Analyst Insight

Sourcing and procurement technologies are becoming an increasingly critical element of enterprise IT portfolios as organizations strive to become more efficient and demand-driven. Improved profit margins, greater working capital, and a reduction in expenses are the key financial considerations that are influenced by supply management organizations. Companies with initiatives driven by the chief procurement officer (CPO), the chief supply chain officer (CSO), or an equivalent vice president of procurement recognize that sourcing and procurement technologies can enable the transformation toward being more efficient and demand-driven.
-Mickey North Rizza, research director at AMR Research

AMR Research finds that companies that have invested in sourcing and procurement technologies did so to improve operational performance and align with CEO objectives. Improving operational performance is vital for organizations striving to grow top-line revenue and reduce overall costs. This requires CEOs and their organizations to execute in the present and innovate for the future. Doing so means the CPO initiatives must become imperatives.

The four CPO imperatives identified by AMR Research are:

• Ensure reliable supply. Ensuring a reliable, steady supply chain with contract management, supplier scheduling, and supplier performance management is critical to becoming more demand-driven.

• Mitigate risk. Mitigating risk with third-party assessments, analytic tools, supplier performance and dashboards with predictive functionality is a necessary component in a global market.

• Improve working capital. Improving working capital with the addition of electronic invoice presentment and payment (EIPP), dynamic discounting, and third-party financing technology and services assist companies in cash management.

• Reduce and contain the costs of goods and services. Spend analytics, e-negotiations, e-procurement workflow, expense management, and catalogs help reduce and contain the costs of good and services.

The Outlook

The Future is Bright. All imperatives are driving sourcing and procurement technology investment and in turn the market, which AMR predicts will grow from $2.4bn in 2006 to $3.5bn in 2011. Buyers are calling for a transformation from traditional, localized sourcing and procurement practices to demand-driven and efficient ecosystems that exist in a global economy. But transformation requires consistent and enabling technology with flexible functionality that pushes the envelope of progress. Companies implementing effective transformations use sourcing and procurement technologies and services as enablers.