Welcome!

SOA & WOA Authors: Bernard Golden, Elizabeth White, Carmen Gonzalez, Ivan Antsipau, Paul Speciale

Related Topics: Cloud Expo, Java, SOA & WOA, Linux, Big Data Journal, SDN Journal

Cloud Expo: Article

The New Face of Procurement

Business success increasingly hinges on supply chain innovation and procurement advantages

The next BriefingsDirect thought-leader panel discussion focuses on the future of business and how companies can benefit from the new insight and analysis that transparent business networks and processes allow.

The power of data-driven business networks and the analytics derived from them are increasing, but how do enterprises best leverage that intelligence as they seek new services, products and efficiency? How do automation and intelligence enter the picture for better matching buyers and sellers?

BriefingsDirect had an opportunity to learn first-hand at the recent 2014 Ariba LIVE Conference in Las Vegas. To learn more about how business -- led by procurement -- is changing and evolving, and how to best exploit this new wave of innovation, we sat down with Rachel Spasser, Senior Vice President and Chief Marketing Officer at Ariba, an SAP company, and Andrew Bartolini, Chief Research Officer at Ardent Partners in Boston. The discussion is moderated by me, Dana Gardner, Principal Analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: How is procurement maturing, and how do you see it expanding in terms of its strategic implications for any business?

Bartolini: Over the past 15 years, we really have experienced a procurement revolution, although at times it feels a little bit more evolutionary in nature.

In 2006, the average procurement organization, from our research, managed about 30 percent of their total spend. A mere seven-and-a-half years later, that number has doubled. So the average procurement organization is now influencing a majority of their total enterprise spend. The best in class, the leaders in the field, are now managing between 85-95 percent of total spend.

Bartolini

So procurement has risen in stature. There is now a chief procurement officer (CPO) or a single point of contact within a procurement operation at about 85 percent of organizations.

Procurement has stepped out of the back office and into the front ranks, and continues to gain in stature. As it gains in influence, it continues to guide organizations in making smart decisions within the organization and identifying the right business partners outside the organization.

Gardner: So procurement is really expanding, that it's growing up in a sense, not just a static business transaction, but something that is dynamic, living, and growing. Are more and more people getting involved with some of these newer technologies?

Spasser: If you think about the history of procurement, it really was a back-office function that was primarily focused on cost savings in a very tactical way for most companies. As we’ve seen that function evolve over the past 10 years, it has become much more strategic in nature, and it has an impact on much more than just cost savings for an enterprise.

Spasser

There have been a lot of technological advances that have given the procurement professionals the ability to move from manual processes and manual tasks to automating those and therefore focusing on higher-order opportunities to deliver value to the company.

More getting involved

More people are getting involved. For the first couple of years, there were a lot of people sitting on the sidelines, watching what was happening and trying to understand how that could impact their businesses.

Today, people are embracing networks and embracing the opportunities that networks bring, such as e-invoicing. Today, something like 70 percent of companies are using e-invoicing in some capacity. That's a huge improvement and growth over even just a few years ago.

Gardner: We’ve seen the role and impact of social and community, of community vetting of processes, and people looking to their peers for trust and feedback. We know that’s impacted a lot of things. Is this playing a role in procurement as well? Is there a social factor here?

Spasser: There are plenty of opportunities in a couple of areas. First of all, from a risk-management perspective, having more information -- information that's both qualitative and quantitative -- is only going to help procurement organizations make better decisions.

When you look at the social and business networks, the community intelligence, and the data and the insights that live within that network, all of a sudden you’re providing infinitely more information and making the procurement executives smarter, enabling them to make better business decisions, and changing the nature of their game.

Instead of having to respond reactively to changes within the macro environment or within their supply chain, you now have the ability to arm them with information that can make them proactive in their decision making, and proactive in their approach to finding new suppliers, managing existing suppliers, and that really does change the game.

Fertile time

Gardner: It strikes me that the transparency and the ability to qualify and quantify have given us some really new and interesting services such as Dynamic Discounting, like the ability to create AribaPay, and also learn about innovation in the field. We have heard about MSC, where they’re pushing their ability to deliver inventory right into their customer's environment. So, it’s a very fertile time for business procurement processes.

Any thoughts about where the next level of analysis or insight will come?

Spasser: Absolutely. Just going back to your comments on Dynamic Discounting and AribaPay, when you look at procurement, both Andrew and I have talked about it becoming a more strategic function.

When procurement starts impacting the cash flow and the working-capital management of companies through opportunities like Dynamic Discounting or AribaPay, all of a sudden, it enters a completely different realm in terms of its importance and in terms of the amount of respect and inclusion that it gets sitting at the executive table within companies.

If you arm people with information, they have the ability to make better business decisions.

When you talk about what’s next, there are lots of different directions in which procurement can go with the information that they’re given. We talked about risk management, but as companies are coming up with corporate-responsibility mandates, whether that’s sustainability or green or fair labor practices, they can be negatively impacted if they don't truly understand every tier within their supply chain.

And we see this with companies like the Gap or Lululemon in the consumer packaged goods (CPG) and retail space, where these companies have really suffered severe brand damage as a result of having issues within tiers 2, 3, 4 and beyond in their supply chain. That’s one example, but it's a powerful example of how, if you arm people with information, they have the ability to make better business decisions.

Whether that’s a business decision related to offering a discount or whether that’s a business decision about choosing to do business with a supplier or not, based on what you know about them or their second and third tier suppliers, all of this is really important and it's changing the nature of procurement.

Gardner: You brought up governance, risk, and compliance (GRC). I had a very interesting discussion here at Ariba LIVE about InfoNet, using that in association with the data from Ariba Network, and reducing that risk by being able to predict using advanced algorithms and very complex and powerful analytics platforms to see into the future and predict when risks are unacceptable.

Andrew, you’re saying that procurement taps this intelligence, and things like InfoNet have predictive abilities. What is the market telling you, and how far are we into this? Have we just scratched the surface of analytics or are we into the third inning?

Early in the game

Bartolini: With the maturation of the procurement function, we’re still in the early part of the ballgame. If you look at the leading procurement organizations today, the characteristics of these best-in-class organizations are process, discipline, an ability to execute, and driving efficiencies and effectiveness.

What's now prized within the larger enterprise and within procurement itself is the ability to be agile and to drive innovation. This has effectively pulled procurement further into the spotlight, as it really does serve as a process hub within the organization and it really does serve as the prime relationship point for third-party suppliers.

The good news in all of this is that the technology that was introduced also around the time that we started thinking about the procurement revolution has finally started to catch up to the actual user needs, from a usability standpoint, from an integration standpoint, from a time-to-value standpoint.

We’re seeing organizations now move from the initial adoption, where they are just trying to get activity through their systems, to becoming more effective in their usage of these systems and technology.

The skills that reside within the average procurement organization are not where they need to be to be thought of as world class or operational excellence.

When you look at the challenges that a CPO faces, a lot of that is driven by the talent that resides within the organization. Sometimes that's doing more with less. It’s very hard for CPOs to get a new job requisition, even in very large companies, it's a challenge to get that investment in procurement.

Also, the skills that reside within the average procurement organization are not where they need to be to be thought of as world class or operational excellence.

Enter technology and automation. When you look at the reams of data that sourcing and procurement activity generate, the skills of the average procurement organization to go in and analyze and find the right trends, whether that’s pricing trends or identifying key risks, is still not where it needs to be. So, it’s early stages there.

But with things like InfoNet and business networks you’re starting to see the co-location of transactional information, communication that supports those transactions, and then an ability to analyze and make decisions based upon that, all within one central location. That's a very powerful asset for procurement.

Gardner: And not only in one location, but in a cloud environment, where information from an entire industry can be brought together with the proper anonymization, security, and privacy in place -- but then the insights can be global or scaled down to individual organizations.

