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Procurement’s Survival Manifesto on a Knife-Edge as the As-A-Service Model takes hold

March 09, 2017 | Derk Erbé

We're witnessing the most far-reaching evolution in Procurement’s existence with ambitious procurement professionals desperate to elevate the profession to a much more strategic level aligned with the needs of the business or face irrelevance in the wake of emerging digital procurement solutions and rapid automation of transactional procurement processes. This means procurement leaders need to reposition procurement as a strategic ally that supports the business stakeholders it is designed to serve.

The evolution of Procurement As-a-Service solutions is making day-to-day procurement needs become increasingly easy at access in an affordable on-demand model. Our Procurement As-a-Service Blueprint shows the steps service providers have made in morphing their service offerings to combine people, technology, and processes into these on-demand, flexible services, with pay-as-you-go, As-a-Service pricing, and subscription based models.

Procurement As-a-Service delivery models are already having a significant impact on the market thus far; with the expectations of procurement services buyers rapidly changing. The average size and length of outsourcing engagements have plummeted from large ($50-100 million) and long (8-10 years) to small ($3-6 million) and short (1-3 years). This greatly impacts ambitious service providers’ revenue models once they have realized the ability to scale modular, agile services delivered via a utility model and increase their overall profitability. This is in addition to delivering high-value upstream procurement activities in strategic sourcing and category management to build out their end-to-end procurement capabilities.

Customer Demands and Technology Drivers will relentlessly continue to Disrupt Procurement

Let’s explores how the landscape will evolve and who we expect to rule the Procurement As-a-Service space.

The big survival challenge for procurement is threefold;

  1. Redefining Talent: The old-school procurement professional has become legacy and needs to be completely reoriented or retired. Focusing on (transactional) procurement with the sole purpose of saving as many costs as possible is a dead end - it's counter-productive in the new business world, especially when it’s increasingly easy to leverage digital procurement solutions to source purchases at the lowest prices and conduct most transactions digitally without the need for human interaction. The name of the survival game for procurement is relationship management; becoming the spider in the web that consists of internal business stakeholders, suppliers, service providers, partners. Next to relationship skills like empathy and business acumen, the new skills that need developing are critical thinking, creativity, and complex problem-solving. And being able to use technology to improve processes and ultimately experiences.
  2. Embracing Technology is Critical: Standardized procurement platforms combined with cognitive automation is the only way forward. Procurement tech platforms like Ariba, SMART by GEP, Coupa, Tradeshift have demanded a lot of attention the past few years and have emerged at the core of procurement. Processes are clustered, integrated and delivered by platforms. Processes that are not suitable to be on these platforms are the focus of robotic process automation. The next wave of technology affecting procurement and sourcing is cognitive and artificial intelligence.
  3. Delivering the customer experience must be embedded into all procurement activities. The pièce de resistance is creating better experiences for customers, being end-customers, buyers within the internal organization, suppliers, partners and your customers' customers. It's about creating buying experiences that meet the needs of more mature internal buyers, underpinned by seamless, straight through transactional processes. Effective procurement is all about enabling much more collaboration and innovation to take place with suppliers, providers, partners and customers and amongst them.

Posted in: Procurement, Engineering & Supply Chain OutsourcingProcurement

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