Though the middle market might have more resources than small businesses, many firms in this category are only just beginning their digitization journeys. As these businesses migrate to the cloud and upgrade their back-office systems, their service providers are tasked with finding the middle ground between offering sophisticated, cloud-based solutions and ensuring that those tools are user-friendly to accommodate first-time users.
Stanton Jandrell, CEO of procurement software provider Fraxion, recently told PYMNTS that this is precisely the balance required in the procure-to-pay space.
"There is a reasonable amount of flux in our target market base, which is the result of companies implementing new ERP systems," Jandrell said of the mid-market's shift toward the cloud. "The biggest challenges are the adoption of cloud-based technologies to solve procurement challenges, and the relative immaturity of the markets."
Many of Fraxion's middle-market customers are using eProcurement software for the first time as they shift away from relying on their ERP systems or other legacy tools to manage purchasing. This trend makes the usability of eProcurement solutions key to successful adoption, though, as Jandrell emphasized, these tools cannot negate the complexities of middle-market firms' eProcurement needs. These businesses not only need a solution to generate purchase orders, but value-added micro-services.
Plus, said Jandrell, these firms increasingly require the capability to manage processes before and after purchases are made.
Historically, that has meant disparate, siloed platforms for expense management, contract management, accounts payable automation and more. Yet, just as the cloud has introduced new opportunities for middle-market businesses to heighten efficiencies, it has also opened doors for service providers looking to meet the demand for value-added services that can integrate with each other.
Traditionally, Jandrell noted, silos have existed between the procurement function and other processes because the mechanism to integrate data was difficult and costly.
"Three to four years ago, maybe even as little as two years ago, it was too complex to have an ecosystem of these solutions cooperating and working together," he said. "But that has certainly changed, and the change has accelerated in the last year or so."
Data connectivity and API integrations are at the heart of that capability to seamlessly connect procurement to payment, spend management and beyond. Jandrell added that evolutions in data extraction technology continue to open doors to enhance data integrations and elevate the capabilities of these solutions. He also highlighted machine learning and cognitive services that can more accurately, easily and quickly extract data from an invoice, for instance.
"A lot of competitors in the [accounts payable] world use a combination of [optical character recognition (OCR)] and people to validate data," he said. "That tends to mean there is a cost associated with processing an invoice that's not truly electronic to extract data. Cognitive services and AI platforms will drive that down to just a few cents."
Similar opportunities for efficiency exist in predictive analytics and forecasting technologies, which are driving the procure-to-pay space toward a procure-to-pay ecosystem in which humans are only involved for exceptional transactions. Recurring, everyday or consistent purchases for years — like the procurement of office supplies that have been about the same price — still require human approval and intervention today. However, technology is evolving to remove the need for human involvement in such transactions, which can similarly save businesses time and money.
The innovative drive of procure-to-pay solutions for the middle market reflects this customer base's own pursuit of elevated functionality, as it embraces the cloud and digitization.
There is still a long way to go in terms of technology's ability to offer fully automated procure-to-pay workflow — and in terms of the middle market's adoption of such tools, considering the industry's position in the early stages of cloud adoption. Yet, Jandrell noted that being in the early stages of digitization is not to be confused with the need for elementary tools.
"What's going to be interesting is to see how we can help the middle market begin [its] journey to automation in the procurement process," he said. "This is about making the technology they're using — for the first time, in many cases — as intuitive as possible. We're [seeing] much more user-friendly applications that allow people to participate very easily in automatic procurement, and that extends into the payments, contract management and other processes. That doesn't mean simpler software; it means that the software requires a much more intuitive design, and more focus on [AI] than probably ever before."