Despite the documented benefits of automating procure-to-pay processes, many companies still struggle with justifying the cost of P2P solutions and building a strong business case.
I did not write those words. Gartner did, in its 2022 Hype Cycle for Sourcing and Procurement Solutions. Yet anyone who has gone through a P2P implementation could have written that sentence.
We know P2P software can benefit businesses. It improves purchase compliance to contracted prices obtained during sourcing projects. It automates manual tasks such as document matching, order tracking, and payment approvals. It reduces finance and procurement team burdens by enabling self-service purchasing by employees.
And yet, P2P implementations often fall short of these aspirations. Complex processes and interfaces confuse employees, who circumvent the system to get what they want faster. Automation benefits are kneecapped by manual workarounds required to get data in the system and facilitate cross-functional coordination. Finance and procurement teams suffer reputational damage as onerous system rollouts frustrate stakeholders, whose perception of these functions as back office order takers remains unchanged due to the experience.
Procure-to-pay still has more to give. But it won’t reach its full potential in its current form. Instead, a new paradigm is needed — one whose value proposition corrects the fatal flaw that caused P2P to plateau before it had fully delivered.
That new paradigm is intake-to-pay, and it will eat procure-to-pay within the next 1–2 years by solving first for adoption by end stakeholders, so it can drive greater visibility of spend, proactive influence on stakeholder demand, and continuous optimization of the end-to-end procurement process via a broader procurement orchestration layer.
What is Intake-to-Pay?
An intake-to-pay system is an integrated software solution that enables adoption and automation of the entire procurement process from initial purchase need identification and request through to purchase approval, ordering, invoicing, and issuing of final payment.
Intake-to-pay coordinates the full spectrum of downstream procurement activity, including not only the traditional procure-to-pay process but also vendor onboarding, information and document collection, and risk and relationship management.
The crucial component of intake-to-pay, though, is the addition of an integrated intake-to-procure process to procure-to-pay.
As discussed in our April edition where we defined the differences between intake management and procurement orchestration, intake-to-procure solutions provide a centralized interface for all stakeholders to request, approve, and collaborate on pre-purchase order (PO) procurement processes.
This is an essential point because, before the creation of intake-to-procure as a process category, the information gathering and approval process that occurs before the creation of a purchase requisition (PR) primarily happened outside of procure-to-pay (P2P) solutions via manual tools such as email. Our own research into this process has found that the typical purchase request requires 20–50 emails per request to finalize a PR, a state of affairs that not only robs finance and procurement teams of promised P2P efficiency gains but also reinforces procurement’s image as a blocker rather than an enabler for stakeholders.
Procure-to-Pay is No Longer Sustainable
Before procure-to-pay, there is a gaping hole at the start of the process. Stakeholders don’t know where to go to initiate a request or order, and even when they do know where to start, they use such systems so infrequently that they don’t know how to operate the tools. This causes them to reach out to finance or procurement for manual remediation, which then leads them to either a PDF process guide with hundreds of pages of screen shots and instructions, or, in some scenarios, dedicated teams within finance or procurement who manually key in PR and PO data to encourage stakeholders to bring their spend to them without the hassle of interacting with P2P.
Case in point, I once attended an eye-opening presentation at SIG by a major outdoors equipment retailer on how they restructured their procure-to-pay process as part of a wider procurement transformation initiative. In order to improve stakeholder engagement and perception of procurement, they committed to manually entering all of their PR/PO data on behalf of their requesters. To support that strategy, the procurement team absorbed 7,635 labor hours/year (equivalent to ~4.6 FTEs).
In 2023 and beyond, however, such approaches will increasingly become unsustainable. Finance and procurement team members are burning out or moving on to other positions, leaving teams strapped for resources. Volatile economic conditions are causing leadership to home in on efficiency as their key initiative going forward, bolstered by a generative AI hype cycle that is promising to thin back office payrolls.
To survive, finance and procurement teams will need to orchestrate every resource at their disposal. They must automate every piece of transactional work they can to win back time in their days. And they need to use that precious time to build the relationships with stakeholders they need to influence and deliver value on strategic priorities.
Integrating intake-to-procure with the P2P process is Step 1 on a journey to a more strategic end state, because it focuses first on the root cause of P2P implementation failure — poor adoption of the process by employees and suppliers — and then delivers automation and optimization of the process beyond what it is today.
The 5 Causes of the Procure-to-Pay Plateau
Realizing the potential of intake-to-pay requires a deeper understanding of the headwinds that limited the success of procure-to-pay. When a typical organization is seeing only 50%–60% adoption of its P2P process, they need to know why.
P2P got us part of the way there, but it won’t get us where we need to go. There are five barriers we need to overcome to leave the plateau.
1. P2P ignored the request process
P2P systems included support for purchase requisitions, but the way they modeled this process ignored the complexity and requirements needed to make fielding requests actually work.
What P2P offered for purchase requests was e-forms, many of which were inflexible and unintuitive. As a requester, if you didn’t know how to input the requested data correctly or what the appropriate way to answer a question was, you had to reach out to finance or procurement to troubleshoot or get the answer.
