IBM CPO Bob Murphy – Analytics and AI at Heart of Procurement’s Future

We featured a picture of him in one of our Friday "Down the Procurement Pub" columns recently, but we have not as yet written much about our meeting with Bob Murphy, the CPO of IBM – yes, he runs the whole lot, all $48 billion in third-party spend and several thousand people in the function.

Murphy, an engineer by training, replaced the legendary John Paterson who retired last year, which makes it two Scotsman in a row. And he is another loyal company man, having worked for IBM for over thirty years. We covered a fair bit of ground, so today we'll just pick up on some of the interesting points he made, and we may well come back later with more from our conversation.

Murphy is very direct, in a good way, and you imagine that he would be a tough but fair “opponent” in a negotiation. And whilst this is a bit of a cliché, he seems genuinely passionate about IBM and procurement. As we mentioned here, IBM's strategy is now to use their internal procurement team and capability to help sell procurement solutions, including the Emptoris software products as well as outsourcing and other services. So Murphy is increasingly finding himself talking to clients and potential clients; it's a smart strategy for the firm, we suspect, and he will go down well with practitioners as he is so obviously one himself.

Procurement is much closer to the relevant sales team now in IBM, with visibility on their wins and losses. Murphy is also aligning procurement more closely with internal stakeholders and their requirements – “we have 12 workstreams as part of our #getsimple initiatives where we measure ourselves on our ability to decrease complexity, increase our speed and improve our agility”, he says.

His team is also close to the transformation in the outsourcing offering - “the best measure of success is how external clients recognize IBM Procurement Services shifting from a service delivery to trusted advisor role, by involving us in process workshops, strategy meetings and so on”.

As we’ve noted before, IBM are putting a lot of emphasis into analytics and Watson, their cognitive AI-type super computer. As Murphy says, “we rely more and more on cognitive analytics solutions  - how procurement and sourcing professionals consume and exploit data will see profound changes”.

He has a neat description that describes the role of analytics evolving like this:

DESCRIPTIVE      -              What happened?

PREDICTIVE        -              What will happen?

PRESCRIPTIVE    -             What should we do about it?

COGNITIVE         -               Systems learn to interact naturally with people

But if you think Watson sounds very futuristic, Murphy also brings it back to tangible procurement issues, describing how the firm can take advantage of the Watson Buying Assistant which uses that technology. It can support users, for instance in making buying decisions from catalogues, and direct them down the best procurement path using its analytics and AI capabilities.

“If we were to take an example organization with $1bn addressable spend, and the sourcing teams are taking out 5% of cost per year, that would result in $50m sourcing savings opportunity. However, average organizations typically have 55% compliance, yielding only $28M of that $50M savings opportunity. If WBA could drive only 2% incremental compliance, there would be an additional $1M to the bottom line. We think Watson could easily generate more than that”.

He is very positive about the partnership with Coupa, as you might expect, but comes back to analytics as perhaps the number one factor when he sums up his thoughts about the future.

“ The next step in our search of value will be powered by our ability to embed Big Data and Analytics into the fabric of everything we do. Looking at our customers, we believe enterprises will have an insatiable appetite for mobile innovations, Watson powered analytics, and Cloud-based solutions. Our ability to integrate across our business lines is going to be a major contributor in driving competitive advantage for IBM. Our focus on technology - the IBM & Coupa partnership is an example- will allow us the speed and agility that are the cornerstones of servicing clients. We need to continue to transform, simplify and automate to deliver the outcomes that matter. As we all know, the only constant is change”.

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