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Recently, Ariba had the opportunity to get SAP’s VP of Network Growth, James Marland, together with Andrew Bartolini, Managing Partner and Chief Research Officer at Ardent Partners. This resulted in four interesting conversations on the topic of “The Future of Procurement.” The first conversation revolved around Procurement Innovation. The second conversation focused on the increasingly important topic of Risk. The third, concentrated on getting a grip on Tail Spend, as well as SAP’s recent acquisition of Fieldglass for Contingent Workforce Management and Concur for Travel & Expense.
Of particular interest to James and Andrew was Gartner’s recent finding that the average procurement organization manages slightly more than 60% of all enterprise spend. Which means procurement is involved in about 60% of all the goods and services that are purchased. Now, organizations are looking to tackle the last 40%, Tail Spend, and for good reason. According to Andrew, “Our research shows that the average procurement organization saves somewhere between 6 and 12% on every dollar of spend that is brought in during the first contract cycle.”
This means that for many organizations there is a lot of value to bringing that last 40% under procurement’s control.
Trends in Tail Spend
Often the reason that this doesn’t happen is that these types of spend can be challenging to control.This includes contingency workforce, SOW spend, business travel and HR benefits. Of these, contingent workforce and business travel are the two largest spend categories.
“A changing workforce means new challenges. Contingent workforce is an area that is growing at a phenomenally fast pace, and is becoming increasingly more strategic. Our research predicts that in the next three years between 45 and 50% of all staff working onsite an enterprise will be contingent, non-permanent employees”says Andrew.
This trend of hiring more and more non-permanent employees creates an opportunity for procurement to provide its expertise, by combining HR best-practices with procurement best-practices, in something that Ardent partners calls: Total Talent Management. Andrew states, “Procurement as a centralized point can codify these relationships, add rigor to the process… It’s engaging and collaborating with the business, understanding what the goals and objectives are of why you would tap into a specific type of worker, and then setting a framework around that so they can focus on the business and procurement can focus on the highest value for money.”
Business Travel
The second largest spend category in most enterprises is business travel. Procurement may not always be involved, but it can play an important role here by analysing travel spend, utilising sourcing strategies, and selecting the highest value travel vendor. However, procurement will have to deeply consider how to best tackle the category. Andrew advised, “As procurement continues to evolve in its role and place in the organization, simply coming in with very rigorous and set policies works fine if you are talking about office supplies. But when you are looking at a business traveler who spends 40 to 80% of their time on the road, the overall satisfaction and productivity of that business traveler has to be taken in account.”
Flexible mobile systems
During their conversation, James and Andrew also focused on flexible systems that allow for business users to get what they want easily. In order to make sure that this happens, solutions are going mobile. According to Andrew, “One of the challenges we have seen on the procurement side, from a technology standpoint, is the level of complexity that exists, number of clicks it takes to do things. Moving all these things to a mobile platform is going to require brutal simplification, and we believe that is going to be a major driver for adoption in years to come.”
That points to the opportunity that mobile applications can deliver to the procurement function in terms of user adoption.
If this is for you and your organization, both Fieldglass and Concur solutions will be present at Ariba LIVE in Munich, 8-10 June. You’ll be particularly interested in these breakout sessions:
Applying Procurement Best Practices to Travel & Entertainment Expenses
The full list of plenary speakers and breakout sessions is available atAribaLIVE.com.The first three of Andrew Bartolini and James Marland’s conversations on The Future of Procurement are available for listening to at your convenience:
