Procurement “Digitization” Efforts: Ready for Prime Time?

Cloud, analytics, big data, cognitive computing ̶ all these are terms that fall under the broad umbrella of the “digitization” trend that is sweeping the procurement industry. The digitization era has launched with a big bang and much buzz is being generated about the potential impact. Although the speculation is somewhat overhyped, most of the industry has a sense that a new and different way of doing business is about to emerge.  However, most businesses are justifiably cautious and, from an implementation standpoint, are deciding to wait and see.

In truth, the digitization movement is more an evolution than a revolution.  In some cases, the technology, whether it be on-premise or in the cloud, is beginning to reach the stage of practical application (as opposed to just theory). Early adopters aside, the verdict is still out and the mindset of the industry is mixed, if not contradictory in some cases.

A recent study performed by The Hackett Group, a strategic consulting and benchmarking firm, gathered research data from more than 180 large company executives in the US and abroad, whose companies’ annual revenues averaged $1 billion or greater. Their findings have determined that, although these executives recognize the potential business benefits of digital transformation, few are confident they have the necessary strategy, talent and competencies in place to exploit those benefits. Thus, a gap appears to exist between procurement’s transformation agenda and enterprise-level digital transformation priorities.

The research showed that nearly 85 percent of all procurement organizations believe that digital transformation will fundamentally change the way they deliver services over the next three to five years. The use of cloud-based applications, advanced analytics, robotic process automation (RPA), mobile computing and big data are also expected to grow dramatically, the study found. Yet only 32 percent of procurement organizations currently have a formal digital strategy and only 25 percent have the resources and competencies in place today needed to execute on the digital vision.

The research also found that the executives identified a broad range of business risks.  The top four areas of projected risk – cyber-security, intensified competition, disruptive innovation and access to critical talent – are all related to business transformation, of which digitization is just one of the influencers.

The study also found that procurement operating budgets are expected to grow by less than one percent in the coming year, requiring procurement to prioritize and self-fund their goals of improving agility and responsiveness, increasing customer focus, and supporting enterprise digital transformation.

Such a mix of fear and uncertainty, if it does indeed represent the mainstream, could help early adopters to gain competitive advantage. If digitization projects are properly executed, the early adopters can take the leap forward while their competition remains stagnant. The gold at the end of the rainbow, as it pertains to procurement process digitization, is an improvement in business agility. The early adopter procurement organizations have already unearthed significant opportunities for cost savings and efficiency gains, and many are now focusing on improving the experience of their stakeholders as a way to create additional value.

Therefore, all organizations, whether large or small, will need to embrace new strategies for remaining relevant in the marketplace. A lack of confidence in the organization’s ability to execute digital transformation presents a challenge, but it should not close the door to the new marketplace opportunities that will present themselves. By addressing shortcomings, one at a time, and by remaining educated regarding how digitized solutions can improve business performance, procurement can transform as a function and strengthen its role as an enterprise transformation enabler and advisor.  

For more information on the Hackett Group’s research study, register for their complete research report at http://www.thehackettgroup.com/research/2017/social-media/key17pr/.



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