When to add an S2P Solution to your ERP as part of Digital Transformation
Many organisations rely on their ERP systems to manage procurement, but as their procurement needs evolve, they may find themselves considering a Source-to-Pay (S2P) solution. While ERPs provide essential procurement functionality, they may lack the flexibility and advanced features needed to optimise sourcing, supplier management, and spend control. As part of a broader digital transformation strategy, implementing an S2P solution can help drive efficiency, automation, and better decision-making in procurement.
ERP versus S2P: Understanding the Differences
ERP systems are built to integrate various business processes, including finance, procurement, and inventory management. However, their procurement capabilities are often transactional rather than strategic.
S2P solutions, on the other hand, are designed to streamline procurement end-to-end, from sourcing and contract management to invoicing and payments. They provide deeper insights, automation, and supplier collaboration features that standard ERPs often lack, making them a key enabler in digital transformation initiatives.
When ERP Procurement might be Enough
If your organisation has relatively simple procurement needs, an ERP’s built-in purchasing functionality may be sufficient. ERPs work well when procurement is largely operational, with limited supplier complexity, or when tight integration with finance and inventory is needed for basic purchase order processing. Cost sensitivity and minimal need for advanced analytics or automation can also make an ERP a viable option.
Some high-end ERP solutions do offer more advanced procurement functionality, either through their core ERP product or via add-ons and extensions. While these offerings can provide more comprehensive procurement capabilities, they may still lack the depth and specialisation of a dedicated S2P platform. Organisations should carefully assess whether an ERP’s extended procurement capabilities meet their specific needs or if an S2P solution provides additional value.
When to consider an S2P Solution
An S2P solution becomes a strategic advantage when procurement needs become more complex. Organisations requiring advanced sourcing capabilities, such as e-auctions and contract lifecycle management, will benefit from S2P’s ability to manage supplier performance, compliance, and risk more effectively than ERP systems alone. Additionally, businesses operating across multiple regions with varying regulatory requirements can use S2P to centralise procurement and standardise processes.
Improving user experience is another key driver for adopting S2P. ERP procurement interfaces can be cumbersome, whereas S2P solutions are designed to offer intuitive tools and self-service portals that simplify interactions for employees and suppliers. Enhanced real-time spend visibility is also a major advantage, helping organisations enforce compliance and identify cost-saving opportunities.
Supplier collaboration and risk management are also strengthened with S2P, as these solutions go beyond basic purchase order management to facilitate supplier onboarding, performance tracking, and compliance checks. Furthermore, AP automation and invoice matching are often significantly improved with S2P, allowing for touchless processing, AI-powered matching, and automated approvals—reducing manual intervention, preventing errors, and accelerating payment cycles.
Finally, scalability and innovation can make S2P a worthwhile investment. As procurement evolves, S2P solutions increasingly leverage automation and AI-driven insights to adapt to market changes and emerging business needs, ensuring organisations remain competitive and agile in their procurement operations.
Balancing ERP and S2P Integration in a Digital Transformation Strategy
The decision to implement an S2P solution should be based on business needs, integration capabilities, and ROI. While ERP procurement may work for simpler operations, organisations looking for efficiency, control, and strategic procurement benefits will likely find that an S2P solution enhances their capabilities.
It is also important to consider how an ERP and an S2P system work together. S2P solutions typically complement ERP systems by focusing on the Source-to-Contract (S2C) and Procure-to-Pay (P2P) processes, providing greater control over supplier selection, contract management, and procurement execution. However, maintaining two systems requires careful integration, particularly in areas such as master data management, purchase order processing, and invoice reconciliation. Organisations should ensure seamless data flow between systems to avoid duplication, inconsistencies, or inefficiencies. A well-integrated ERP-S2P ecosystem enables businesses to maximise the benefits of both solutions while ensuring a smooth digital procurement experience.
Integrating S2P into your digital transformation roadmap streamlines procurement, enhances supplier relationships, and optimises spend management, resulting in a more competitive and resilient organisation in the digital era.
This blog was written by Jim Goodison, Principal Consultant at Lumenia. For further information please send an email to Jim Goodison.
