What Top Management Consultants Say are the 7 Most Important E-Procurement Trends Happening Right Now
The Hackett Group, CrossCountry Consulting, and Acquis Consulting Group are seasoned experts at helping businesses implement e-procurement and digital procure-to-pay (P2P) business spend management solutions.
Given their immense experience “in the trenches,” we here at Coupa thought we’d pick their collective brains about what they’re seeing as the most significant trends, opportunities, and challenges in procurement today.
Some questions we were particularly interested in include:
- How will organizations that have already digitized expand their footprint of digital procurement?
- What broader economic and regulatory trends could influence procurement organizations?
- Which new technologies will enterprises and mid-market companies be eager to adopt?
So, without further ado, here are the insights from our three experts:
Tim Yoo, The Hackett Group
- Digital P2P is Moving From the Wish List to Being a Must-Have
Last year we definitely spent less time convincing clients they need new technology, and more time helping them develop the business case for it. The market has shifted, and I think that fact will push those companies who have not yet invested in digital technology for procurement to finally make a move. So, we’re preparing for the market to accelerate even more this year.
- Data-Driven Technology is Creating New Talent Requirements
Companies are finding that, as they implement P2P technology, it doesn’t necessarily reduce headcount. Instead, it drives a need for people with different skills and a different mindset. Tech-enabled procurement organizations need experts who understand how the technology works and how to optimize it for their particular business situation. And they need people who can analyze data and know what actions to take based on the results.
Leadership will need to start measuring people on outcomes versus activity and set targets and goals that are aligned to department or program goals. Savings will remain part of those goals, but the old “two bids and beat up on your vendors” approach is giving way to proactively using data to increase predictability and improve the business, and workers will need to be savvy enough to keep up.
- The Move to Best-of-Breed Systems Continues On, With a Twist
Last year, I predicted that companies would move to best-of-breed solutions for end-to-end processes, rather than expanding their ERP deployments. That was directionally correct, though I don’t think we saw the kind of progress I envisioned. However, we’ll see continued movement in that direction in 2019, with an added emphasis on selecting solutions that have the right controls. With GDPR regulations in full force and the continuation of the Sarbanes-Oxley Act in the US, more and more companies are realizing they have got to address risk and compliance with external regulations and internal policies and they’re looking for technology to help them.
- Supplier Management is Coming to the Fore
Supplier management and consolidation are foundational procurement tasks, but I think there are some factors that will drive more activity this year, along with a search for better tools.
First, you can’t look at risk and compliance without looking at supplier risk. Companies really need to be weeding through their suppliers and validating and updating information at least annually, but I’d bet money that most don’t. During this recent period of economic expansion, a lot of companies have been focused on growth. Now, a tilt toward optimization and mitigating risk is necessary, but companies are not going to want to do it the old, manual way. So, they are looking at tools that can automate parts or all of the process, and consequently, most of the technology players in this space are working to develop and expand their offerings.
- CFOs are Joining in the Fun
The shift toward a more holistic approach to business spend management started around 2015. In 2018, we started to see CFOs and CEOs realize this is something the need to pay attention to. Over the next couple of years, more companies are going to look at how they can leverage procurement to help them with compliance and, of course, with cost savings. It’s been almost a decade since the Great Recession. A lot of companies are thinking about how to be more fiscally responsible so that they can weather any economic bumps in the road ahead.
- Enterprise Marketplaces are Growing in Both Scale and Depth
Vertical marketplaces are popping up in a number of industries, and I think we’ll see procurement organizations capitalize on them more 2019. These are B2B-focused marketplaces that are positioning themselves to be the single point of contact for an entire category of spend.
For example, in clinical research, a lot of biotech and pharma companies have preferred supplier programs and preferred rate cards, but as we all know the supply market fluctuates according to supply and demand. Now, there’s even a marketplace where these companies can put out an RFP for a research study or a clinical trial, and they will collect the bids and come back with two-to-three recommendations. The trial can get started almost right away because all the specifications are already documented and the marketplace is directly contracted with those suppliers, and the customer is contracted with the marketplace.
- AI, AR, and VR are Gaining Traction with Enterprises
This isn’t confined solely to procurement, but last year we saw large enterprises begin experimenting with artificial intelligence and augmented and virtual reality, and that will continue this year. However, the supply market for these technologies is still very volatile. There are lots of small players popping up, merging and getting bought, and so far, there are no clear winners. We may start to see some penetration into the mid-market this year, but I think smaller companies are going to watch and wait, for now. The one exception could be manufacturing companies, which are beginning to look seriously at AI and VR for maintenance of their capital equipment.
While your organization might have its own particular needs, it’s always a good idea to keep apprised of what’s happening in the procurement industry. We hope you find these expert insights to be a useful benchmark as you work to improve your own processes. We’ll be sure to check in with these e-procurement veterans to keep you informed on any new developments!
Tim Yoo is a Principal at The Hackett Group. Harpreet Narula is a Partner at CrossCountry Consulting. Sean Park is Senior Vice President, Procurement and Strategic Sourcing Advisory Services at Acquis Consulting Group.