 2015 We see the following key themes for the B2B ecommerce market in 2014 and 2015 epurchasing software market will grow by 11% in 2014, led by supplier networks and services procurement Sell-side ecommerce solutions are starting to catch-up with buy-side epurchasing solutions Supplier networks are playing an expanding role in the B2B ecommerce space, but SaaS is reducing some of their importance New entrants like TradeShift and Viewpost have the potential to disrupt supplier network economics Supplier networks will need to morph into industryfocused business networks to survive 3

4 epurchasing process is an 8-stage process 1. Spend analysis 2. Supplier assessment Supplier risk and performance management 3. Supplier identification 8. Electronic invoice processing and presentment Supplier network services 4. Sourcing 7. Order fulfillment (services procurement) 6. Procurement 5. Contract life-cycle management

5 Definitions of epurchasing products Product eprocurement esourcing Contract lifecycle management (CLM) Spend analysis Supplier risk and performance management Services procurement Electronic invoice presentment and processing (EIPP) Key features Requisitioning, approvals, employee-facing catalog, punch-out to suppliers, and catalog management tools RFQ/RFP/RFI generation and distribution; collaborative response scoring; reverse auction; multivariable complex sourcing and scoring; sourcing team project and activity management Contract terms and conditions library; contract creation templates, wizards, and guides; contract repository for all finished contracts; reports and analysis Loading of spend data; cleansing and normalizing of spend data; classification into spend categories; identification of savings opportunities; reports and analysis Supplier master data management; internal supplier data collection and presentation, including employee satisfaction surveys and rating; external supplier financial data, social responsibility rating, diversity ratings, and other risk information; supplier qualification data for potential suppliers Requisitioning and approvals for purchases of contingent workers and project services; support for services pricing mechanisms; tracking of time cards and project completion; onboarding of contractors and consultants Capture of electronic invoice data; automated matching of invoice with PO, contract, and receipt; workflow to approve unmatched invoices; cash forecasting, discount management, and financing; support for dynamic discounting

6 Overall epurchasing market key trends Market will see improving growth of 11% in 2014 up from 7% in Good growth will continue in 2015, with 12% Fastest growth in supplier risk and performance management, services procurement, supplier network services, CLM, and automated spend analysis, with growth rates of 10% to 18% eprocurement has widest adoption, with more than 21,000 enterprises having this product by 2015 SaaS subscriptions have large and growing share of market, and now spreading into eprocurement and CLM SAP and Oracle have large shares of mature eprocurement and esourcing products, but 20% or less share of new and faster growing categories except for acquisitions New entrants and those with vertical or geographic focus keep the market fragmented and competitive

7 epurchasing revenues to rise by 11% in % US$ millions $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 $3,427 $174 $483 $433 $141 $213 $742 14% $214 $574 $488 $172 $250 $827 $269 $669 $294 $547 $231 $296 $916 $321 $769 $347 $598 $291 $336 $362 $397 $1,073 $848 $479 $401 $690 $632 $362 $311 $379 $432 $998 $1,039 $1,114 $446 $1,259 $557 $755 $409 $491 $1,182 $1,051 $1,136 $1,232 $1,333 $1,390 $1,381 $1, * 2015* *Forrester forecast $3,894 14% $4,454 12% $4,993 7% $5,362 11% $5,929 Base: Data from more than 100 vendors (numbers are rounded) $6,622 Supplier risk and performance management Supplier network Services procurement EIPP Spend analysis Contract lifecycle management (buyside) esourcing eprocurement

8 SaaS subscriptions taking a larger share 12% US$ millions $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 $3,427 $795 $1,336 14% $893 $1,576 $672 $720 $975 $1,836 $1,136 $2,147 $1,164 $2,418 $1,198 $2,927 $1,302 $3,362 $831 $879 $931 $941 $1,054 $625 $705 $812 $831 $849 $863 $ * 2015* *Forrester forecast $3,894 14% $4,454 12% $4,993 7% $5,362 11% $5,929 Base: Data from more than 100 vendors (numbers are rounded) $6,622 Services Subscriptions Maintenance License