Opening up

Bartolini: This is an area where enterprises are finally opening up. I worked in this industry 15 years ago, and everything was very proprietary -- our requirements on certain products or items or how much we were spending.

The Internet has really opened it up. Information is at everyone's fingertips. Organizations are starting to understand that there is value that can be created by sharing information in an industry, and particularly with trading partners.

From our research, we’re seeing that organizations can invest in a business network today and get a payback within a year, just based simply on transactional efficiencies.

Where this gets more interesting is when you start to introduce other social aspects. When you start to introduce third-party specialists, who can offer services that add value to all of the participants in a network, it becomes a very interesting place to be. That’s why there's such interest and excitement around business networks.

Leveraging specific skills will be more important, whether that's through contingent workforce or through hiring to very specific skills.

Gardner: It strikes me too that procurement is expanding its importance to companies. When we think about some of the labor issues that many are forecasting with the workforce of the future, it’s going to be difficult to get a highly skilled full-time employee. Or you might want to have them for a shorter period of time. So procurement becomes a facet of hiring. It becomes a labor-acquisition process as well, and then, of course, it goes to more services than just products or merchandise alone.

Rachel, the question is how strategic do companies view this? Andrew says that we need to get more competency and sophistication in procurement. Do companies appreciate that this is really more and more a part of their core assets strategy and a core competency?

Spasser: Definitely. Even this morning, I was speaking with a number of CPOs who talked about human resources as a key factor in whether they’re going to be able to get to the next business level.

I would agree wholeheartedly with Andrew that the skill set is going to be different than it has been in the past. Leveraging specific skills will be more important, whether that's through contingent workforce or through hiring to very specific skill sets.

One of the interesting things that we’re seeing is that, in a lot of companies, the procurement function becomes a rotation within the executive ranks, as they’re bringing people up and training them to be in higher levels of management. We see many of our customers taking people who really don't have a traditional procurement background and cycling them through the procurement function.

In fact, SAP is doing that itself. Marcell Vollmer, who has been a great advocate of Ariba, is not a procurement guy by trade, but has really made a huge impact on SAP procurement because he brings a different skill set. He brings that analytic background, and he brings that general business and relationship management savvy.

Complex services

 

When you look at the types of spend that companies are trying to attack today, you’re looking at complex services and you’re looking at a contingent workforce. Those take on a life of their own, because they are very, very different than buying a physical good.

We live in a service economy, and as that continues to evolve, it’s going to become more and more important to procurement and to companies as a whole.

Gardner: Andrew, thinking a little bit toward the future, we’ve talked about procurement now having a heightened role and a larger profile because of the analytics that are being brought to bear: The wider purview across services, and the impact with human resources, rather than just goods and materials and facilities.

As we get to more of a digital economy, a networked economy, like we’ve seen in consumer behavior, what do you see for companies when it comes to this notion of a shared supply chain -- that we’re all interdependent parts of a supply chain, and that we need to be thinking about it differently? Where is the shift in thinking that needs to come, and where does your crystal ball show you we’ll be in five years?

The consumer today really expects better, newer, and more innovative products in a rapid fashion and at a cheaper cost.

Bartolini: The consumer today really expects better, newer, and more innovative products in a rapid fashion and at cheaper cost. That's the world of procurement.

If you’re a procurement professional and your supply base looks much like it did 10 years ago, there are problems on the horizon. If your supply chain and your supply base looks like it does today come 10 years from now, there’s going to be questions as to the viability of your company.

The speed of business is most visible in areas like consumer electronics. You see the leaders in smartphones in one cycle are out of business five years later. This is happening in other supply markets. It’s not as visible, and maybe it's not as fast, but it is happening!

Organizations understand that the window of opportunity to generate a premium on their products and services has collapsed, and they’re increasingly relying on their supply chains to support capitalizing on those opportunities. That really creates a shift from net-sum negotiations to win-win negotiations. That creates a shift from managing contracts and service-level agreements (SLAs), to managing business outcomes. That really changes the view of a supplier from an order taker to one that’s a key collaborator.

