Thoughts on Procurement Technology Investments
When I started working in the procurement technology space many moons ago the solutions were very specialised (i.e. e-sourcing) and often just an ERP add-on (i.e. catalogue management). These solutions solved fairly specific problems. Gone are those days of (relative) simplicity.
Nowadays vendors are offering and marketing broad suites that are said to cover all your procurement processes. In some areas, like SXM, the complexity has increased by vendors offering very different types of solution with fairly similar names (or very similar solutions with very different names for that matter).
So, in this, my first article for Spend Matters, amidst all this confusion and complexity, I´m going to give my tips for making sure that you get maximum value from your procurement technology investments. In the coming weeks I will dive into each in more detail for our PRO subscribers.
So without further ado, here we go:
- Identify business objectivesToo many organisations I´ve spoken to over the years have really lacked a clear objective as to why they are investing in procurement technology. The idea seems to be that you can transform your procurement operations just by investing in a broad procurement suite to “digitalise.” For a number of reasons this is not a good idea but perhaps most importantly, how do you measure the success and value of your investment if you don´t know what it is that you want to achieve? Now, investing in procurement technology can very well be an (important) part of a procurement transformation but it won’t do it on its own. So the first thing to do is to really define why you are investing in procurement technology. Is it to increase visibility, is it to streamline the P2P process, is it to increase spend under management (if it is you will also need to define what you mean by spend under management …)? It might be all of these and that´s fine but it leads us to the next point.
- Don’t try do everything at onceIf you have multiple objectives with your investment in procurement technology you really need to prioritise. Very few organisations that I have come across have the resources and change management capabilities to implement more than one or two modules at a time. The big suite vendors will often discount their offers significantly if you buy everything at once and this leads to a pressure to implement everything at once (since you already are paying for it). Instead you should go back to your business objectives and identify what your most important need is and start there.
- Focus on the basics firstOrganisations that are starting from scratch should focus on getting the basics right first. There is no point in focusing on AI or advanced optimisation if you don´t have the underlying processes and data available. If your organisation is of this type you should focus on finding easy-to-use solutions that can get you up and running quickly and drive good adoption without too much training. Getting a good understanding of your spend is typically a very good place to start since this can inform your strategy moving forward.
- Select a solution and vendor that meets your requirementsSo once you have done the three first steps it’s time to find a solution. If you have identified your most critical needs and business objectives as well as what type of solution (i.e. easy-to-use vs advanced etc.) this seems fairly straightforward. But it´s easy to be led astray by vendor marketing that will try to convince you that this feature is really crucial or bury you under buzzwords like AI and so on. Stick to your guns and focus on your critical needs and leverage SolutionMap. Identify your persona and zero in on the right SolutionMap(s) to find out which vendors are most likely to meet your needs.
- Review and redesign processes and perhaps even your organisation as part of preparations and implementationThere is a Swedish saying that “you shouldn´t pave the cow paths” which is very applicable to procurement technology. If you invest in a procurement technology solution you really need to review your processes at the same time. Here you can often lean on your implementation partner or solution provider to make sure that you leverage built-in best practices. But you obviously need to be a bit cautious and make sure that you take any organisation-specific requirements into account. The important thing is to recognise which of these requirements are need-to-have vs nice to have.
There we go, easy right?