“The future is already here—it’s just not evenly distributed” – William Gibson, cyberpunk author
Recently, I had a great conversation about the state and direction of the procurement function with James Vespoli, Chief Procurement Officer for PNC Financial Services, and Steve Hall, editor of Procurement Leaders magazine. About 400 procurement folks registered to join our talk, which was broadcast live on the web but had the feeling of a conversation in the hotel bar after a conference. In case you missed it, you’ll find the full webinar replay here. Here’s my recap.
Our chat was part of an ongoing research program called “The Future of Procurement” that I’m running for Oxford Economics and our sponsors at Ariba, an SAP company. We surveyed 500 procurement executives and 500 non-executive procurement workers from around the world to get a fully rounded view of where procurement is headed.
We started with a quote from the cyberpunk novelist William Gibson: “The future is already here—it’s just not evenly distributed.” That sums up the survey findings pretty well. Many companies have an increasingly embedded, collaborative, and tech-enabled procurement function and are already living in the future, while others are far behind.
One futuristic concept that’s become a reality is the increasingly strategic role of procurement, which has gone from buying stuff at scale to driving business results. “I’ve seen a tremendous transformation that comes from procurement teams being able to demonstrate the amount of contribution they can bring to a company’s profitability,” said Jim. His bullishness is shared by a lot of executives—nearly two-thirds of those surveyed see procurement becoming more strategic and absorbing other functions in the years ahead. Just half of non-executive employees expect things to turn out that way—they are more likely to think that procurement will either shrink or get completely absorbed into the lines of business. Steve played devil’s advocate, asking if a shrinking procurement function isn’t actually the optimistic scenario if it means better overall business outcomes.
A big trend in the data shows an increase in the amount of collaboration between procurement and its partners, both inside the firewall and beyond with suppliers. Jim was clear that collaboration is not a magic word for procurement—you’ve got to have a plan to make it pay off. Soon we were talking about measuring performance. The most popular Key Performance Indicator is cost savings and avoidance, which means a lot of people still aren’t thinking in big strategic terms. Jim said cost is critical, but there has to be more to the story. “Our company holds up savings, but our success is determined in how we’re engaged.” He agreed with an audience member that measuring engagement remains a challenge.
We talked technology, emphasizing the key role of business networks and other collaborative platforms to the future of the function. PNC gets a lot of value from its internal social network, and we have heard in the course of our research about procurement using tools like LinkedIn to, say, identify minority contractors.
Perhaps the most important challenge for the future is talent. As with any evolving function, the question is if the people you have now can do the jobs you need tomorrow. Executives are getting the message—their top two investment priorities are recruiting and training programs. In addition to the business and technology skills emphasized in the surveys, Jim also prioritizes people skills when looking for talent—the better to keep those collaborative partnerships humming. “The capability to work with the business partner, have good business acumen, and work on a strategic plan to challenge [suppliers] in the way they conduct their business is a tremendous combination and a powerful way for a strategic sourcing person to have an impact on the organization,” he said.
Which brings us back to that opening quote. The most valuable procurement organizations already inhabit this highly-evolved future, while laggards will take years to catch up—if they stay in business that long. This uneven distribution of abilities and outcomes represents procurement’s great challenge—and its great opportunity.
Edward Cone is the Technology Practice Lead and Deputy Director of Thought Leadership at Oxford Economics, where he has overseen research programs on topics including cloud computing, the Internet of Things, and global talent trends. Click here for the full webinar replay plus more thought leadership from Oxford on The Future of Procurement.