Where is the Procurement Software Market Going and Why

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This is Part 2 in a three-part series tracing the evolution of procurement technology and the value it has generated in the past, expectations for today and where things might be headed in the future. In this installment, we’ll explore how expectations for procurement technology are changing in today’s environment.

Part 2: Applying Lessons From Procurement’s Past to Today

The incredibly rapid evolution of procurement technology (which I explored in the first installment in this series) might seem too good to be true. And it was, especially for organizations that got caught up in technology limitations of first- and even second-generation solutions. Indeed, far too many implementations of procurement technology to date have:

  • Been driven by functional vs. broader company organizational integration (i.e., procurement pursuing activities in silos)
  • Emphasized too much customization of software for often low-value business purposes, which delayed implementations and sometimes ran counter to the outcomes they were trying to achieve
  • Served “off the shelf” or generic needs versus targeted requirements by industry or by company despite the customization efforts referenced above (early Ariba implementers and consultants, you are guilty as charged!)

The procurement era we are operating in today is different and comes with a new set of expectations beyond just supply assurance and year-over-year cost reduction.

Procurement is now expected, for example, to engage the business and suppliers to drive innovation (and even top line revenue), identify and reduce business and supply chain risks, and effectively manage not just spend but also working capital and overall expenditure –– including influencing demand requirements at the source (as opposed to simply capturing them in a sourcing activity or requisition).

One way of looking at these new requirements is to divide them into three separate areas:

  • Improving control and lowering risk
  • Enabling agility and overall innovation
  • Driving high adoption that guarantees outcomes

Let’s bring each of these three areas alive with actual case examples:

Improving Control and Lowering Risk

  • A mortgage finance company was able to bring 100% of purchase requisitions and purchase orders online by deploying a P2P solution across all users.
  • A financial services firm as able to analyze 100% of total spend –– yes, 100%!
  • A global information services provider was able to reduce supplier (invoice) overpayments to 0%, eliminating the need for invoice audit recovery activity and materially improving working capital.
  • A global manufacturer was above to implement a supply risk management program within a toolset that actively tracks 2,000 suppliers.

Enabling Agility and Overall Innovation

  • 26,000 employees at a European insurance firm and 10,000 suppliers made use of a P2P system within one year of deployment.
  • A large insurance company managed 1,000+ procurement projects (not just sourcing events) online in a single year.
  • A large automotive supplier managed 1,000 productivity action plans and tracked savings at all stages of its programs.
  • A global metals producer managed 3,000 individual supplier evaluations and audits across 150 sites within a single solution.

Driving High adoption to Guarantee Outcomes

  • A financial services firm achieved 100% employee adoption across 8,000 employees (including 1,000 employees within two weeks of an initial “go live”).
  • A public sector nuclear power company has over 72,000 users of its source-to-pay system.
  • A global automotive manufacturer on-boarded 95,000 suppliers.
  • An engineering firm manages 18 million individual documents within its procurement systems.

Results like these are impressive. But they are also essential for procurement organizations faced with new requirements such as sustainable procurement cost reduction, continuous improvement and broader business enablement.

Technology Implications

To enable meeting new business expectations and requirements and to achieve these types of outcomes involves thinking through how technology will be used by everyone in the company –– and how procurement solutions have become, in effect, procurement’s face to suppliers and others in the business. It also involves selecting technologies based on enablement and outcomes rather than simply on “check the box” functional requirements.

As important, it involves thinking through how technology can:

  • Capture and support all goods/services and spend types (not just direct and indirect spend!)
  • Support unique requirements by industry, geography, etc.
  • Enable simplicity to drive high adoption by all types of users, including “casual” users in the business, requestors/approvers, tactical buyers, business unit spend owners, data analysts, configurator/administrators and IT integrators (not just for requisitioners)
  • Provide rapid access to data, visibility and analytics that spans suppliers, sourcing events/activities, contracts, P2P data (requests, POs, receipts, invoices, etc.), working capital, expense data and risk information  
  • Achieve as close to 100% supplier enablement as possible and capture tail spend (i.e., going beyond the “80/20” rule)

A few years ago, it would have been difficult to check the box on all of these requirements. But given the rate of innovation with procurement technology and the benefits brought on by cloud and network deployment models, just about anything is possible today with the right approach, patience, buy-in and budget.

But of course this begs the question: Where are we headed in the future? In the final installment in this series, we’ll take out our looking glass and investigate.

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