GEP Value Trends: Procurement Technology

GEP Value Trends: Procurement Technology

Second in a Research Series on Procurement from
Information Services Group (ISG) and GEP

September 2012

ISG Research conducted in conjunction with:

© Copyright GEP 2012. All rights reserved.

Introduction

ISG undertook research in June 2012 with support from GEP to provide insights to CPOs and other Procurement
executives in an effort to assist them in understanding some of the key issues facing other procurement
organizations. Additional goals were to provide insights to steps that they might take to address some of these
issues and to move their organizations to the next level in delivering value to their companies.
Respondents to the survey were primarily based in North America with 28 percent of respondents representing
other geographies. Respondents included leaders from the financial services, healthcare and pharmaceuticals,
business services, manufacturing, energy, government and public sector, media and telecom, retail and travel
and transportation sectors. Fifty-nine percent of respondents were from businesses of more than $5B in annual
revenue and respondents were generally CFOs, CPOs or their direct reports.
The research focused on three key aspects affecting the procurement function:
• Procurement Strategy: Key Challenges and Transformation Drivers

• Procurement Technology and Implementation

• Procurement Outsourcing
In this three part series, we bring to you insights from the research covering these three aspects, one at a time.
These insights reflect the voice of numerous procurement leaders across several industries and can be an
effective tool in benchmarking your own procurement organization.
In the first report, we focused on key challenges faced by procurement executives today, areas they perceive as
opportunities for improvement and top priorities for procurement executives at this time.
This report, the second in the three-part series, provides insights into Procurement Technology and
Implementation trends including type of procurement software most actively used today, trends in procurement
software adoption, trends in software deployment model and the importance of brand in software provider
selection.

2 © Copyright GEP 2012. All rights reserved.

Survey Approach and Respondents
Respondents to the survey were primarily based in North America with 28 percent of respondents representing
other geographies. Respondents included leaders from the financial services, healthcare and pharmaceuticals,
business services, manufacturing, energy, government and public sector, media and telecom, retail and travel
and transportation sectors. Fifty-nine percent of respondents were from businesses of more than $5B in annual
revenue and respondents were generally CFOs, CPOs or their direct reports. It should further be noted that
respondents tended to be from organizations that participate in forward-thinking professional societies and are
therefore likely to have a higher degree of awareness of more advanced trends in procurement. Organizations
that do not actively participate in such societies may therefore be underrepresented in the survey.


Procurement Technology and Implementation
Procurement tools have been implemented by many organizations, but their adoption within the enterprise has
varied significantly. Much of this is driven by the manner in which they are used, as many users across the
corporation will have need of access to a transactional tool set, but, typically, only a small team within most
organizations is focused on managing spend analytics. Vendor management tools also tend to be concentrated
among a relatively small user base, while contract management tools tend to be more distributed. This suggests a
number of interesting behaviors:
• Contract management tools tend to be most widely used in a rudimentary form as a basic repository, with
multiple users entering contracts into the database with the objective of populating a single corporate
location for virtual storage of scanned copies. Multiple users are performing data entry, which tends to
result in inconsistent data entry, making it difficult to report on trends or overall performance across the
contract database.
• Vendor management tools are less widely distributed, reflecting relatively new rollout to limited
populations with vendor management responsibility.
Moving forward, it will be important for both of these tools to be coordinated with better standard controls on data
entry and use to provide an enterprise view of vendor and contract risk and performance. Because data entry for
both tools takes a significant level of effort to be performed consistently, customers will need to plan for
appropriate staffing to manage this work effort. Those that do not will only achieve partial benefit due to a lack of
consistency of overall reporting.


Procurement software adoption is highest in transactional tools, with 44 percent of companies reporting that they
have fully implemented the software adoption and 28 percent indicating that they are in the process of doing so.
Only 10 percent of companies that have not implemented procurement software indicated no plans to do so. This
suggests that the market for transactional solutions is largely saturated, and that a significant percentage of future
activity will be generation two upgrades or replacements to existing tools, typically where such replacement
provides improved functionality, or better ease of use to existing platforms.
At the other end of the spectrum, only 14 percent of companies surveyed have implemented a vendor
management platform and another 27 percent are in the process of doing so. Nearly 40 percent of respondents
are considering implementing a vendor management platform for the first time, suggesting that this will be an
active market for expansion of existing suites or adoption of point solutions as part of a portfolio software solution.
ISG believes that with increased focus on corporate governance, risk, and regulatory compliance, demand for
vendor management solutions will continue to expand over the next few years.


