Key Findings from Our 2017 Digital Procurement Report
The widespread digitalization that has characterized industry 4.0 is considered to be the greatest revolution to impact procurement in decades. Expectations for new technologies and their application in procurement are high.
The digital transformation of business is already underway. Digitalization is no longer viewed as the aspiration of a select few, but as an inevitability for businesses in nearly every sector.
Over the past several years, the hype surrounding digitalization has also extended to procurement. These days, digital transformation is a top priority for most CPOs, and it has become nearly impossible for procurement professionals to escape buzzwords such as AI, blockchain, cognitive procurement, RPA.
Given this pressure to “become digital” it can be difficult to sift through the hype to extract genuinely useful insights and benchmarks to help procurement professionals inform their digitalization strategy going forward.
JAGGAER’s 2017 benchmarking study, Digital Procurement: Just Hype Or The New Standard? cut through the hype to gather data on the state of digitalization in procurement organizations around the world.
The key findings from the study revealed that 83% of companies were not taking full advantage of the opportunities and benefits that digital procurement had to offer.
A 2018 Hackett Group report revealed that while 95% of respondents indicated that digital transformation would fundamentally change the way services were delivered over the next three to five years, only 46% of companies indicated that they already had the resources in place to facilitate this transformation.
Technology has already fueled the transformation of many work areas and processes, and these processes are changing as quickly as new technology is developing. These changes promise great potential for procurement, but:
- Are companies ready for the new trends in digital procurement?
- Where do procurement organizations stand today?
- Are budgets being reallocated to new technologies?
- And, if so, what is their real potential?
These are the questions that are answered in our report based on a survey conducted between August and October 2017 that enabled us to collect responses from 168 organizations from across all industries and all company sizes.
In a series of posts, we will cover the key takeaways from our survey, focusing on:
- The current level of digitalization in procurement organizations
- Priorities for investments and developments
- Digital Procurement’s key areas of potential:
- Data and integration
- Digital Category Management
- How to build a digital roadmap.
Digitalization in Procurement: For most, a Work in Progress
The survey results show the progress that companies have made with digitalizing their procurement processes. Most companies (54%) have already laid the foundation for their digital transformation in procurement and are piloting or planning to pilot more advanced digital technologies. The majority of companies, however, still needs to overcome some challenges with integrating their data and processes before they can progress further.
The survey results offer some interesting insights into the current status of Digital Procurement strategies and programs across sectors, company sizes, and organizational structures. It reveals that there is almost a 50/50 split between professionals who say they do not have the required level of knowledge and awareness of the latest technologies and the ones who say they know them well enough to understand their potential and have an opinion on them.
Also, the technology in place is still mostly transactional and is primarily used for core processes like SRM, eSourcing, and eProcurement.
Only 2% of organizations already use “smart” technologies that help procurement make better decisions by offering recommendations to users and learning from past activities. As far as the current level of digital equipment is concerned, the vast majority of companies still lack a clear strategy or a concrete action plan.
Priorities for investments and developments: from a buzzword to added value
In general, our survey results show that:
- companies of all sizes and from all industries are growing more optimistic about the potential that digitalization has to offer
- the majority of companies recognize the digitalization of procurement as an opportunity.
From an efficiency standpoint, the technologies that have the highest potential according to the respondents are SRM, eProcurement, and eSourcing. All three are at the core of Procurement activities and set the ground for the most critical activities like category management and supplier development: from defining strategies (analytics, eSourcing), to definition (SRM) and execution (eProcurement and eSourcing.)
From an effectiveness standpoint, the technologies that respondents identify as the most promising and that would have the greatest impact are Big Data analysis (53%), SRM, Procurement, and eSourcing (46%), and Predictive Analytics (40%). With regard to more recent and emerging technologies, such as blockchain, robotic process automation, and digital assistants/chat bots in particular, the results show that companies are still rather reluctant to implement them. Only a small number of respondents seemed to have a clear idea of how these tools could create value for their company.
The readiness to invest is, in general, still moderate. Most of the respondents prioritize analytics-related technologies. This confirms the adage that in today’s business world “data is gold.” Without the right insights, it is difficult for organizations to make a breakthrough that goes beyond the usual tactics and strategies. At the bottom of the scale are blockchain where 65% of respondents say they do not (yet) have plans to invest, robotic process automation (52%), and digital assistants (including chatbots) 48%.
What we can conclude from these results is that digital procurement is still very much a “work in progress” in most organizations. They are still working on creating a solid digital foundation. This is an important first step, but it is important for organizations to recognize the value they can get from “digital” and to make it a priority. Digital technologies will help organizations build up the right capabilities and will help them set up the right road map. These are critical aspects that are also covered in our report that we will discuss in upcoming blog posts.