Flat earth society membership continues to decline

Credit: GPT5 - after a lot of effort!

Similarly the group who had previously resisted the thought that AI would transform business and Procurement is now declining even more rapidly. Perhaps Jamie Diamond is right “some [AI investment] will be wasted”, but big businesses are now chasing it and investing.

Why? Well AI can do two things extraordinarily well:

1) Ingest vast quantities of complex unstructured data and draw conclusions

2) Automate what were previously largely human tasks

So essentially better, faster, cheaper outcomes.

For decades businesses have focused on core activities whilst outsourcing the rest to suppliers, which in turn has driven up supplier spend as a percentage of enterprise expenditure, the ratio of which is now often around 70%. This extension of the enterprise must be appropriately and professionally managed. Quality, service, profitability and even a company’s reputation are outcomes of good procurement, and the function has been on the rise for decades.

AI is here, with its life changing abilities to interpret X-rays, drive cars and interact as a customer service agent (my first prompt is always please connect me to a human!). There is however a dawning realisation that this will reinvent Procurement and it will.

The more forensic a corporation’s ability to understand what its suppliers are actually doing for it, the better and faster decisions can be made, AI does that this at scale. Other use cases exist, automating the more transactional processes e.g. verifying suppliers delivering compliance and cost savings (cheaper). 

The feeding frenzy has begun. Thousands of start-ups are taking small mouthfuls of the problem and delivering solutions.

Last week thousands flocked to Digital Procurement World in Amsterdam, it was more like a pilgrimage than a conference. There were cool trainers, entertainers, founders and CPOs - what a mix! Though I’m not sure about the compère asking the audience to “make some noise” for a CPO and a CEO in their late 50's.

Vendors had on display everything from an agent called Bob, who can find out how much you spend with your favourite consultancy; to Yvonne, who can read 2,000 contracts in 10 seconds to check clause consistency; to Aman, who will travel relentlessly around the globe looking for newsfeeds in every language that might spot a supplier breaching a policy.

Best of breed and innovation is in overdrive and that’s great. CPO’s know the answer is out there but when faced with a couple of hundred providers with converging products how do you choose? Stick with SAP or Oracle, buy from a recognised provider or go with the cool start-up? And then when you’ve selected your ten must-have providers, you have to stitch them together (normally behind the CTOs back). It’s even created a new software category, ‘Orchestration’, to help with that challenge.

One of the world's biggest companies shared that Procurement will be soon reporting to the CTO - That’s how convinced they are of the case to embrace AI.

So everything is changing, and the panacea is just around the corner, right? Not quite.....

We see a number of considerations.

• Best of Breed is dead. Convergence is coming.

  
  

• Technology is moving so fast that a great product alone will cease to be a moat for procuretech incumbents.

  
  

• Procuretech providers who succeed will be domain experts and financially viable - say goodbye to 70% of them.

  
  

• User-facing AI needs high quality data like an athlete needs nutrition not Quavers.

  
  

• Our old friend change management isn’t going anywhere. The limiting factor won’t be the tech, but our ability to adapt to it.

  
  

• However fast AI moves, enterprises still turn like container ships. Our ERPs are here to stay for at least another 5 years.

If in 1969 we could put a man on the moon, this shouldn’t be this difficult to fix, and imagine how disappointing it would have been to look down and see a flat disc.

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