According to Gartner, worldwide end-user spending on cloud services is forecasted to grow by 18.4% in 2021 to $304.9 billion, up from $257.5 billion in 2020. The pandemic has reaffirmed the importance of Software as a Service (SaaS) over on premise application which would otherwise cost enormous time and money along with in-house servers, IT infrastructure and periodical maintenance. The procurement professionals have thus shifted their focus towards adopting cloud-based applications to make enterprises intelligent, agile, and resilient while using digital technologies.
As enterprises across the world are embarking on digital transformation programs in diverse scales and forms, SaaS plays a key role in this transformation. With continuously evolving customer needs and product proliferation, procurement organizations are pushed to evolve and adapt quickly. To keep the IT landscape synchronous to the pace of evolving business, applications need to be rapidly deployed to automate business processes, improve productivity, and reduce costs. Thus, the cloud-based applications form the heart of any digital transformation giving users the chance to reap benefits from all emerging technologies. As more digital technologies come in existence, enterprises will prefer adopting cloud-based applications.
Let us explore in detail how SaaS products have impacted the procurement function through ‘People, Process and Technology’.
‘People’ – New Skill Set and Roles
The procurement structure and mindset of professionals will need to change with an increase in adoption of SaaS based products. Enterprises will continue to adopt new digital technologies and procurement function will soon start to have people with a mix of both domain and digital skillsets. AT Kearney Report suggests that by 2025, 20% of procurement employees will be data experts, and 70% of savings will be generated by data analytics. Erstwhile buyers are focused more on building metric driven frameworks to derive cost savings. Now, they would soon start evaluating digital technologies such as AI/ML, advanced analytics, big data and/or intelligent automation to achieve their desired KRAs. Thus, digital acumen will form a key skillset for procurement professionals. Although there is heavy dependency today on the IT department, the gateway between procurement and IT will soon diminish as SaaS based applications are becoming more business user friendly.
SaaS products have made value creation quick and reliable, thereby leaving the competitive advantage to the strength of functional and analytical skillsets of procurement personnel.
Transforming Procurement ‘Processes’
Applications underwent a long development and customization phase to suit business processes of the organizations. Today, with cloud-based ERPs, it offers the agility to bring ‘out of the box’ features in a fraction of time. SaaS allows users to create purchase orders, contracts, and handle payments anywhere, anytime over the internet as opposed to a conventional ERP. Having a cloud ERP during the pandemic has provided flexibility to users to access anywhere, anytime thereby keeping business critical processes running. Procurement processes could be tweaked to match the changing business needs and priorities through SaaS. Competitive bidding, e-auctions, supplier queries and customer support will be quick and reliable over collaborative cloud platforms. The risk management process will be more resilient through cloud applications fetching data in real-time from multiple sources assessing economic, political, or environmental risks to material supply. SaaS based applications will make information availability easy and accurate across various procurement processes thereby bringing better visibility and transparency.
The levels of transparency would bring accurate insights, improved business decisions and collaboration between stakeholders (both internally and externally).
‘Technology’ – Test Drive at the Doorstep
In contrast to a big bang implementation of large products that burn a big hole in the CPO’s budget. SaaS provides the flexibility to start small with any technology – AI/ML, IoT, advanced analytics, blockchain, and so on. The ‘pay per use’ or ‘pay as you go’ averts business and financial risks if the product does not deliver required value or perform as expected. Most of the SaaS vendors today offer trial versions for free or very minimal charge. This way organizations can test the solution in their actual procurement environment before committing to a contractual purchase. There are numerous SaaS based analytical products specific to sourcing, contracting, procurement, risk management, vendor payments, sustainability, and so on. This leaves procurement personnel spoilt for choices to test drive several solutions in the market before picking one. Professionals could directly run proof of concepts within 4-5 weeks to build confidence on the product suiting their business needs.
As per Gartner’s recent report, the proportion of IT spending that is shifting to cloud will accelerate in the aftermath of the pandemic, with cloud projected to make up 14.2% of the total global enterprise IT spending market in 2024, up from 9.1% in 2020. For long, procurement has shifted from a function of cost center to value creation. SaaS will now spear head procurement to a strategic position in the enterprise to improve bottom line, customer experience and streamline process of businesses.
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