Gardner: Rachel, thinking about organizations wanting to do this better, maybe they listen to this podcast or read this and they think, “I see procurement as more of a core competency, having a greater impact on our company. If we need to move at the speed of business going forward, we need to get better at this.” How do you start? Any ideas about resources, methodologies, and workshops? How do you get a new procurement competency process going in your organization?

Spasser: One of the greatest ways to learn is to learn from your peers. Conferences like Ariba LIVE really provide that opportunity, because you get the best of the best, and they’re sharing their true stories. And it's not just success. They’re sharing their pitfalls too, and they are sharing how they navigated through those to achieve the business outcomes that they sought.

Talk to peers

There are lots of books to read and experts to talk to, but I think that the best way to learn is to talk to peers who have been through the same process and who have candid feedback and candid advice to share.

Gardner: Perhaps identifying leaders and influencers in your field and following them on blogs or Twitter or other community-based and social-based interactions?

Spasser: Absolutely. There are plenty of communities, whether they’re on LinkedIn or whether they’re proprietary, like Ariba Exchange, and these discussions are happening everyday. I would encourage people to seek those out, participate in them, go to events, and really learn from those who are leading the way, because if they are not going to be on the train quickly, they are going to find themselves left way behind at the station.

You may also be interested in:

More Stories By Dana Gardner

At Interarbor Solutions, we create the analysis and in-depth podcasts on enterprise software and cloud trends that help fuel the social media revolution. As a veteran IT analyst, Dana Gardner moderates discussions and interviews get to the meat of the hottest technology topics. We define and forecast the business productivity effects of enterprise infrastructure, SOA and cloud advances. Our social media vehicles become conversational platforms, powerfully distributed via the BriefingsDirect Network of online media partners like ZDNet and IT-Director.com. As founder and principal analyst at Interarbor Solutions, Dana Gardner created BriefingsDirect to give online readers and listeners in-depth and direct access to the brightest thought leaders on IT. Our twice-monthly BriefingsDirect Analyst Insights Edition podcasts examine the latest IT news with a panel of analysts and guests. Our sponsored discussions provide a unique, deep-dive focus on specific industry problems and the latest solutions. This podcast equivalent of an analyst briefing session -- made available as a podcast/transcript/blog to any interested viewer and search engine seeker -- breaks the mold on closed knowledge. These informational podcasts jump-start conversational evangelism, drive traffic to lead generation campaigns, and produce strong SEO returns. Interarbor Solutions provides fresh and creative thinking on IT, SOA, cloud and social media strategies based on the power of thoughtful content, made freely and easily available to proactive seekers of insights and information. As a result, marketers and branding professionals can communicate inexpensively with self-qualifiying readers/listeners in discreet market segments. BriefingsDirect podcasts hosted by Dana Gardner: Full turnkey planning, moderatiing, producing, hosting, and distribution via blogs and IT media partners of essential IT knowledge and understanding.

