THE NEW AGE OF PROCUREMENT TECHNOLOGY - PROCUREMENT NEWS
Thursday, 22 Jun 2017
Procurement technology went full sail and you eagerly jumped on board. But now 90 per cent of all technology is about to become obsolete. Are you prepared for the new age?
Vice President, Purchase-to-Pay
As the vice president of Basware’s Purchase-to-pay solution it goes without saying that I’m involved in a lot of procurement technology selection decisions. And over the years, I’ve noticed a recurring pattern in the process, across numerous organisations. It tends to play out a little bit like this:
A CPO of a large organisation is at the end of their tether thanks to a messy purchase-to pay process. It’s the age-old story with AP and procurement operating independently, maverick spend with unapproved suppliers, late payments and paper absolutely everywhere.
The easiest, and seemingly smartest, solution to the problem is the implementation of a new purchase-to-pay system, which said CPO requires, being extra savvy, to be a Software-as-a-Service solution. The CPO knows they can get a decent ROI on whichever supplier they choose.
So what’s the problem?
Unfortunately, our CPO is only looking 5 inches in front of their face! It’s no exaggeration to say 90 per cent of today’s procurement technologies will be obsolete in the coming years. And so procurement needs to start looking much further ahead!
Remember Siebel? We can’t either…
You’d be pretty hard pushed to find an organisation that uses Siebel nowadays. You might even struggle to find someone who knows what it is!
Siebel was the cream of the Customer Relationship Management (CRM) crop in the late 90’s and early 2000’s. It was the absolute best at its time. Hundreds of millions of dollars were spent on licensing and implementing Siebel, with the promise of visibility, efficiency, and improved customer satisfaction.
Fast forward a mere ten years and…nobody uses it. It turned on a dime thanks to Software-as-a-Service and, more specifically, Salesforce. An enormous technology shift took place, and suddenly Siebel and everything like it was utterly obsolete. More than a few CMO’s were fired as a result.
What can we expect from the next tech shift?
What can we expect from the next technology shift? We hear about AI, machine learning and cognitive computing all the time and there’s a lot of concern amongst procurement professionals that it’s going to displace our workforce.
But it’s coming to procurement whether we like it or not. There’s a glaringly obvious application of AI for procurement professionals.
One word: data.
When today’s CPOs try to objectively evaluate the functionality of potential new solutions, they’re often bypassing a crucial aspect (opting to solely measure tactical functionality); the game-changing competitive advantage their organisation can achieve through the power of the data. There are two major considerations to be made here.
1. Is the system architected for centralised data capture?
The system should be able to capture your data, the data of all organisations using the solution and, ideally, be able to connect with other solutions. The more the system is designed for centralised data capture, the better chance you have of being able to take advantage of the latest data-driven tech changes.
My advice is that you eliminate anything that focuses solely on you and your data. If it’s not central, you can be sure you’ll get stuck behind and end up like one of the organisations using Siebel. But, of course, design alone is not enough.
2. Does the system actually capture that data?
To capture all of this data, there are three parties that matter: suppliers, requisitioners, and AP. This is where tons of business cases fall apart.
- Suppliers: To capture data you have to get all your suppliers on the system. Not just your big sophisticated suppliers, every single one! You have to get them connected, or you will fail, if not today then most definitely in the imminent future.
- Requisitioners: Who are the worst employees when it comes to using a procurement system? It’s fair to say that it’s often the sales and exec teams; the people driving revenue for the company. These groups are only going to use a new procurement system if it’s the easiest and fastest way for them to get their jobs done, which means it has to fit in seamlessly with how they work. If you don’t give them a system that they want to use, you won’t have them, and again you won’t be capturing the data from their transactions.
- AP: This is probably the most important part but so often an afterthought when looked at from a Procurement perspective. Consider how many hundreds of thousands or millions of invoice transactions are processed within your company. Now multiply that by the thousands of other companies out there and you’ll get a sense of how quickly that data can scale. Most P2P systems can’t process all of those different kinds of invoices. And that’s where we end up in Siebel world, yet again!
By committing to finding and using a system that captures all of this data, and does so not just for your organisation, but in a truly centralised platform, procurement will soon be able to achieve the following:
- Fraud detection
- Machines that know when you need something. Doesn’t it seem miraculous when Amazon knows what you need and presents it to you when you login? Let me tell you that it’s not. It’s data
- Dynamic discounting marketplaces
- Exceptions handled without any human intervention, based on patterns of prior behavior in the data. This might not be behavior that humans can readily identify, but machines can with ease by crunching all of that data
Procurement would do well to remember that, In today’s world, the big value is in the data, not in tactical functionality.
Eric Wilson is the head of Basware’s Purchase-to-Pay business for the Americas and APAC.
This blog was originally posted on Procurious.