For several years now, Spend Matters has been collecting and publishing a series of articles about predictions and insights on procurement, supply and services trends for the year ahead from expert tech and service providers in the market.
This year is no different and we’ve framed the subject around “insights,” highlighting providers’ observations from the year they’ve left behind and how they see them shaping the year ahead.
This series will run from mid-December to mid-January, then our analyst Bertrand Maltaverne will wrap up with his own take on the key themes that emerge.
In no order of preference, other than by the date they dropped into our digital letterbox, today let’s hear from Keith Hausmann, CRO of Globality.
Globality’s top trends expected to reshape indirect spending in 2023
Indirect spend will become the focus of C-suite efforts to improve their bottom line. Indirect spend can account for 20% to 40% of revenues, yet rarely draws executives’ attention. Where companies were once able to squeeze margins from their supply chain, rising costs for products across the board are preventing them from tapping that source. Instead, companies will tap indirect spend, such as technology, marketing and real estate, in order to preserve earnings, margins and profitability. There will be more strategic focus on indirect spend and less emphasis on simply “slashing” the budget which is what most companies have traditionally endeavored to do.
Automation will bring a more consumer-like, self-serve buying experience to the enterprise. Automation is having a profound impact across entire organizations. Injecting automation into key enterprise functions including procurement and leveraging it to bridge data silos that inherently exist is dramatically more efficient and effective. Enterprises will increasingly require procurement technology solutions to be more consumer-like, intuitively designed and agile to improve efficiencies, better work with their business stakeholders and help to do more with a leaner staff. It will be crucial to have mechanisms that prevent business stakeholders from making a sub-optimal selection of suppliers and guide them toward making the decisions that ensure their costs are truly fair market, especially when their spending is directly impacting the company’s profitability targets.
Within procurement teams, skill sets will shift from transactional abilities to relationship management and problem solving. As data analytics and automation become more prevalent, companies will no longer need large procurement teams focused on transactional work. Instead, procurement talent adept in strategic problem solving and relationship management will be much more in demand. Effective procurement teams will have the ability to leverage insights derived from technology and artificial intelligence while transactional tasks will be completed more efficiently through automation which also frees up budget.
Chief Procurement Officers (CPOs) will face a war on procurement talent and expertise. As the focus increases on indirect spend optimization, many organizations will realize that their talent pool in areas like marketing or technology buying are not up to the task. For too long Procurement has played a mostly transactional role in these areas, and expertise has become rare. CPOs will realize that there aren’t enough deep experts in the indirect procurement space to fill every vacancy at every major corporation, and the only answer is complementing humans with machine learning or, in other words, crowdsourcing the competences and knowledge which have become scarce.
CPOs will become critically important to the performance of a business as inflation remains stubbornly high and the global economy slides into recession. CPOs will be the central, accountable point in collaborating across the C-suite as executives define the strategic vision, design the IT roadmap and determine how OpEx and CapEx can be spent more wisely from a supplier cost and value perspective to improve the bottom line. As custodians of the most impactful data a company generates, they control an increasingly strategic lever that helps companies manage costs while prioritizing resources in key areas to not only survive but also thrive during the tricky times that lie ahead in 2023.
Thanks to Globality for being a part of the series.
Look out for more Spend Matters Insights for the year ahead over the coming weeks.
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And if you are looking for procurement services providers to help you with your 2023 decisions, look no further than our Procurement Services Market Landscape Directory.