Said another way, P2P did not acknowledge the existence of the intake-to-procure process. Instead, it assumed all of the needed data collection and approvals for an order would happen offline, and at some point requesters would come to finance or procurement’s interface ready to order. Intake-to-pay addresses this gap by integrating intake-to-procure into the P2P process natively, filling this essential gap.
2. P2P didn’t work for services spend
P2P solutions were built for an industrial, goods-centric world. They work well for purchases that are easily modeled by a catalog. That is, they work for purchases where the product, quantity, price, and delivery details are all predefined and consistent.
When it comes to buying services, however, P2P fell short. Services procurement is often more complex, as these categories can vary widely in scope, duration, and delivery method. The pricing of services can also be more complex. Pricing might be based on time and materials, milestones, performance outcomes, or other factors. Standard P2P systems, which are typically designed to handle straightforward unit pricing, did not support these pricing structures effectively.
Intake-to-pay is built for a world where services are rapidly growing their share of budgets. A proper intake-to-procure process gathers inputs for services like software or contractors or legal advisory and acknowledges the criticality of contracting as part of the workflow for purchase requests. It makes services more visible and easier to collaborate on for approvals, closing the adoption gap for purchases that were poorly suited for processing in traditional P2P systems.
3. P2P was an island
Procure-to-pay systems involved integration work, primarily with ERP. And they sometimes integrated other data sources, like punch-out catalogs or supplier diversity or risk data. But the full extent of integrations was limited by the desire of P2P providers to consolidate more processes in-house.
The reality, as discussed above, is that purchasing is a cross-functional process that requires significant coordination with legal, IT, security, finance, and others in order to work effectively. And each of those functions works in its own systems already. Without deep and seamless integration into the overarching workflow, process steps become bottlenecks and users need to enter data manually into multiple systems, which is time-consuming, error-prone, and discourages adoption.
Intake-to-pay acknowledges the cross-functional nature of the broader purchase approval workflow and integrates supporting CLM, GRC, ITSM, and other systems into that process, rather than fighting against them.
4. P2P was narrowly designed for procurement
It may seem obvious that a system called procure-to-pay would be designed with procurement in mind. Yet that focus was also the downfall of a lot of P2P deployments.
Getting value out of P2P is dependent on stakeholders adopting the process and the system, because they must comply to the process in order for procurement to realize negotiated rates, for the data in the system to be accurate and fresh, and for all sides to obtain the efficiency improvements they seek.
With that in mind, P2P should have been designed with end users in mind first, not just finance and procurement.
The results are what we see in P2P evaluations today: long RFPs filled to the brim with nice-sounding features that seem necessary to the procurement user but in reality do not get fully utilized. These features were built with the goal of optimizing for compliance, not adoption, which led to highly rigid workflows and data models that baffled rather than educated stakeholders.
As intake-to-pay develops, our assumptions about how the purchasing process works will evolve. The system will programmatically apply policy to make the purchasing process intuitive, and the experience will be as intuitive as a consumer app. The goal will shift from raising awareness of your P2P system user guide to deleting it altogether.
5. P2P treated suppliers like second-class citizens
Not only did P2P minimize the challenge of end user adoption internally, it also treated suppliers as tertiary to the process.
Ideally, suppliers would experience automation and visibility benefits from collaborating on a more digitized P2P process. In practice, however, suppliers did not get this from P2P. Instead they got portal fatigue, minimal help digitizing themselves, and increased administrative work to interact with their customers.
Intake-to-pay reduces burdens on suppliers by working with them earlier in the process to gather key information and documents upfront, while providing them visibility into the request and approval workflow. By prioritizing adoption and collaboration as the starting point, intake-to-pay will bring suppliers closer to their customers, rather than alienate them.
Intake-to-Pay is Modernizing Procure-to-Pay
It’s important to acknowledge that the era of P2P has not been an abject failure. P2P did deliver serious benefits, and we all owe a debt to the foundation it has laid for better standardization and automation of purchasing.
It’s also important to acknowledge that P2P is a mature market that has largely plateaued. Many organizations have accepted the status quo of incomplete adoption, onerous change management processes, and manual workaround to get these systems to actually work.
In this era of recurring economic and geopolitical volatility, combined with a new wave of top-down pressure to increase efficiency, finance and procurement leaders need more from their P2P process. They need it to become a form of procurement orchestration rather than a digitized version of a rigid process aimed at compliance.
In that context, intake-to-pay is an evolution of P2P rather than a replacement. By integrating intake-to-procure into procure-to-pay, intake-to-pay will make the entire process work better, because it will drive the upfront stakeholder adoption needed to create earlier and wider visibility of spend, automated orchestration of cross-functional approval processes, and continuous optimization of the components of those processes.
And most exciting of all, it’s only getting started.
Enjoy this newsletter?
Sign up yourself if this was forwarded from a friend or colleague.
Need help with something? Hit reply to send us research questions or to say hello. We love to trade notes!
Note: By clicking subscribe you conﬁrm that you have read and understood the Zip Privacy Notice that explains how we collect and use your personal information, and includes directions on opting out from our newsletter. If you have any questions, please reach out to firstname.lastname@example.org.