Intelligent software agents in advanced sourcing: The bots really are the experts

Exciting times for Ireland-based, sourcing automation and optimisation software firm Keelvar. We don’t hear from them for a few years then, suddenly, major news! Keelvar, which is currently managing more than $90 billion in spend annually for blue-chip firms like Siemens, Coca-Cola and BMW, announced last month an impressive $18 million Series A funding round for expansion following the success of its AI-driven sourcing bots development.

Clearly we were keen to find out more from founder and chief executive Alan Holland.

An upswing in demand for advanced sourcing

Keelvar has been witnessing a more urgent demand for advanced sourcing software, and not just since the current pandemic and its impact on the supply chain. This is something that is borne out of ‘need for speed’ and automation. Never before has the firm seen so many large firms knocking on its door asking for a solution that can help them rapidly — not in a few months’ time, or next year, but within the next ten days!

“For years,” says Alan, “we’ve been telling customers that their timelines are too drawn out. Enterprises expected long procurement technology implementations, but all that is changing. The automation of everything is accelerating – and now the shoe is on the other foot. Large enterprises are realising that modern SasS-based companies, like ours, can do things much faster. So there has been a complete shift in expectations.”

Keelvar started to see this trend arising late last year. Some of its biggest customers liked the capabilities they saw in its sourcing automation solutions and were requesting faster and faster time to deliver. At the time, however, Keelvar didn’t have the resources readily available to answer that demand and to scale outsourcing bots across the wider world across all categories as fast as customers would have liked. “While we have always grown profitably,” said Alan, “we have grown organically, and hired according to new customer demand, but we weren’t building capacity in advance.”

That situation changed with more customers hungry for faster rollout of automation. Earlier this year Keelvar decided it needed to ramp up resources to respond to urgent demand — while the pandemic was not the source of this, it certainly accelerated it.

Intelligent sourcing agents as expert sourcing managers

As the firm’s initial sourcing optimisation solution is now developed to the point of being completely feature-rich and is used by many of the world’s big brands, Keelvar wanted to do something a bit different. They came up with an advanced sourcing tool that hasn’t been tried before and would be easy for the average sourcing manager to use.

Keelvar realised that the market doesn’t need to understand optimisation or even why they need it, they just need it to do its job. Alan explained: “Optimisation has been around for a long time — but it has only been the senior leadership teams and the expert sourcing managers who really understood its value and were brave enough to try it. So our idea was to build something radical, intelligent software agents that could source better than the expert sourcing manager — enter our AI-powered sourcing bots. They simply hook into the API of our sourcing optimiser product — so no complicated user interfaces — and become a sourcing expert for every category of spend.”

“The intelligent agent is powerful, because it knows everything there is to know about a spend category: the entirety of the supply base, what bidding mechanisms work best, target rates, speed of bidding, whether you use ascending price, how many rounds of bidding you should do, and all the key parts of the process. All the data collected is structured, and that’s the benefit of having a sourcing optimiser. That structured data can be mapped against taxonomies and comparisons can be made between a company’s taxonomy and the Keelvar standard taxonomy, so that you get a coherent market view of that spend category. Intelligent sourcing agents can be developed for each category and, frankly, outperform them.”

This kind of sourcing initially was used for MRO and freight, but Keelvar has begun collecting enough data to develop the bots for every other category. It has built different levels of bot intelligence per category, which grows and develops as more and more data is harnessed. This means that immediate value can be had from any optimisation exercise for any company. Bots are usually rolled out by category, and typically full automation can be arrived at in just a few weeks.

The business model

Unlike traditional business models in the software world, where user licences are the norm, Keelvar has units of work call ‘billable bot actions,’ akin to utility pricing. An average mini tender might use between 7 and 15 bot actions for example, but each one costs less than a euro. Add to this economies of scale as throughput increases, and it’s pretty cost-effective. As our analyst Magnus Bergfors said, “this is an interesting model and one which we have not yet seen in SaaS. Customers will be able to pay annually in advance for estimated bot actions until monthly activity levels are confirmed.”

While this solution is more about transactional sourcing, it can augment what you are doing in strategic sourcing. It frees up time for more relationship building to take place, and for more risk management to be managed. “There are many things that require human empathy,” says Alan, “but automating processes that can and should be automated is not one of them.”

Growth and development

Keelvar’s impressive first round of funding will help the firm build a larger solution engineering team to develop granularity and more specific categories and sub-categories. They will also be focusing on developing richer dashboards; as with any automation, it leads to fewer users, so being able to see quickly and easily what has happened and generate targeted reports is vital.

The firm is rapidly growing headcount. We are going to see a senior leadership team developed in North America and the US market will build out from there. Europe is also a major growth area we understand.

So there is a lot of interesting work going on at Keelvar. We are excited to see what the bigger picture will look like in the near future: integrations with other vendors maybe? Analytics? Supplier relationship management?

Also of interest is a Human+Machine contest that Keelvar is aiming to put on in Q4 2020, to see how its bots compete and whether AI can really deliver on its potential — we look forward to that.

Magnus will be taking a closer look at the tech too in the coming weeks — so look out for his analysis — in the meantime, watch this fascinating space!

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