9 Americas expands its dominance of epurchasing market 12% US$ millions $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $3,427 $294 $57 $1,253 14% 14% $4,454 $11 $3,894 $349 $76 $1,369 $21 $435 $80 $1,568 11% 7% 12% $5,929 $19 $4,993 $514 $85 $1,701 $527 $94 $607 $99 $2,085 $1,871 $670 $104 $2,319 $3,501 $2,672 $2,845 $3,112 $1,812 $2,080 $2,352 $21 $5,362 $25 $26 $6,622 $28 Asia Pacific Africa Middle East Europe Americas $ * 2015* *Forrester forecast Base: Data from more than 100 vendors (numbers are rounded)

10 Fastest growth will be in newer and smaller product categories, especially supplier networks epurchasing software (percentage change) * 2015* eprocurement 8% 8% 8% 4% -1% 10% esourcing 11% 11% 9% 4% 7% 6% Contract lifecycle management (buy-side) 17% 19% 14% 13% 14% 14% Spend analysis 22% 34% 26% 7% 16% 13% AP-EIPP 13% 12% 9% 6% 9% 9% Services procurement 24% 26% 18% 15% 19% 16% Supplier network 19% 17% 15% 10% 27% 17% Supplier risk and performance management 23% 25% 20% 13% 10% 12% epurchasing Market 14% 14% 12% 7% 11% 12% *Forrester forecast 2014 and 2015 global epurchasing software market forecast (Percentage change in US dollars)

11 SRPM, supplier networks, spend analysis, and supplier networks are growing fastest Vendor revenues, compound annual growth rate, 2009 to 2014 Spend analysis Suppler risk and performance management (SRPM) Services procurement Supplier network Contract lifecycle management (CLM) EIPP esourcing 6% 7% 18% 17% 17% 14% 12% eprocurement 4% Base: Data from more than 100 vendors (numbers are rounded)

12 eprocurement, supplier networks and esourcing have highest adoption Number of clients (thousands) * 2015* eprocurement Supplier network esourcing EIPP Contract lifecycle management (buy-side) Suppler risk & performance management Spend analysis Services procurement *Forrester forecast Base: Data from more than 100 vendors (numbers are rounded)

13 Cloud computing or Software as a Service (SaaS) has a major presence in epurchasing SaaS subscriptions revenues as a percentage of total product revenues, 2014 Cloud computing Supplier network Services procurement SRPM Spend analysis Total EIPP esourcing 100% 85% 80% 71% 61% 59% 56% eprocurement CLM 30% 28% 2011 Forrester Research, Inc. Reproduction Prohibited Base: Data from more than 100 vendors (numbers are rounded)

14 SaaS use as replacement has risen in epurchasing What are your firms plans to complement or replace the following applications with software-as-a-service (SaaS)? epurchasing, Q % 37% epurchasing, Q % 31% epurchasing, Q % 29% epurchasing, Q % 27% Use or plan to use SaaS to replace Use or plan to use SaaS to complement N = 330 North American enterprises for 2010, 385 US firms for 2011, 456 for 2012, and 719 for 2013 Source: Forrester Research, Forrsights Software Survey, Q4 2010, Forrsights Software Survey, Q4 2011, Forrsights Software Survey Q4 2012, and Forrsights Software Survey, Q4 2013

15 SAP s acquisition of Ariba and Fieldglass means a big jump in its market share Market share of epurchasing and CLM vendors by size (percent of total epurchasing and CLM revenues) 22% 20% 19% 18% 18% All other vendors 17% 17% 16% 16% 15% 12% 13% 13% 13% 13% 22% 23% 23% 11% 11% 10% 15% 17% 19% 19% 19% 2011 Forrester Research, Inc. Reproduction Prohibited 14% 14% 9% 8% 11% 13% * *Forrester forecast Base: Data from more than 100 vendors (numbers are rounded) 21st to 40th largest vendors 11th to 20th largest vendors 3rd to 10th largest vendors Oracle SAP Acquisitions SAP Organic

