Procurement in the cloud 2016 - four trends to watch

Profile picture for user TomAnthony By Tom Anthony January 27, 2016
A quick synthesis of learnings from the previous year and some bold assertions about the trends that will effect Chief Procurement Officers in 2016, from Oracle's Tom Anthony.

'Best of' lists, reflections, predictions, resolutions - they consume online, print and other media this time of year. But how many of these assessments and prognostications are relevant to you and your business?

For procurement executives, here’s one you can actually use: a quick synthesis of learnings from the previous year and some bold assertions about the trends that will affect you in the coming months.

State of play

Let’s take a look at some of the factors at play in business today. Perhaps the most important event affecting business is occurring right before our eyes. The technological and generational shift with companies moving to the cloud; an insatiable demand for digital data and analytics; and a push for anytime, anywhere, any-device access to corporate information is changing the way enterprises are viewing themselves.

This move to contemporary technologies is augmented by several macro trends. Automation of all roles is turning every employee into a knowledge worker, highly skilled at his/her job and deployed into assignments accordingly.

In the United States, the millennial population is now 83.1 million, representing more than one quarter of the nation’s populace, while globally, millennials will comprise half the workforce by 2020. Further, today there are 2.6 billion smartphone subscriptions globally. By 2020, this number will be 6.1 billion.

The net here is that the very nature of business and work—how, where, what, and by whom it is done—is undergoing a radical change. Success will be defined by those who understand the sea change and can leverage the transformation to their advantage.

So, let’s get right to the trends for 2016!

Trend #1: the influential CPO/procurement organization

IDC analysis and research indicates that the worldwide market for procurement solutions grew 6.4% in 2014 reaching $3.9 billion. The demand for procurement cloud offerings drove growth. These figures suggest an increasing influence of the procurement organization, and by extension, the chief procurement officer (CPO), within the enterprise. Indeed, a successful cloud procurement solution deployment can provide tangible results focused on cost effectiveness, process efficiency, greater insight into supplier decisions, and generally a more coherent global supply chain.

Further proof points are found in an Accenture report detailing US$1 billion in savings via a transformation of the procurement function, as well as the big savings for CyraCom via a procurement cloud solution. Needless to say, the clout that the CPO is bringing to the table is resonating across the organization. We expect this trend to continue and deepen throughout 2016.

Trend #2: increased collaboration with suppliers

The last 10 years have seen the industry create a range of collaboration functionality (and acronyms) related to the “social enterprise.” These have included user profiles, groups, content sharing, conversations, blogs/wikis, tagging, ratings, and instant messaging. We are at a point today where our personal usages of these items and collaboration technologies have become relevant to the enterprise workplace.

Collaboration from the procurement perspective revolves around facilitating it within a company and with suppliers. However, collaboration in the cloud is vastly different from what many of us are used to in the old economy model. Intra-company collaboration is top of mind with a broader set of Procurement executives as they continue to seek increased influence in the organization. With procurement technology increasingly social, helping to facilitate and codify a collaborative process, expect this trend to become a critical requirement for CPOs.

Trend #3: increasing spend visibility using analytics

Companies that do not mine and cultivate their information as if it were the most important asset are leaving it to be monetized by competitors. As it is, organizations are awash in data on their customers, prospects, partners, and suppliers. The complexity of representing data, analysis, and insights in actionable scenarios is a challenging yet critical task, required for efficiently operating a business.

Analyzing spending allows procurement executives to gain visibility into direct and indirect spending across global accounts and to identify opportunities for consolidation and reduction of costs, and provides transparency across finance, operations, and procurement for process improvement opportunities.

Understanding this, procurement solutions will look to provide information in a way that best suits decision-makers. Beyond static, backward-looking reporting, expect to see sophisticated analytics techniques incorporating better visualization and interactivity within reports, delivering the kind of story procurement executives, CPOs and CFOs have been craving.

Trend #4: reducing risk while improving compliance

Risk mitigation remains an important consideration, further supported by Deloitte’s Global CPO Survey, which showed geopolitical and economic risk as standouts. This area is an opportunity for CPOs to help quarterback the risk assessment process, tying it in with supplier prequalification, onboarding, and ongoing performance management, and perhaps to design an exception-based process that is better at identifying and monitoring high-risk suppliers.

Risk reduction will continue to be top of mind in 2016, with the role of technology becoming crucial in determining standard supplier prequalification and onboarding processes with built-in control points, the use of ongoing monitoring capabilities to stay ahead of potential risks, and of course automation of the entire process.

Having reached the cloud inflection point where a lower-cost, easy-to-upgrade, and simple-to-scale cloud procurement solution is an expectation, 2016 promises to be a breakout year that showcases the business advantages that a modern solution brings to the procurement function.