My guest this week on The Procuretech Pub requires no introduction to anyone who is familiar with the digital procurement space. Dr. Elouise Epstein is Partner at Kearney in San Francisco and author of the book Trade Wars, Pandemics and Chaos: How Digital Procurement Enables Business Success in a Disordered World.
We have an informal and very open discussion about procurement technology's past, present and what direction the future trends are moving in this space.
From its beginnings, where best of breed led the way, through the rise of the suites and now to a more emerging hybrid model.
She explains how around 2013, Kearney began receiving calls from enterprises who had implemented what I now often refer to as "legacy suites", saying that users didn't want to use them and they weren't seeing their return on investment. It wasn't really until 2020, where Covid definitely seems to have given the market a push, that organisations started to adopt more of a "platform-based" approach with an increasing emphasis on a best-of-breed tech ecosystem.
Elouise is a big critic of the big suite approach and is an advocate of the platform approach, where this is built upon through best-of-breed technology. We just don't have 100% the ideal, perfect platform that we need just yet. The software used as a platform has ended up being in that role kind of by default, and there isn't a system built to act as a platform in its core function just yet.
Building their own platform can also be an option for very large enterprises who have the IT capabilities in-house to do this. This is an approach for the brave / well resourced IT departments, but advantage of this strategy is that each "module" can easily be exchanged. Using a legacy suite as the platform doesn't allow this to happen as easily for P2P, or S2C to some extent.
Who will come in to challenge the market leaders? Will someone from outside procuretech come in to challenge them, such as Salesforce or AWS?
And, where will the others go if they survive this? It could be that they pivot more towards the mid market, but that would obviously mean a significant realignment of their pricing model and features offered in order to compete and flourish in this market segment.
She starts off by saying she's not a fan of 2x2 evaluations because they create artificial markets rather that have to fit into that specific evaluation framework. Much of the innovation doesn't neatly fit into a box, and innovation is constantly changing as the market evolves.
How the data is being used and how the evaluations are put together is important to be able to truly appreciate and evaluate which procurement software is best for a specific business, based on their own unique, individual criteria.
Keeping on top of the market evaluations and maintaining relevance of these lists is a mammoth task. Inevitably, there will be imperfections. The needs and requirements of enterprise level clients will be vastly different to those of the mid market.
Knowing enough to be dangerous and not being completely reliant on the reports and content of third party research is key to leveraging the information they provide, while not blindly trusting it without the adequate due diligence on how it's been put together.
There is some up-skilling required. Gone are the days where half an FTE manages digital transformation along with their regular day job as IT Category Manager or Centre of Excellence Leader.
Hiring consultants can often unwittingly foster bias in the process due to "foxes guarding the hen house", where there are systems integrators, analysts and tech providers who are very closely in step with one another.
By not outsourcing the decision making to third parties, this enables the company to reduce the possibility of bias or influence and maintain objectivity and neutrality.
While on the one hand, conference sponsors are easy to spot, it also leads to the risks of opting for the safe, established legacy brand which offers less innovation than one of the more disruptive startups.
Sponsorship of expensive events and reports provides a springboard, and while procurement is not the only industry where this happens, it can often stifle innovation.
There's a difference between not getting fired through choosing the safe option, and truly succeeding in your digital transformation by opting for a disruptive .
Instead of hiring data scientists to come and do procurement, what is more likely to result in success will be procurement professionals being more open to acquire some of these new skills. That doesn't mean we all have to become programmers and mathematicians, but it certainly requires an up-skilling and an increase in analytical capabilities.
Good user experience and automation is going to be central to how technology is adopted by businesses as we move forward.
On the enterprise side, the huge sector that is kind of squished under the ESG banner has the biggest potential. Elouise remarks that it's a disservice to categorise everything in this space so generally, and specifically calls out:
Procurement's reason to exist is to deal with and manage third party vendors, and as such, we're the best department to be leading and driving this space!
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