For companies planning to implement additional procurement functionality, transactional procurement initiatives
have the nearest horizon, followed by vendor management. In view of the much lower installed base for vendor
management solutions, and the fact that 38 percent of surveyed companies are planning to implement a vendor
management solution, we expect that vendor management will be the hottest segment of the market in the next
year, followed by contract management. Most companies considering implementation of a sourcing tool appear to
have a longer time horizon for their decision, indicating that it appears to be a less pressing immediate concern
and that they believe that they can continue to get by with manual sourcing approaches in the near term.

Procurement Software Adoption Horizon
Software Implementation Horizon

Transactional Procurement (n = 10) 40% 40% 20%

Vendor Management (n = 21) 38% 43% 19%

Contract Management (n = 16) 38% 31% 31%

Spend Analysis (n = 12) 33% 42% 25%

Sourcing (n = 15) 20% 47% 33%

Within 6 or 12 months Within 18 months Can't say

Source: ISG Procurement Technology and Outsourcing Trends Survey March 2012
# If you answered ‘considering implementing’, what is the timeline that you are looking at to pursue these software opportunities?


The majority of companies that implemented procurement software, or are in the process of doing so, are using
traditional installed versions on company infrastructure. However, this reflects historical investments, and
increasingly we are seeing companies adopt a hosted or cloud-based delivery model. The reasons for this shift
include greater ease of rollout and adoption, typically resulting in a faster deployment across the company.

Procurement Software Adoption Trends
Software Deployment model Business Impact of Software adoption

72%
18% Transactional Procurement (n = 24) 17% 58% 8% 13%4%
Transactional Procurement (n = 39) 8%
2%

70%
Vendor Management (n = 20) 20% Vendor Management (n = 8) 0% 37% 38% 12% 13%
5%
5%

60%
Contract Management (n = 32) 31% Contract Management (n = 18) 11% 39% 17% 33% 0%
6%
3%

54%
Spend Analysis (n = 35) 29%
14% Spend Analysis (n = 21) 24% 52% 10% 14%0%
3%

49%
Sourcing (n = 35) 37%
11% Sourcing ( n = 19) 26% 58% 16%0%
3%

Software license on company infrastructure
Exceeded expectations Met expectations
Software license hosted
Approaching expectations Below expectations
Saas (Private Cloud)
Can't say
Cloud

# If you answered ‘fully implemented’ or ‘currently implementing’, which software approach are you adopting?
# If you answered ‘fully implemented’, how would you rate the impact of adopting software and tools on your organization meeting its business case?

Copyright © 2012 Information Services Group, Inc. All Rights Reserved 36


We observed considerable variation in adoption of various procurement software modules by industry, notably a
significantly lower use of spend analytics in manufacturing than in other segments, reflecting a less focus on
indirect spend in that sector, and a much higher use of contract management in regulated industries such as
financial services and healthcare.

Procurement Software Adoption Trends by Industry
Financial Services (n = 18) Manufacturing (n = 6)

Spend Analysis 50% 22% 11% 17% Spend Analysis 17% 50% 33%

Contract Management 44% 33% 17% 6% Contract Management 17% 50% 33%

Vendor Management 11% 39% 22% 28% Vendor Management 0% 33% 67%

Sourcing 39% 17% 28% 16% Sourcing 34% 33% 33%

Transactional Procurement 33% 33% 17% 17% Transactional Procurement 50% 50% 0%

Business Services (n = 10) Healthcare & Pharmaceuticals (n = 10)

Spend Analysis 30% 30% 40% 0%
Spend Analysis 40% 40% 0% 20%

Contract Management 30% 30% 40% 0% Contract Management 40% 40% 10% 10%

Vendor Management 30% 20% 50% 0% Vendor Management 30% 20% 20% 30%

Sourcing 20% 30% 40% 10% Sourcing 30% 50% 10% 10%

Transactional Procurement 50% 10% 20% 20% Transactional Procurement 30% 60% 10%
0%

Fully implemented Currently implementing Considering implementing Not considering implementing
# How would you define your adoption rate of various procurement tools and software in the following areas of procurement?

Procurement executives had varying degrees of familiarity with procurement tools in the marketplace, but were
almost universally familiar with Ariba, followed by SAP (which recently announced that it would be acquiring
Ariba), Emptoris and Oracle. The next bands with relatively higher degrees of familiarity include Zycus, GEP and
Coupa.


