The Future of Sourcing Procurement Technology
In our latest Supplier Experience Community session, which was our first for 2023 and which brings together executive attendees from leading global brands, we were delighted to welcome Dr Elouise Epstein from Kearney and Lance Younger of ProcureTech. They joined us to talk about the rapidly changing ways in which procurement technologies are being sourced, from agile tech sourcing through to the rise of the procurement garage, incubators and accelerators.
In the session, Elouise covered three topics: the need for Procurement to have its own architecture; why we must fundamentally change the way we source technologies; and how this connects to the no/low code revolution.
Lance talked through his perspective based on experiences at ProcureTech, where they are seeing organizations introduce more digital innovation into their organizations and where they are working with Procurement teams to do this through accelerator and incubator driven processes as opposed to traditional RFx-led approaches.
The Procurement Architecture – what is emerging today?
Elouise presented the newest version of the Spider Diagram of Procurement technology, highlighting specifically the dramatic increase in the number of vendors and the massive explosion of innovation in this space.
She explains, “Clients tell me that this is headache inducing – and it is headache infusing for me as well. But the point is, collectively, we have to understand what these solutions do and we have to understand that it’s not the solution themselves. I like to say it’s the labels not the logos. You have to understand that each of these logos represents a net new capability or at least a new separated capability that we’ve never had before, or at least been able to do in the way that we’ve talked about.”
“If you’re going to do risk management, you can’t just buy one tool and call it a day. To do true risk management, you need at least six, seven, eight tools and probably more. The same is true for Environmental, Social, and Corporate Governance (ESG),” she adds.
Meanwhile, it is important to consider the impact of these tools on supplier experience, as Elouise comments, “As we think about supplier experience, and certainly from an enterprise point of view, the greatest risks to your organizations come through your third parties, your suppliers. And the greatest opportunities for ESG come through your suppliers. And so, we have to be able to get better at engaging with suppliers when we talk about supplier experience.”
This raises an important question. “The real question is, who is going be the platform in the middle? Who is going to stitch all of this together? There are four components to the ‘middle.’ User experience, an app store, a data foundation, and intelligence.”
Elouise also encourages thinking about the procurement architecture in terms of stakeholders. “When you think about who’s going to access our systems, we have our internal stakeholders, we have Procurement ourselves. We have automation. We have perhaps what I would consider the most important one, which is the suppliers and then, of course, leadership outside of Procurement. And so these are user archetypes. We have to understand that that’s who we’re designing for. So every time a client tells me, ‘well, we use SAP MDG, for master data management or the management of our suppliers,’ I just laugh because that is an old way of thinking about supplier management.”
The Impact of the New Architecture on Sourcing Procurement Technologies
As Elouise describes, “I like to talk about moving away from RFPs to RFSs or ‘Requests for Solutions’ and asking your providers to come together with a broader solution that is not just some piece of technology, but that’s actually a broader solution.”
Therefore, the key point is, it is all about solutioning. “That’s why moving from RFP to RFS is so important. And so, with that in mind, what we talk about is setting up a ‘digital garage’ or ‘procurement garage.’ Now everybody has a different term for it. It’s structured differently. But the gist of it is, that they [the enterprises] are moving to this RFS approach where they bring solution providers in and work with them collaboratively to test and learn – they try it before they buy it.”
The main result from adopting this approach is, in Elouise’s view, the creation of a segment of innovation. Also, as the business is engaged, it fosters better adoption of a solution. Plus, the time to value is dramatically reduced.
“If it doesn’t work out, then you move on, and you’ve only spent three or four weeks on it. Failure is a big part of the garage,” she explains, advising, “You can’t fear the failure – and corporations do everything they can to eliminate failure. But failure is how we learn. And so, the digital garage, it de-risks that failure.”
In short, it marks a departure from the traditional 7-step process, which, in Elouise’s view of today’s world, simply wastes time that could have been better used.
How does this connect to low code and no code?
“Another of those big innovations that’s happened is the ‘low code/no code’ approach,” Elouise explains.
“What I want you to take away is that we have to get familiar with this. Because, remember the complexity of my spider map, we won’t see that because we will basically create workflows, drag and drop workflows, and all that complexity will get managed on the backend, managed through the tool.”