16 Buyers have driven B2B ecommerce, with lagging adoption of ecommerce solutions Buyers have had more incentive to automate buying processes Buyers have had clear goal of cutting costs In a low inflation, slow growth environment, buyers have had more leverage to negotiate prices and set terms of commerce So buy-side technologies have gained more adoption than sell-side technologies However, sellers are becoming more active in trying to influence the terms of trade So, sell-side technologies are now starting to gain ground on buy-side technologies

17 The ecommerce technology map Sell-side ecommerce includes a range of solutions, include commerce platforms and CLM Source: Top Technologies For Your BT Agenda, July 29,

18 Firms have invested more in procurement software than ecommerce software Have implemented or plan to implement Procurement software Have implemented or plan to implement ecommerce software Global 2000 (over 20 K employees) 61% Global 2000 (over 20 K employees) 53% Very large (5-20 K employees) 58% Very large (5-20 K employees) 45% Large (1-5 K employees) 66% Large (1-5 K employees) 57% Medium-Large ( employees) 62% Medium-Large ( employees) 57% Medium ( employees) 43% Medium ( employees) 42% N = 382 medium, 250 medium-large, 423 large, 265 very large, and 272 global 2000 respondents Source: Forrester s Forrsights 2013 Software Survey

19 But new project spending is tilting more toward sell-side projects, not buy-side Percentage of new project budget devoted to buy-side projects Percentage of new project budget devoted to sell-side projects Global 2000 (over 20 K employees) 10% Global 2000 (over 20 K employees) 15% Very large (5-20 K employees) 12% Very large (5-20 K employees) 17% Large (1-5 K employees) 11% Large (1-5 K employees) 14% Medium-Large ( employees) 11% Medium-Large ( employees) 12% Medium ( employees) 11% Medium ( employees) 14% N = 510 medium, 422 medium-large, 510 large, 287 very large, and 250 global 2000 respondents Source: Forrester s Forrsights 2013 Budgets and Priorities Survey

20 And ecommerce and sell-side CLM catching up with epurchasing and buy-side CLM epurchasing and ecommerce Vendor revenues $7 (US$ billions) $6 $5 $4 $3 $2 $1 $0 $3.4 $3.9 $1.5 $4.5 $1.7 $2.1 $2.4 $5.0 $5.4 $5.9 $6.6 $2.7 $3.1 $ * 2015* * Forrester forecast Source: Forrester Research, Inc. epurchasing software ecommerce software $600 $500 $400 $300 $200 $100 $0 CLM vendor revenues (US$ millions) $477 $431 $379 $336 $296 $213 $250 $122 $171 $145 $136 $278 $243 $ * 2015* Buy-side contracts Sell-side contracts

21 Suppliers have to do different things for clients depending on their size and tech adoption Suppliers have to: Have an electronic catalog Be able to receive and respond to electronic purchase orders in standard formats Personalize content by company and by employee roles and authorities Customize catalog, content, and prices per contract requirements for large buyers Integrate directly into buying system of strategic customers Use supplier networks to connect to small and mid-size customers Provide electronic invoices For small & midsize clients For large enterprise clients For Global 2000 clients Yes Yes Yes No Many Most No Some Many No No Some No No Some Some Many Many Some Few Many

22 B2B involves two customer vifecycles Sourcing Qualification Sourcing Contract Invoicing End User Search Choose (Price vs utility) Approval & order Receive/ use 22

23 Usability is vital - users expect B2C features Easy search Comparison Filters Tailored process Peer reviews

24 But CPOs don t want their users to have access to all B2C features Upsell Cross-sell Drive impulse buying Extensive catalogue CPOs want to encourage down-buying and prevent up-selling