@ThingsExpo Stories
Explosive growth in connected devices. Enormous amounts of data for collection and analysis. Critical use of data for split-second decision making and actionable information. All three are factors in making the Internet of Things a reality. Yet, any one factor would have an IT organization pondering its infrastructure strategy. How should your organization enhance its IT framework to enable an Internet of Things implementation? In his session at Internet of @ThingsExpo, James Kirkland, Chief Architect for the Internet of Things and Intelligent Systems at Red Hat, will describe how to revoluti...
The Internet of Things will greatly expand the opportunities for data collection and new business models driven off of that data. In her session at Internet of @ThingsExpo, Esmeralda Swartz, CMO of MetraTech, will discuss how for this to be effective you not only need to have infrastructure and operational models capable of utilizing this new phenomenon, but increasingly service providers will need to convince a skeptical public to participate. Get ready to show them the money! Speaker Bio: Esmeralda Swartz, CMO of MetraTech, has spent 16 years as a marketing, product management, and busin...
Samsung VP Jacopo Lenzi, who headed the company's recent SmartThings acquisition under the auspices of Samsung's Open Innovaction Center (OIC), answered a few questions we had about the deal. This interview was in conjunction with our interview with SmartThings CEO Alex Hawkinson. IoT Journal: SmartThings was developed in an open, standards-agnostic platform, and will now be part of Samsung's Open Innovation Center. Can you elaborate on your commitment to keep the platform open? Jacopo Lenzi: Samsung recognizes that true, accelerated innovation cannot be driven from one source, but requires a...
SYS-CON Events announced today that Red Hat, the world's leading provider of open source solutions, will exhibit at Internet of @ThingsExpo, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Red Hat is the world's leading provider of open source software solutions, using a community-powered approach to reliable and high-performing cloud, Linux, middleware, storage and virtualization technologies. Red Hat also offers award-winning support, training, and consulting services. As the connective hub in a global network of enterprises, partners, a...
P2P RTC will impact the landscape of communications, shifting from traditional telephony style communications models to OTT (Over-The-Top) cloud assisted & PaaS (Platform as a Service) communication services. The P2P shift will impact many areas of our lives, from mobile communication, human interactive web services, RTC and telephony infrastructure, user federation, security and privacy implications, business costs, and scalability. In his session at Internet of @ThingsExpo, Robin Raymond, Chief Architect at Hookflash Inc., will walk through the shifting landscape of traditional telephone a...
BSQUARE is a global leader of embedded software solutions. We enable smart connected systems at the device level and beyond that millions use every day and provide actionable data solutions for the growing Internet of Things (IoT) market. We empower our world-class customers with our products, services and solutions to achieve innovation and success. For more information, visit www.bsquare.com.
SYS-CON Events announced today that Matrix.org has been named “Silver Sponsor” of Internet of @ThingsExpo, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Matrix is an ambitious new open standard for open, distributed, real-time communication over IP. It defines a new approach for interoperable Instant Messaging and VoIP based on pragmatic HTTP APIs and WebRTC, and provides open source reference implementations to showcase and bootstrap the new standard. Our focus is on simplicity, security, and supporting the fullest feature set.
How do APIs and IoT relate? The answer is not as simple as merely adding an API on top of a dumb device, but rather about understanding the architectural patterns for implementing an IoT fabric. There are typically two or three trends: Exposing the device to a management framework Exposing that management framework to a business centric logic • Exposing that business layer and data to end users. This last trend is the IoT stack, which involves a new shift in the separation of what stuff happens, where data lives and where the interface lies. For instance, it’s a mix of architectural style...
SYS-CON Events announced today that SOA Software, an API management leader, will exhibit at SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. SOA Software is a leading provider of API Management and SOA Governance products that equip business to deliver APIs and SOA together to drive their company to meet its business strategy quickly and effectively. SOA Software’s technology helps businesses to accelerate their digital channels with APIs, drive partner adoption, monetize their assets, and achieve a...
From a software development perspective IoT is about programming "things," about connecting them with each other or integrating them with existing applications. In his session at @ThingsExpo, Yakov Fain, co-founder of Farata Systems and SuranceBay, will show you how small IoT-enabled devices from multiple manufacturers can be integrated into the workflow of an enterprise application. This is a practical demo of building a framework and components in HTML/Java/Mobile technologies to serve as a platform that can integrate new devices as they become available on the market.
SYS-CON Events announced today that Utimaco will exhibit at SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Utimaco is a leading manufacturer of hardware based security solutions that provide the root of trust to keep cryptographic keys safe, secure critical digital infrastructures and protect high value data assets. Only Utimaco delivers a general-purpose hardware security module (HSM) as a customizable platform to easily integrate into existing software solutions, embed business logic and build s...
Connected devices are changing the way we go about our everyday life, from wearables to driverless cars, to smart grids and entire industries revolutionizing business opportunities through smart objects, capable of two-way communication. But what happens when objects are given an IP-address, and we rely on that connection, sometimes with our lives? How do we secure those vast data infrastructures and safe-keep the privacy of sensitive information? This session will outline how each and every connected device can uphold a core root of trust via a unique cryptographic signature – a “bir...
Internet of @ThingsExpo Silicon Valley announced on Thursday its first 12 all-star speakers and sessions for its upcoming event, which will take place November 4-6, 2014, at the Santa Clara Convention Center in California. @ThingsExpo, the first and largest IoT event in the world, debuted at the Javits Center in New York City in June 10-12, 2014 with over 6,000 delegates attending the conference. Among the first 12 announced world class speakers, IBM will present two highly popular IoT sessions, which will take place November 4-6, 2014 at the Santa Clara Convention Center in Santa Clara, Calif...
Almost everyone sees the potential of Internet of Things but how can businesses truly unlock that potential. The key will be in the ability to discover business insight in the midst of an ocean of Big Data generated from billions of embedded devices via Systems of Discover. Businesses will also need to ensure that they can sustain that insight by leveraging the cloud for global reach, scale and elasticity.
WebRTC defines no default signaling protocol, causing fragmentation between WebRTC silos. SIP and XMPP provide possibilities, but come with considerable complexity and are not designed for use in a web environment. In his session at Internet of @ThingsExpo, Matthew Hodgson, technical co-founder of the Matrix.org, will discuss how Matrix is a new non-profit Open Source Project that defines both a new HTTP-based standard for VoIP & IM signaling and provides reference implementations.

