The Future of Source-to-Pay
Procurement Trends, Source-to-Pay, E-procurement
The challenge with writing about the future is that you invariably write about the present out of necessity. I have no crystal ball through which to see the future, I can only look around for markers which appear to point in a certain direction. It’s then up to me (and you, as you read this) to apply my own insights and it will be up to you to agree or disagree. I personally feel the dialogue is more interesting than any one person’s opinion - even if it’s mine.
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Let’s frame the conversation into the following sections:
- Source-to-pay today
- Trends and market forces
- A potential vision for the future
Incidentally, the whole concept of source-to-pay is relatively new. It was only in the early 2000s when vendors (with conveniently positioned portfolios) started pushing analysts to accept purchase-to-pay. Before then, e-procurement and accounts payable processes were very much siloed. Fast forward to today and the consolidation of the market has created vendors with broader portfolios and as you might expect, the market today is source-to-pay (even source-to-cash) rather than the slightly smaller process of purchase-to-pay.
The ingredients are all still the same. People, processes, and technology make up the Venn diagram of the mix but over the years, the contents within the circles have not remained constant or equal. For example, financial process automation - or accounts payable automation has been a really hot topic for years, but with the ubiquity of e-invoicing and the addition of rules-based automation and now machine learning, AP automation is offering diminishing returns (we’ve squeezed all the value out and it’s as lean as it will get). Although it hasn’t happened yet, procurement is on a similar path of diminishing returns but, thankfully for those with bonuses connected to savings, the savings will always be possible (it will bottom out though at around 2.5-4%).
Market forces and trends
The confluence of technology and process will, of course, drive further automation (ie: less human involvement) and, where human interaction persists (supplier-buyer interaction/collaboration), will fuel not automation, but insights. People will be enabled to make better decisions. And as automation thins the numbers of procurement professionals on the team, decision making will increase in pace.
What’s happening above is almost entirely driven by machine learning and AI. Automation with business rules is tried and tested but what isn’t fully leveraged is AI. Throw AI at the problem, give it a few thousand process flow examples and then set it loose. (Fingers crossed, hope to avoid another Cyberdyne). All we are really asking AI to do is flag the important discrepancies while taking care of all the mundane - and this is what it’s designed for at present.
Analytics is a (still) trending technology but it’s AI-infused analytics which is really getting exciting. A couple of years ago we were talking about predictive analytics and now we are imagining automated decision making based on predictive analytics. This will of course further reduce the need for basic category managers (and much of AP) but does this mean we are on a path to total automation based on better, faster decision making? I think not. Unfortunately, or fortunately, the homo sapien is anything but perfect and this lack of perfection will make it hard for AIs to really take over (can you program irrationality?)
A vision for the future
Woody Alen once said “It is clear the future holds great opportunities. It also holds pitfalls. The trick will be to avoid the pitfalls, seize the opportunities, and get back home by six o'clock.” This one quote encapsulates the digital transformation faced by all organizations of any size. According to a recent Gartner study*, over 85% of organizations fail in their ambitions for digitalization. This appears to be a staggeringly high amount of failure but for anyone who has seen digital transformation first-hand, it’s hardly surprising. This stuff is complicated. One process at a time in a one-dimensional organization seems easy enough but for larger companies, the number of variables to consider multiply.
The future, as I indicated at the beginning of this post, is unknown. The present tells us, however, that the near future will be full of our best efforts and a good amount of failure. But we shouldn’t be afraid of failure. Another good quote from someone slightly more tech-savvy than Woody Allen comes from Mark Zuckerberg: “In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks.” We must be emboldened to engage with new thinking and allow new technology to, in fact, transform how we approach business processes and business models.
You are never supposed to offer up new information in your conclusion but I’ll do it here regardless. As the Head of Product Marketing at OpusCapita, you would be right in thinking one of my main roles is to own the vision. But vision is rarely built in a vacuum - we need input. We need to hear from our customers in order to better understand what it is we are here to do for them. The most interesting recent trend which I’ve noticed as I speak with CPOs in the course of my work is the realization that procurement is directly connected to customer satisfaction. That may seem simple to you but ask your average Category Manager what is important about what they do and it will be a rare moment when he or she tells you that a more efficient procurement process will directly benefit the end customer through faster services and/or lower costs. This example of a greater situational awareness from within the source-to-pay space is emblematic of the transformation taking place. These people who make the connections between their tactical efforts and the strategic goals of the organization will be the leaders of tomorrow and they are transforming us today. Whatever they build will be interesting to watch.
*Gartner, Digital Business Transformation: Closing the Gap Between Ambition and Reality, Ian Cox, Kristin Moyer, 18 June 2018
Rowan has more than 10 years of experience in the purchase-to-pay arena. During this time, he has managed the go-to-market for a diverse set of portfolios including Accounts Payable Automation, B2B Networks, Financing Services, eProcurement and Product Information Management.
Read more blog posts about Source-to-Pay
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In 2020 everything changed! The global impact of Covid-19 changed the game and we are still learning about the new rules.