25 End users are caught in the crossfire Seller End User Purchasing Search & filter Mobile app Loyalty Sole source Upselling Solution to a problem Mobile requisitioning Personalization Fastest delivery Utility over price Visibility & control Inadequate Standardization Approved supplier Enforce policy

26 Supplier networks are where buy-side meets sell-side on the outside B2B buyers have many points of interaction with B2B sellers Spend analysis Market analysis Company A buy-side process Supplier assessment Sourcing Contracting RFx/tender Bid/proposal Draft contract Purchase order Prospect qualification Bid/proposal Contracting Company B sell-side process Procurement Response, ASN Order management Order receipt Receipt Order fulfillment Invoice Invoice receipt Advance payment notice Invoicing

27 Supplier networks provide PO, invoice and other document exchange The logic of supplier networks: a way to avoid the spaghetti of multiple one-to-one connections Buyer #1 Buyer #2 Supplier #N Buyer #N Supplier #1 Supplier #N Supplier #1 Supplier #2 Supplier #3 Supplier #2 Supplier #3 vs. Supplier #N Supplier #1 Supplier #2 Supplier #3 Buyer #1 Buyer #2 Supplier Network hub Buyer #N Supplier #1 Supplier #2 Supplier #N Supplier #3

28 Supplier network services: new vendors with disruptive free offerings will shake up Consolidation of supplier networks have slowed to a halt due to different pricing models and revival of industry-owned exchanges PO-focused supplier networks like Cap Gemini/IBX, Hubwoo, Perfect Commerce, and SciQuest overlapping and converging with invoicefocused supplier networks like ADP P2P, Transcepta, and Tungsten (formerly OB10) Industry-focused supplier networks like Agentrics, E2Open, Elemica, GHX, GT Nexus, and SupplyOn are still factors in the market, with varying degrees of growth EDI networks like OpenText GXS and IBM Sterling operate on a different plain, but are coming under pressure from supplier networks New entrants like Nipendo, Tradeshift, and Viewpost (as well as SaaS vendors like Coupa) are offering free PO and/or invoice delivery, threatening price model of Ariba and other supplier networks

29 PO/invoice supplier network services all subscription and services; Ariba gaining share US$ millions Percent of total $1, % $1,200 $1,000 $800 $600 $400 $200 $0 $98 $476 $99 $570 $105 $664 $110 $738 $116 $957 $136 $1, * 2015* Subscriptions revenues * Forrester forecast Service revenues 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 39% 2% 9% Base: 20 vendors (numbers are rounded) 50% 49% 49% 49% 47% 48% Ariba s acquisition of Quadrem and b-process 25% 22% 21% 4% 22% 3% 5% 26% 25% 19% 18% 4% 6% 30% 29% * 2015* Vertical industry networks Other horizontal networks Basware SAP/Ariba

30 EDI networks revenues are falling below supplier networks US$ millions US$ millions $1,800 $1,400 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $344 $410 $611 $566 $751 $696 $684 $768 $475 $500 $527 $916 $964 $1,059 $1,200 $1,000 $800 $600 $400 $696 $574 $684 $669 $769 $768 $916 $848 $1,259 $1,073 $964 $1,059 $200 $200 $ * 2015* Subscriptions revenues * Forrester forecast Service revenues $0 Base: 20 vendors (numbers are rounded) * 2015* PO/invoice network subscription revenues EDI network subscription revenues

31 But supplier networks become less important in a world of SaaS eprocurement The supplier network logic was compelling when every buyer was using onpremises eprocurement software But a SaaS vendor can provide one-to-many connections to suppliers on behalf of its buyer clients On-premises eprocurement Buyer #1 On-premises eprocurement Buyer #2 Supplier Network hub On-premises eprocurement Buyer #N Buyer #1 Buyer #2 SaaS vendor Buyer #N