SUNNYVALE, Calif., Oct. 20, 2014 /PRNewswire/ -- Spansion Inc. (NYSE: CODE), a global leader in embedded systems, today added 96 new products to the Spansion® FM4 Family of flexible microcontrollers (MCUs). Based on the ARM® Cortex®-M4F core, the new MCUs boast a 200 MHz operating frequency and support a diverse set of on-chip peripherals for enhanced human machine interfaces (HMIs) and machine-to-machine (M2M) communications. The rich set of periphera...

SYS-CON Events announced today that Aria Systems, the recurring revenue expert, has been named "Bronze Sponsor" of SYS-CON's 15th International Cloud Expo®, which will take place on November 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Aria Systems helps leading businesses connect their customers with the products and services they love. Industry leaders like Pitney Bowes, Experian, AAA NCNU, VMware, HootSuite and many others choose Aria to power their recurring revenue business and deliver exceptional experiences to their customers.
The Internet of Things (IoT) is going to require a new way of thinking and of developing software for speed, security and innovation. This requires IT leaders to balance business as usual while anticipating for the next market and technology trends. Cloud provides the right IT asset portfolio to help today’s IT leaders manage the old and prepare for the new. Today the cloud conversation is evolving from private and public to hybrid. This session will provide use cases and insights to reinforce the value of the network in helping organizations to maximize their company’s cloud experience.
The Internet of Things (IoT) is making everything it touches smarter – smart devices, smart cars and smart cities. And lucky us, we’re just beginning to reap the benefits as we work toward a networked society. However, this technology-driven innovation is impacting more than just individuals. The IoT has an environmental impact as well, which brings us to the theme of this month’s #IoTuesday Twitter chat. The ability to remove inefficiencies through connected objects is driving change throughout every sector, including waste management. BigBelly Solar, located just outside of Boston, is trans...
SYS-CON Events announced today that Matrix.org has been named “Silver Sponsor” of Internet of @ThingsExpo, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Matrix is an ambitious new open standard for open, distributed, real-time communication over IP. It defines a new approach for interoperable Instant Messaging and VoIP based on pragmatic HTTP APIs and WebRTC, and provides open source reference implementations to showcase and bootstrap the new standard. Our focus is on simplicity, security, and supporting the fullest feature set.