“It brings much more capability to the end user, much more quickly. And so, in essence, what I will state clearly (but what is often left unsaid) is: we don’t need IT anymore. IT can put in the core system and be done. We don’t need to rely on them again. And so, when you think about the procurement architecture, all of that sits within that fabric and it gives us tools like this that allow us to run our operations without ever having to deal with IT.”
How can we adopt a new approach through accelerators and incubators?
In the second section of the session, Lance talked about his experiences of organizations adopting a digital garage or accelerator approach to sourcing technology, as he points out, “It requires a change in the ways of working in an organization. Ultimately, it is a new way of working that can be adopted within Procurement and that can then be applied across everything that Procurement does as well, whether that’s the introduction of more agile ways of working, or indeed different ways of engaging with the market.”
As Lance describes, “Many organizations are seeing digital transformation as being fundamental to how they progress and how they move forward. For us, that boils down to two main things. It is making stronger matches between leading corporates and digital solutions. But most importantly it is making sure that the solution can scale as well.”
Lance talks to a number of main trends that are providing the context for a move towards a digital garage approach. First, there is an explosion in new digital procurement categories and capabilities. Second, there is a supply and demand element, which means that there are more chances to co-create very rapidly to make something exist if it doesn’t already, which will continue to fuel the best-of-breed ecosystem. Finally, we are seeing an integration of both technology and talent. As Lance comments, reiterating Elouise, in this environment, “You don’t need an RFX, you need an RFS.”
He explains, “What we are seeing in the majority of instances, is an approach that is a lot lighter, a lot leaner, and a lot more collaborative, by either using accelerators, incubators or venture studio approaches, and by engaging leading digital solution providers earlier in the process to help you with the design, to help you with the future proofing.”
He continues, “Best-in-class basically has agile at its core. Running in sprints and epics.”
You don’t need a start-up, you need solutions
“When we’re working with organizations, we look at solutions, but, more importantly, we look at capabilities. We are assessing different digital solutions and whether they have the ability to supply those capabilities now. Even more importantly, have they got the capability to be able to scale and meet the requirements of an organization in the future? We see that as being critical,” Lance underlines.
A shift in buyer-side behavior is also required. “It needs to be end-to-end, and that starts right up-front, which is basically understanding trends that are happening – whether it’s changes in the technical architecture, the increased use of no code or low code, through to intelligence and insights that often come from academia and expert networks. All of these feed the ability of an organization to create their digital or procurement strategy.”
“The other thing that’s important here is how the overall architecture stack, from the visualization to the app layer, to the data layer, to the middleware, hardware, how that all fits together because an architecture driven by digital influences the speed to market that you have as a corporate as well,” he adds.
All of these considerations are woven into the fabric of an accelerator method for procuring technology. “So, you get that peer learning, the peer sharing, before you go into co-creation. It’s meant to be light and lean at the start, looking for capabilities and input before you run through a co-creation. Yes, you do the classic selection activities of understanding the commercials and understanding compliance and information security. But you go to a stage further in working with the team that’s going to deliver the solution. Ultimately you end up with a more comprehensive solution and a better fit for what you want,” he says.
Time to value
Addressing the time to value point, Lance continues, “When you kick off a project, you can, in seven weeks, move all the way through a proof of concept. If you’ve got open access to a sandbox, or to data or branding, you can basically build out a proof-of-concept in those seven weeks.”
“I hasten to add that, as you go through these types of process, there’s the opportunity to either go faster or stop altogether. So you’re not stepping out of the governance that you need, but you are moving forward with it at a good pace as well,” he explains.
There are also specific expectations of the vendor. “As you’re moving forward, agility and flexibility need to be a given, there has to be a responsiveness. There has to be a customer-centric and user-centric focus, and then openness to share information about the road map, what’s happening, and act on that.”
Lance concludes, “As long as the intent is right and you want to get the right outcome, you will get there because the ROI is there, in terms of the better fitting solution that’s going to enable you to scale better. But it might be, for instance, that you start with a project and a project team and then that might move into something that’s a bit more structured.”
Lance emphasizes that it all comes back to, “getting the right match for organizations, but then making sure that they can scale together. And yes, that means that corporate needs to scale. But then the digital solution needs to be able to scale as well,” he says.