This month in his exclusive PASA column ‘Gordon’s Window’, Gordon Donovan, VP of Global Procurement Research at SAP, provides a handy expert summary of July’s global procurement research.
Save your own time reading research when you can get the key takeaways in one place!
An interesting set of reports this month. There is a focus on AP with some themes emerging around the need to automate, especially around invoice approvals and time to pay.
Exception management is still a big issue. There is a focus on fraud in a number of reports, with some identifying the rising cases of fraud, potentially driven by AI.
Several reports identify budgets for procurement technology are either increasing or staying the same.
Automation and digitisation are common themes across all reports, and as per last month where there were comparable benchmarks, I’ve pulled them all together and compared them with SAP benchmarks from our program.
IDC SaaS Path: Executive Summary, 2024 — Examining the SaaS Buyer’s Journey
This paper provides visibility into the mind and journey of the Software as a Service (SaaS) buyer across multiple functional applications. For my summary, I’ll be focusing on the procurement aspect.
According to the report, procurement application buyers are willing to spend more for advanced AI capabilities with strong interest in applications that drive cost savings and improve operational efficiency.
They seek quick time to value from trusted brands that offer robust data security and ease of implementation. They have shown an increased appetite in exploring the functionality of Spend Orchestration applications that can improve the user experience and provide great visibility to all spend.
There are other personas also listed, including CLM, travel and expense.
Key barriers for adoption include industry specificity, price, cloud preferences and data security.
Following up on the Economist study, which identified that 71 percent stated that procurement was involved in the digital transformation of the organisation, this report identifies the roles (IT and LoB) and confirms the involvement of procurement in evaluation, recommendation and final decision with all being over 34 percent.
The paper also confirms that the majority (51 percent) planned to increase spending on procurement applications, with 43 percent planning to keep spending where it currently sat.
Key attributes that buyers looked for in procurement included trusted brand and robust data security (29 percent), value for money (27 percent) and ease of integration (25 percent).
Overall, an interesting report that taps into buyer preferences across a range of LoB.
Fraud & Payments Studies
There have been a few reports this month about fraud and payments. The next couple of sections will cover them.
The first is from a PYMNTS study that identified that nearly 60 percent of large firms use at least five systems for AP.
It also identified that executing payments was the step in the source to pay cycle that CFOs (23.3 percent) experienced most delays in last year, followed by authorising payments (18.3 percent).
Manual AP handling is still the norm, with just 17 percent of enterprise firms running their source-to-pay systems largely without human involvement.
Ravelin also launched their fraud and payments survey for 2024 and raised some interesting points.
Fraud increased for 75 percent of companies and payment fraud was up by 69 percent. AI-powered fraud affected 64 percent of respondents, but 66 percent found ML useful in fraud prevention.
The majority of sectors identified that impact on revenue and loss of profit was the top pain point, with 30.3 percent identifying costs of between $5-10 million p/a and 27 percent stating it was over $15m.
These two reports are good intros for the rest of the AP reports this month.
AQPC: Finance in Focus, Priorities for 2024
In APQC research, the number of finance and accounting managers who pointed to late customer payments as a priority issue in managing cash flow increased by 10 percentage points between 2022 and 2023.
Potential causes for the heightened level of concern over late customer payments include:
- Economic factors, including recession fears, high interest rates and decreased liquidity
- Supply chain disruptions, which can result in the need to increase inventory or delay work among other implications
- Changes in payment culture and the broad shift towards longer payment terms
The report makes some suggestions for managing this, including providing incentives for early or prompt payment.
Interestingly, 55 percent of finance leaders identified cash flow management as a top priority for finance to focus on in 2024, with 60 percent identifying process improvement.
Ardent Partners: State of AP/Metrics that Matter
There were two reports from Ardent Partners this month, including the State of Accounts payable and AP metrics that matter.
