Analyst Eye on ancient challenges procurement faces

Continuing our series of analyst observations on procurement tech market movements, this week we are considering how technology serves as an enabler for procurement to expand from purely occupying a savings role to an orchestrating one.

The Spend Matters analyst team learns as much from the various workshops and advisories in which we participate as the solution providers with whom we work. Our recent work has covered topics as varied as UX, AI-ML, low-code/no-code, intake process guidance (orchestration and collaboration), supply and payment risks and advanced analytics. “However,” Xavier Olivera, Spend Matters lead analyst for downstream procurement, states, “what somewhat frustrates or saddens me is that the key challenges service providers and organizations face resemble those I remember from my start in this world of information technology and consulting — which was almost 30 years ago!” Even though the latest in procurement technology is Spend Matters ’bread and butter,’ some of the actual issues these advancements in tech address remain the same.

The first ancient issue procurement still struggles with is that even though the recently published Deloitte CPO survey, which was produced in conjunction with Spend Matters chief research analyst Pierre Mitchell, highlighted the conducting role that a top-achieving CPO plays in orchestrating an organization’s functions, procurement’s role within the organization is still purely understood as a tool to get savings. This role forces procurement to treat suppliers as a worker not as a business partner. “Traditionally,” Xavier explains, “the buyer held the purchasing power. They could squeeze a supplier’s profits. This has changed, however. On many occasions, the power is actually held by the supplier due to the risks of ensuring the stream of supply, changing the relationship’s dynamics.”

Procurement’s best path towards savings, then, is not through haggling with suppliers but optimizing the orchestration of operational activity — which runs procurement directly into yet another ancient issue: gathering quality data. The data-related challenges procurement faces — the complexity of today’s world, the large amount of data and information involved in making the right decisions, the growing competitiveness in organizations, the need for connectivity and access with all type of sources, the holistic and value creation approach, etc. — have accumulated and only continue to accumulate, especially for organizations that continue to grow and have already invested heavily in technologies in general, e.g., IT.

Just as the procurement department of today best serves the organization by expanding its purview beyond solely saving money from suppliers, procurement solutions best serve practitioners by expanding their horizons beyond single, isolated applications. The result, as Pierre has explained before, is a movement towards platforms and a platform of platforms. Within all those platforms, you still need that orchestrating role to move and translate information between systems. In fact, a new category of solutions, which includes Zip, ORO and Tonkean, has emerged to resolve this very issue. You can read about them here.

“If you go to, say, Australia,” Xavier says while explaining these new solutions, “you need an adapter to connect your devices because the voltage is different. Similarly, platforms try to translate all the data gathered into one uniform operational language. Companies have already invested a lot into their systems landscape, which is often already perfectly operational, so they are not going to throw it all away.” What they are doing in order to continue growing and adding value to their business is assembling a solution ecosystem made up of multiple solutions that can work in a unified and orchestrated way to solve business challenges. As time passes, complexity increases, the amount of data gathered grows and businesses need ever-more intelligence to make decisions, discern the important aspect of data and navigate that complexity. More and more solutions crop up to attack the individual heads of this hydra , but the user needs an orchestrated field of action to succeed.

Making the necessary decisions to develop an ecosystem could seem like starting from scratch, but that is not really required. What is required is discovering the solutions that perform best within a needed field of action. With Spend Matters TechMatch, for example, you can see how different vendors match up and how they cope with different requirements according to your answers to a questionnaire. For P2P, this can mean comparing the degree to which a solution provides guided-buying or how well it can receive all goods, assets and services to match with POs and invoices. All solutions do something well. It’s a matter of finding the one that can both serve an organization’s direct need and best fit within that organization’s solution ecosystem.

Technology is an enabler. It may allow procurement to expand from pure savings to delivering value via the orchestration of an organization’s functions. But it requires procurement to leave behind its traditional role of ‘savings generator’ and become a truly central part of the business that generates value for all stakeholders related to the area. Procurement is experiencing a moment of change that it has to take advantage of. By making the best use of the new technology at its disposal, it can move from its old operational role to one that is truly strategic for the business. This is the time!

But what now?

• If you want more Spend Matters Insights on how Procurement can drive value and overcome age-old issues, become an Insider and receive expertise informed by more than 10 years of independent, zero pay-to-play, brutally honest coverage of vendors, market developments, M&A activity and trends affecting procurement, finance and supply chain.
• If you want more in-depth coverage of any solutions that may complement your solution ecosystem, you can research vendors and consultants serving the procurement and supply chain industry by using Spend Matters comprehensive, free directory.
• If you have found solutions and can’t judge which enables your organization to be the most efficient, log into the TechMatch, where you can directly assess the capabilities of digital procurement solutions, conduct side-by-side comparisons and identify product and service differentiators.