The Age of Analytics: Mainstream Adoption by Procurement Expected to Triple by 2021

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Procurement has likely entered the beginning of a massive swell in the adoption of advanced analytics tools. Researchers from The Hackett Group have found that mainstream adoption of advanced analytics in procurement functions is expected to more than triple in the next two to three years, increasing from the current 20% to 63%.

This trend holds true for other functions, as well. Adoption of advanced analytics is expected to increase from 5% to 41% within finance departments, from 6% to 67% within IT departments and from 8% to 53% overall.

Given the benefits associated with the effective use of analytics, the increased adoption makes sense. Earlier research has found that analytics-driven organizations are twice as likely to be top financial performers and five times as likely to make faster and better decisions.

In a survey conducted by The Hackett Group for its 2018 Key Issues study, about four out of five executives across functions viewed improving functional analytical, modeling and reporting capabilities as being highly or critically important. Similar figures apply for procurement executives specifically.

Source: The Hackett Group

Market intelligence, spend analysis and procurement scorecards are some of the predictive and prescriptive analytics tools that procurement executives plan to adopt in the next two years. Procurement functions are by far most sanguine about spend analysis, the adoption of which is expected to increase to 73%.

Executives are also predicting a significant jump in the mainstream adoption of cognitive computing and artificial intelligence (AI). Only 4% of procurement executives currently use cognitive and 11% AI, but those percentages are expected to increase to 16% and 35%.

More broadly speaking, mainstream adoption of cognitive computing is expected to increase to 16% across organizations, and for AI, adoption is expected to reach 31%. The procurement and IT functions are expected to undergo wider adoption of these technologies than finance or human resources.

However, there is still quite a bit of work to be done before organizations can become analytics-driven, the Hackett report shows.

Less than half of procurement executives say that their organizations have analyzed and quantified their procurement operational risks. For 44%, procurement process execution status and operational performance are continually monitored, with performance variances analyzed and predicted.

The talent gap poses another challenge. The Hackett Group’s Joel Bresser, senior director, and Erik Dorr, vice president of research, argue that data savviness, business acumen, relationship management, agility, creativity and a strategic mindset are the key competencies of a digitally enabled workforce.

“Tomorrow’s digital and analytic workforce will have dramatically different roles in business functions,” write Bresser and Dorr. “These individuals will need significantly enhanced skills and competencies [in] a range of disciplines in order to perform those roles. Many organizations, however, lack sufficient depth in these skill sets today.”

Check out the full report from The Hackett Group here.

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First Voice

  1. Mark Usher:

    The other dimension of interest here is size of organization. Based on my interactions with my mainly mid-market procurement customers over last couple years (say $200-1B sales range) there has been increased appetite to get a handle on core spend visibility but for many the ‘upmarket’ toolsets of AI/cognitive are not yet on their radar. Some I’ve run into have also had less than stellar initial experiences with auto-classification/machine learning, in many cases due to poor level setting of expectation re: what auto-class. does and what it doesn’t. What I tell my mid-market clients is stay focused on your specific decision making information needs & let the providers pitch their capabilities very much custom to these needs. This is even more important when there has been so much M&A in the spend analytics provider market and lets face it the suites would vastly prefer all customer needs to be identical. Big message IMO is the advanced analytics tools will be 100% adopted one day, but for a little while you have a lot of mid-market folks who are still trying to get 100% of their spend over the first hurdle.

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