Brand appears to be a more of a contributing factor to software/service provider selection than a major one, with
40 percent of respondents indicating that brand was of minimal importance and only 7 percent listing it as the
most important criteria, with the results being similar across large (revenues > $10B) and middle-sized (revenues
of $1-$10B) enterprises. The higher the organizational level of the respondent, the less that the respondent
considered brand to be a major factor For example, 57 percent of CPOs said brand is of minimal importance for
service provider selection and none said it was the most important criterion, while at the manager level 15 percent
of respondents perceived brand to be the most important criterion and only 29 percent said it is of minimal
importance. Among verticals, brand importance was ranked lowest by the manufacturing sector and was
somewhat higher in financial services and healthcare/pharmaceuticals.


Importance of Brand by Organizational Role

57%
Brand is of minimal importance in the selection of
44%
a software/service provider
29%

43%

Brand is important,but other factors also matter 52%

58%

0%
Brand is the most important factor in the selection
4%
of a software/service provider
13%

CPO VP/Director Manager/Staff

Source: ISG Procurement Technology and Outsourcing Trends Survey March 2012 n = 57
# Please describe the importance of Brand in the selection of a procurement software/service provider


Importance of Brand by Organizational Size

41%
Brand is of minimal importance in the
selection of a software/service provider
33%

55%
Brand is important, but other factors also
matter
57%

4% $1 B - $10 B
Brand is the most important factor in the
selection of a software/service provider > $10 B
10%

n = 50


Importance of Brand by Industry

50%
Manufacturing (n = 6) 50%
0%

50%
Business Services (n = 10) 30%
20%

20%
Healthcare & Pharmaceuticals (n = 10) 70%
10%

22%
Financial Services (n = 18) 78%
0%

Brand is of minimal importance in the selection of a software/service provider
Brand is important,but other factors also matter
Brand is the most important factor in the selection of a software/service provider



Conclusion
We will continue to provide research into the increasingly dynamic procurement space.
• The procurement technology adoption rate is high for Transactional Procurement and Spend Analysis
software and tools, while Vendor Management has a low adoption rate.

• Although SaaS and cloud models are gaining traction, they currently occupy a lower share among
procurement software deployment models. This could primarily be on account of perceived threats related
to security, data confidentiality and loss of control. Providers of these solutions will need to demonstrate
to potential buyers that these perceived threats will be appropriately managed with their solutions.

• The market for procurement software has become increasingly complex, and most buyers have a limited
familiarity with the range of solutions available. Buyers should seek additional insights and subject matter
expertise to ensure that they have a full understanding of their options in both delivery models and
service providers prior to finalizing their solution strategy.


For more information about GEP, please visit www.gep.com, or contact us at info@gep.com. Alternatively, call us
at any of our locations listed below:

Clark, NJ, USA London, UK Mexico City, Mexico São Paulo, Brazil
+1 732-382-6565 +44 (0)20 3008 7471 (52) 55 4777-2251 55 11 2787 6393

Prague, Czech Republic Mumbai, India Hyderabad, India Shanghai, China
(420) 233 025 400 91 (22) 6137 2100 91 (40) 4004 4212 86 (21) 6122 1238

About GEP

GEP is a diverse, creative team of people passionate about procurement. We invest ourselves entirely in our
client’s success, creating strong collaborative relationships that deliver extraordinary value year after year. We
deliver practical, effective procurement services and technology that enable procurement leaders to maximize
their impact on business operations, strategy and financial performance. Named a category leader in procurement
outsourcing by the Black Book of Outsourcing, a Star Performer in Everest Group’s Peak Matrix of service
providers, and to the Supply & Demand Chain Executive 100 for seven years, GEP is also ranked as one of the
Fastest Growing Technology Companies in Deloitte's Technology Fast 500. Clark, NJ-based GEP has eight
offices and operations in North and South America, Europe and Asia. To learn more, please visit www.gep.com.

Unauthorized copying, distribution or re-printing in part or whole, without the written permission of GEP is strictly prohibited.


GEP Value Trends: Procurement Technology

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (19)

Andere mochten auch

Andere mochten auch (8)

Ähnlich wie GEP Value Trends: Procurement Technology

Ähnlich wie GEP Value Trends: Procurement Technology (20)

Mehr von GEP

Mehr von GEP (7)

GEP Value Trends: Procurement Technology