Making the Business Case for Digital Procurement this Budget Season
The days remaining in this fiscal year are slipping away quickly. All across the enterprise, decision makers’ attention is turning to 2019. The start of a new year brings new budgets – along with all their ups and downs. Procurement’s spend management mandate might lead one to expect that we have an inside line on securing funds, but this is not usually the case. Procurement teams have varying levels of visibility and influence during the annual budgeting process – especially when it comes to making the case for investment in our own technology. And an investment in digital procurement can be the difference between ‘getting by’ and ‘getting ahead’.
Procurement teams that have successfully transformed into a strategic and digitally-enabled function have stronger relationships with stakeholders and executive leadership. This is partially because of the increased access to information that transformation provides and partially because of reduced ‘static’ thanks to access to integrated, end-to-end digital procurement.
As high-tech and futuristic as ‘digitally transformed procurement’ sounds, it starts with one simple step: moving spend data and analysis out of applications like Excel or Sharepoint and onto a procure to pay (P2P) platform.
Unfortunately, fully digital procurement remains elusive for many organizations. According to recent research by The Hackett Group, State of Procurement Digital Transformation Part 1: Value Drivers and Expectations, only 63% of procurement organizations have a plan for digitally transforming themselves. Given that it would be unrealistic to expect 100% of those plans to be successfully executed, we are likely left with less than half of procurement teams benefitting from digital transformation. And while the obstacles to transformation are common, they are not discussed often enough because each team feels that they, alone, face this situation.
Many companies fall behind because of the limitations of their technology. A natural reluctance to ask for the funding required to enable digital transformation is compounded by executives who feel their company is alone in not having digitized relatively simple processes such as invoice management and contract management.
This may leave procurement’s digital transformation in an uncertain position, but hope is not lost. Budget season is an essential time for procurement to make our voices heard. Here are some key areas of focus for procurement teams looking to make the business case for digital transformation: the obstacles that must be overcome and the advantages to be realized.
Transform for the Sake of Risk and Efficiency Chokepoints
Staying with the status quo may seem like a safe or easy choice, but it leaves procurement – and the enterprise as a whole – exposed to risks and subject to poor efficiency. 33% of the respondents in the Hackett Group study cited above admit that their service does not meet internal customer expectations. Imagine what that percentage might be if the internal customers had been asked directly? Making no change to how procurement engages with stakeholders and suppliers to bring spend under management is a significant risk in itself, not to mention the additional risks and leakage it creates: lack of visibility, overlapping contracts, poor governance, and an inability to fully leverage existing agreements and supplier relationships.
Transform for the Sake of Adoption and Value Creation
The vision required to move towards e-procurement software solutions can not just be about moving away from the past. What is the incentive to evolve? It is no surprise that the creation of business value and a user experience that maximizes adoption are front and center. 97% of the respondents in the Hackett Group study report that it is “highly” or “critically” important for them to increase procurement’s value contribution to the business. This will be nearly impossible without the implementation and adoption of cloud-based P2P solutions. Not only can these solutions be credited with increased compliance, they allow the business to make improved decisions in less time – presenting a key opportunity to create or maintain valuable competitive advantage.
Sometimes it is necessary to spend in order to save, but the real justification for leaving Excel behind is that too many procurement teams rely upon it to function in a way it was not designed to operate. Allowing an ‘in a pinch’ mode of operation to continue in the long term is short sighted, a perspective that should be clearer than ever as the enterprise plans out how it will spend its resources in the year to come.
Kelly Barner is the owner of Buyers Meeting Point, an online resource for procurement and purchasing professionals. Her unique perspective on supply management is based on her time as a practitioner, a consultant at a solution provider, and now as an independent thought leader. Kelly has led projects involving members of procurement, supplier, and purchasing teams and has practical skills in strategic sourcing program design and management, opportunity assessment, knowledge management, and custom taxonomy design.