This year’s bumper crop of procurement predictions – an analyst’s response
Now that most people are fully back at work this week, you may have noticed that throughout the festive holiday season we’ve been posting a series of 2020 Procurement and Supply predictions from some of the expert solution providers across Europe who got in touch to share their thoughts on what procurement teams and CPOs should have on their radar for the coming year.
We’ve had a bunch of insight on the various hot topics to watch out for this year, including the importance of Data and Analytics and its proactive use, the changing concept of the P2P suite, the growing emphasis that should be placed on mitigating supplier risk, the growing stringency of regulations and compliance, and the future for S2P lying in smarter processes powered by data and automation. Read what Finnish enterprise P2P and financial software giant Basware had to say on this.
Then we heard from Ivalua about the economic and political climate effects on tariffs, the need for more sustainable supply chains, and the possible effects of a global recession in 2020 on procurement. Read what sourcing and procurement software experts Ivalua predicts, here.
Next up we had thoughts on the widening role for the content and knowledge that exist inside solutions, the need for procurement’s effectiveness as organisations’ digital ability matures, and the top-line Board issue that will put procurement at its heart. Read about that here from leading procurement consultancy Efficio.
We heard from Portugal-based global cloud eSourcing and eProcurement solutions and eMarketplace provider VORTAL, who see the future growth in outsourcing of supplier market research, pre-qualification, onboarding and community building set to expand further, along with increased use of open data in the buyer decision-making process and especially in addressing ‘middle spend.’ Read more about that here.
UK-based global procurement management solutions and systems consultancy State of Flux believes organisations will leverage their nimble supply chains and harness supplier innovation more for competitive advantage, and that SRM technology will start to be seen as just as important as CRM. Read more on this here.
And from SAP Ariba and SAP Fieldglass we heard from six of their senior executives about how they see the immediate future for data, as it moves from an analytical to a decision-making tool; the joining with likeminded trading partners as organisations address sustainability and ethical issues; the growing need for adaptability and flexibility in our systems; a sense of urgency and demand for real change in adopting purpose in procurement strategies; the extension of AI as an integrated part of supplier management; and greater adoption by businesses of a values-driven approach to procurement. Read about those predictions here and here.
Cloud-based, business automation for spend management technology provider JAGGAER offered predictions that focus heavily on analytics, contracts/compliance and risk, as procurement functions mature from intelligent procurement towards autonomous procurement, read that here.
Business process outsourcing and professional services company Capita weighed in with what they see as an increased focus on data sources, treatment of tail spend and a growth in the need for wider solutions. Read more on that here.
Procurement and supply business management consultants, INVERTO, see a zero-based culture continue to become a predominant budgeting approach, procurement’s role will expand as company commercial champions, and the inclusion of sustainable supply base management as the most significant step change procurement can make. Read that here.
But now let’s take a look at what our Europe analysts Magnus Bergfors thinks about the themes for 2020.
2020 vendor predictions: Marketing or real trends?
In total we ended up with six software vendors and three consultancies (though you could argue that one or two do a bit of both) sharing their predictions. Unsurprisingly enough each vendor’s predictions aligns pretty closely to that particular vendors offering and/or marketing initiatives … but if you look at them in aggregate a couple of interesting themes occur across almost all vendor predictions. The main themes I’ve identified are:
- Data and analytics
- UX and automation (AI)
- Risk, sustainability and CSR
This general occurrence makes them more interesting and credible. So let’s have a look at each of these themes.
Data and analytics
Almost all of the participants talk about data and analytics in one form or another which is not very surprising. This is not necessarily a new theme, after all spend analytics solutions have been around for decades. But in reality, many organisations have struggled to get full value out of their spend analytics investments due to a lack of good quality granular data.
By now we’ve all heard (or even said …) something along the lines of “data is the new oil” and as procurement organisations increasingly adopt technologies to digitalise their operations data is becoming more readily available in usable formats. In combination with the acceptance of cloud solutions that, at least in theory, can anonymise and aggregate across their entire customer base the availability of data that can be analysed is growing exponentially.
I fully agree that this is one of the more exciting areas to explore and leverage for procurement teams out there and there is no shortage of vendors to choose from. Suite vendors are adding embedded analytics and leveraging community data while specialists are adding their own perspective and focus areas (like contract analytics, savings analytics, commodity pricing trend analytics, bill-of-materials analytics, and so on).
But, while all of this is true, there remains issues to resolve before we get to real-time predictive analytics across the entire organisation, both from a data access and from an actual technology capability point of view.
UX and automation
UX and automation with a focus on leveraging AI technologies is another fairly common theme, especially across the software vendors. This theme is closely related to the first theme of data and analytics and we find ourselves with a little bit of a “chicken and egg” problem here; to get data in digital formats you need high adoption of procurement tools like P2P, but in order to get high adoption rates of said procurement tools you need easy-to-use, ideally highly automated tools that need data to be trained and configured. So you need the data to train the tools to get the data …
My perspective (as explained in Thoughts on Procurement Technology Investments and in more detail in 5 tips on buying procurement technology (Part 2) — Learn to walk before you run) is that you need to start with your processes and core tools to capture data before trying to deploy advanced solutions using AI technologies. But that being said, vendors that leverage community data across its customers using the same multi-tenant SaaS solution can certainly use this capability to improve usability and jump start the cycle of using data to improve the UX and adoption to capture more data to improve the UX and so on.
Risk, sustainability and CSR
This is a really broad theme ranging from using compliance and using AI to detect risk to geopolitical challenges and procuring with purpose. One of the main drivers behind this (apart from the minor fact of the actual challenges around the increased global trade risk scenario, i.e. Brexit and the US-Iran conflict as well as environmental crises like the Australia fires) is the wish for procurement to raise its game to a more strategic and business-critical role (not that savings aren’t important but …).
To me this is again closely linked to the themes above. To be able to manage the risks you need to have the data and analytics capabilities to identify and ideally predict and prevent or at least mitigate them. And in order to have time to do this you need to automate basic stuff like PO creation and invoice approvals as well as improving sourcing productivity to free up time for the more preventive activities of risk management. My fear is, as Alex Saric from Ivalua points out, that as a result of the risk of a global recession procurement is forced back to focus on savings and cost cutting.
So, while there are some other interesting themes, like supplier collaboration and managing middle and tail-end spend, these main themes are closely connected. Drive data capture and automation to enable analytics and risk management and free up resources to focus on more value-adding activities like CSR and purpose-driven procurement that aligns to company values!
Thanks to all the vendors for taking the time to share what they think will be the prominent areas of growth and forward thinking for procurement and supply organisations this year. Let’s keep them in mind as we enter the end of 2020 and see how they panned out.