New technologies, such as artificial intelligence (AI), B2B marketplaces, and chatbots, are poised to radically change procurement and sourcing processes over the next five years, according to a recent report published by the analyst firm Gartner.
In
"Predicts 2018: Procurement and Sourcing Technology Will Benefit From Advances in AI, Data Visualization and B2B Marketplaces,"
Gartner analysts Patrick M. Connaughton, Magnus Bergfors, Desere Edwards, and Kaitlynne N. Sommers project that by 2022:
- Fifty percent of all legacy spend-analysis software will be retired, replaced by AI-powered, cloud-based solutions
- Seventy-five percent of all B2B "tail spend" (or one-off, nonstrategic spend items) will be purchased in an online marketplace such as Amazon Business or Alibaba's 1688.com
- All major procure-to-pay software suites will have embedded virtual assistants and chatbots to help guide buying and self-service requests.
These three predictions are further detailed below.
Future of spend analysis. According to Gartner, "legacy spend-analysis software has failed to deliver on its promise." Instead, the analysts contend, the current spend-analysis process is time-consuming and error-prone. As a result, procurement managers are not able to make quick decisions in the face of changing market conditions.
Gartner foresees a new breed of spend-analysis tools that will leapfrog traditional software and incorporate more advanced AI, better business intelligence tools, and the ability to process natural (human-generated) language. While some traditional providers will reinvent their solutions using AI to analyze unstructured data, Gartner believes that greater than 50 percent of them will fail to adapt and instead will become obsolete.
Future of tail-spend management. In the past, tail spend has been largely ignored by procurement departments because it was not worth the time and investment. Over the past two years, however, e-marketplaces such as Amazon Business and Alibaba's 1688.com have been growing rapidly because they offer businesses an easy, effective way to handle this type of purchase. These marketplaces currently focus on what would be considered indirect spend, such as maintenance, repair, and operations (MRO); information technology (IT); and office supplies. Gartner expects usage to increase even more as these sites develop vertical-specific marketplaces and improve interoperability with procure-to-pay (P2P) software solutions.
Gartner's analysts suggest that companies find out how much money individual employees are already spending with Amazon Business, Alibaba, or other online marketplaces. If the amount is more than 5 percent of total spend, they recommend that the company consider consolidating that spend under an enterprise account. The analyst group also recommends setting basic guidelines for employees on when they can use Amazon Business and Alibaba and consider adopting P2P software that has a high level of interoperability with these marketplaces.
Future of P2P software. The biggest change that Gartner expects to see in P2P software in the next five years is the introduction of virtual employee assistants (VEAs) and chatbots. According to Gartner, both VEAs and chatbots are computer programs that simulate a conversation with a human being. VEAs work on behalf of enterprises to support employee engagement with, for example, the procurement process. Chatbots have a narrower functionality and are often highly specialized.
These artificial intelligence features will help guide end users through the buying process. A VEA will use a series of simple questions to help determine the best buying channel and payment method for the employee. Initially these interactions will be via text-based communications, but Gartner predicts that voice responses will be enabled in the near future. Chatbots will be used to handle common supplier requests, such as answering questions about the status of a payment or helping to resolve invoice discrepancies.
Gartner recommends that companies identify pain points where chatbots can be added to create immediate value, and then work with their current P2P software vendor to identify potential pilot opportunities.