32 On-premises eprocurement clients still outnumber SaaS eprocurement clients But with SaaS eprocurement growing more rapidly, it s a matter of time before SaaS marginalizes supplier networks 16,000 14,000 12,000 10,000 8,000 6,000 4,000 SaaS eprocurement clients Activated on-premises eprocurement clients On-premises eprocurement clients 2, * 2015* *Forrester forecast

33 Viewpost, TradeShift, and Nipendo are small, but potentially highly disruptive EDI networks, $973 MM in 2014 Open Text, $676 SPS Commerce, IBM Sterling, $126 $253 Other, $133 Liaison, $64 SAP, $36 Compuware Covisint, $86 Seeburger, $90 PO/Invoice networks $1,073 MM in 2014 SAP/Ariba, $317 Free PO and invoice delivery; make money on epayments Free PO and invoice delivery; make money on factoring receivables Free PO and invoice delivery; charge only when fully integrated into ERP E2open, $76 GT Nexus, $105 Supplyon, $51 ADP P2P, $44 GHX, $73 Basware, $47 Disruptors $20 MM in 2014; $40 MM in 2015 Other, $361 Viewpost, $12 Nipendo, $2 TradeShift, $7

34 Supplier networks with vertical industry focus like E2Open, GHX, GT Nexus, and SupplyOn best positioned to resist these disruptors They treat suppliers as customers, not just a source of revenues They are starting to sell software solutions to both buyers and suppliers invoice presentment and management, order management, supply chain planning and collaboration Vendor Primary industry Secondary industry Other SupplyOn Automotive Aerospace SciQuest GHX Universities and research labs Hospitals GT Nexus CPG, apparel Retail Governments Elemica Chemicals Rubber products E2Open Electronics Health care

35 Three archetypes of collaboration Source: April 24, 2012, The Changing Cloud Agenda Forrester report Forrester Research, Inc. Reproduction Prohibited 35

36 Shared structured data: two examples Data.com/Jigsaw Allgeier/CIERP3 In-Memory ERP Data.com/Jigsaw is a crowdsourced customer data approach. Multiple companies access and change a shared customer database. Only the relations between the customer records and your CRM tenant are confidential. The crowdsourcing-pricing gives one address for free for everyone you contribute. Source: salesforce.com Forrester Research, Inc. Reproduction Prohibited CIERP3 is an ERP system built on an In-Memory Database. Data-Objects can be mapped to multiple tenants (namespaces) across one cloud instance. No data duplication or transport. Source: Allgeier IT Solutions GmbH 36

37 Shared unstructured data Google Gmail and Google Apps Google does not officially share architectural details of Google Apps. But exploring the difference between traditional folders and Google-labels indicates that s are not even transported between sender and recipient. Massive de-duplication could mean that a single record is simply labeled to appear under the sender s Sent Mail and the recipient s Inbox label Forrester Research, Inc. Reproduction Prohibited Source: Google ( 37

38 Shared processes B2B Marketplaces The SupplyOn marketplace offers shared processes between manufacturers and suppliers for the European aerospace industry. The procurement and supplier selection process runs in the cloud. Only the negotiation results are stored back into multiple ERP systems. Customer examples AIRBUS/EADS/Eurocopter and others Source: SupplyOn ( Forrester Research, Inc. Reproduction Prohibited 38

39 Conclusions and recommendations epurchasing market continues to post solid growth, with eprocurement slowing as it approaches saturation, but other complementary products gaining adoption SaaS is becoming more and more common, even in eprocurement and CLM Sell-side ecommerce is starting to catch up with buyside, with spending on ecommerce solutions growing faster than epurchasing solutions Supplier networks are strengthening their market position, and gaining on EDI networks But new entrants like Viewpost will disrupt the supplier network space with their free PO and invoice delivery

40 Thank you Andrew Bartels