Is Procurement Digitisation passé?
A lot of procurement people now confess their organisations have done little other than talk about Procurement Digitisation. And they are no longer ashamed to say it. It’s not official, but it’s no longer a secret either. They ask why it’s needed. They want to see a return on investment. They struggle to write a business case.
For years, digitisation was a mantra, a cult. There was no option, no alternative, to investment in digital technology. Questioning it was a heresy inviting scorn and derision. It was a given that every firm desperately needed the promised benefits that digitisation would deliver: more accurate data, more detailed analytics, faster operations, and lower costs.
Until recently.
Digitisation of Procurement doesn’t increase corporate revenues; it is questionable how much it can increase savings; and it is impossible to evaluate, or even show, benefits from ease-of-use. The only quantifiable benefit is reductions in the cost of procurement operations. In most companies this is around 1% of revenues; and that is the total cost of operations, not the reduction targeted by digitisation.
Digitisation programs don’t always run smoothly, and that may be a dramatic understatement. Indeed, it is quite hard to find companies boasting about successful investments in procurement digitisation. The few that we hear about are often underwhelming and trivial; whereas the pain in the faces of those recounting disasters is plainly visible.
It is easy now, with hindsight, to ask why we were so ideological as to put blind faith in uncertain and immature systems.
The data sets in companies’ ERP systems are relatively small and neatly structured. The business intelligence tools in every organisation have more capabilities than procurement can ever use. The accuracy of data that goes into BoMs, P&Ls and balance sheets is more than adequate for procurement strategies. Suppliers’ capability to present detailed, line-item, real-time transaction data to customers improves every day. And every company already has an ability to integrate these existing resources to meet its analytical and reporting needs.
So, please, what is the driver for dedicated procurement digitisation?