Both reports are interesting but, for the purpose of this summary, I won’t distinguish between them as they do cover some of the same information (albeit from a differing number of respondents).
Top priorities for AP in 2024 include automation (43 percent), which is similar to the AQPC report above and also talks to the procurement report from the Economist which identified digitisation as the top short-term priority.
Improving data and reporting is second (41 percent) with enabling suppliers more readily.
Notable for me was the fifth priority, which was to improve collaboration and communication with procurement (31 percent).
This, I think, is very interesting, especially as the shared services operating model is not currently the one that organisations are moving toward for procurement and AP, meaning that this is absolutely essential to ensure that automation, process improvements and digitisation are done in consultation, so as not to negatively impact each other.
Top barriers for AP include the high of exceptions (53 percent) and the approvals taking too long (41 percent), which is a call back to the PYMNTS report earlier. Continuing the fraud theme, this is third at 29 percent.
Jaggaer: State of Procurement Function
This eBook from Jaggaer follows a survey of 220 leaders, to understand the strategic role of procurement.
Similar to the IDC report earlier, 75 percent of organisations worldwide have increased or maintained their budgets for procurement technology, according to the paper.
Other interesting points include 42 percent stating that highly manual processes are the number one challenge holding procurement back, which is a contributing factor when looking at the Economist report earlier this year that identified digitalisation (57 percent) as the top short-term priority.
The second challenge holding procurement back is a tie between cumbersome and slow communications with suppliers, a lack of information and data flow between systems (integration), and inaccurate supplier data. All of these tied at 37 percent.
This also has call outs to a previous IDC report on the power of networks to improve communications with suppliers as well as data quality, and the IDC report above on ease of integration being a key need for buyers of procurement solutions.
The report goes on to identify that spend analysis is the area most ripe for digitisation and automation.
This echoes the Economist report over the last couple of years, which has also identified this, and as a continuation of the theme of automating invoice approvals. 31 percent identified that this was an area ripe for automation.
Prevalent: The 2024 Third-Party Risk Management Study
This study from Prevalent is a really interesting read and covers trends, challenges and initiatives impacting third-party risk management (TPRM).
Top takeaways include:
- 61 percent of organisations reported experiencing a third-party data breach or security incident in the past year, marking a 49 percent increase from the previous year
- Many organisations struggle with inadequate resources, with only one-third of vendor relationships being managed in a TPRM program
- Half of the surveyed companies still rely on spreadsheets and multiple disparate tools to assess and manage their third-party relationships
- Despite tracking risks across the vendor lifecycle, few companies actually do anything about what they find
- A top concern about use of third party was data breaches or security incidents, with 74 percent identifying this as a top issue
- Cybersecurity is the only risk being tracked more this year than last year (58 percent tracking more, 35 percent tracking less)
For any professionals involved in TPRM programs, it’s a must read.
Ardent Partners: State of Procurement Digitisation
This report, commissioned by Ivalua, looks at the state of source to pay digitisation.
Savings are the top priority for the respondents, with 74 percent identifying this, whilst the top strategy for improving performance is to improve internal comms and collaboration, which was also identified in last year’s Economist study (this year’s research shows that the collaboration has improved, while there’s still room for improvement).
Similar to the Economist study, ESG programs are planned changes for the next 2-3 years (64 percent), with the next four areas all concentrating on supplier management capabilities. From risk to relationships and intelligence.
Following the IDC and Jaggaer reports earlier, 79 percent state that budgets are either increasing or remaining the same.
Usability and user experience are a top criteria for solution selection according to the report, and similar to the IDC report earlier, price (value for money) and pricing models feature while top benefits of S2P are greater efficiency (57 percent) and improved productivity (49 percent leading the way.)
Benchmark Summary
I’ve gone through the reports this month and pulled together some quick benchmark comparisons between best in class and what the SAP benchmarking has as best in class through using SAP solutions.
As always, reach out to discuss more. I’m always happy to hear your thoughts!
