Predictions for procurement tech in 2024

The Macro Environment

Several inescapable facts were self-evident in 2023 that shape the evolving landscape this year, namely:

• VC investment in technology collapsed so we have entered a period that reveals a lot of information, or “when the tide goes out you get to see who is swimming naked”, as Warren Buffett once put it.
• Enterprises are actively seeking more nimble technology providers so demand for new solutions to offer a competitive edge remains strong if not stronger than ever.
• There is a bifurcation among innovative tech vendors with some growing strongly whilst others contracting sharply and seeking a path to survival or sale.
• The older suite vendors have been quieter than usual and were not visible at the largest conference, Digital Procurement World, and have been reducing headcount quite aggressively.
• Artificial Intelligence has been a hot topic since Generative AI achieved such coverage from March 2023.
• Relevant use cases for Generative AI in procurement are apparent, so this is not a case of unwarranted hype such as the blockchain era,  but most analysts are remaining circumspect about the relevance.

This macro environment points to it being a shake-up in the ProcureTech where many of the newer vendors will sink or swim. Enterprises will drive ahead with initiatives to increase agility with a smaller group of technology leaders coming to the fore.

The Future of Procurement Technology: 2024

Autonomous Sourcing goes Mainstream

This year will see the first enterprises conducting >50% of their sourcing events in fully automated processes. Tailored workflows for Indirect and Direct categories will automate sourcing for goods and services across all major industries.

Workflow Orchestration empowers Scaling of Sourcing Excellence

Enterprise procurement teams are keen to offer a user friendly entry point for internal customers. The Procurement ‘Front Door’ will become an important source of Intake for internal customers and serves as the source of manually initiated workflows but most of the volume for automated sourcing will come via APIs to Intake. No-code orchestration will facilitate the rapid design and iteration of Intake and sourcing workflow automation. Successful Intake and Workflow orchestration programs will apply sourcing automation to offer visibility, control, delegation and most importantly of all process flexibility to meet all the needs of suppliers, requesters and Procurement across all categories. Each category requires multiple varieties of sourcing workflow to match their needs, hence the need for multiple bots to automate execution of different flows.

Procurement’s new Skill: Bot Architecture

Nocode solutions for orchestrating Intake and Sourcing processes mean that the craft of automating sourcing processes that leverage optimization (executed by bots) leads to the requirement for new skills. The Bot Architect is set to become pivotal in scaling sourcing excellence. The responsibilities involve workflow design that leans upon learnings in strategic sourcing projects and seeks to automate those steps. It includes:

• expressive Intake design including dataset preparation for requester convenience,
• control points for Approvers,
• bid management rules that leans on rich feedback controls and judicious timing,
• intelligent supplier selection for maximizing competitive tension,
• scenario optimization modeling to map multi-criteria objectives (cost, speed, quality, emissions) to corporate goals,
• Machine Learning supervision - control rate of learning for sourcing bots and provide guard rails against bias, and
• integration of data feeds: sourcing process excellence can benefit from third party data sources (e.g. benchmarks, risk management information) so ingesting this data and including logical reasoning in the sourcing process to apply best practices in an automated workflow offers a huge return on investment for Procurement.

The Procurement Centre of Excellence becomes a Critical Force Multiplier

No-code solutions for automating optimized sourcing processes mean that the value of subject matter experts in sourcing is multiplied. In the past, they were leveraged to design and operate negotiation processes for the large or complex strategic sourcing projects. Their skill sets in

• designing bid capture and feedback to realize economies of scale;
• de-risk allocation design for suppliers to lower risk aversion in bidding and
• the knowledge in how to map corporate goals to constrained scenario optimization;

has historically been applied to the largest projects only. But now with no-code solutions that fully automate processes with a human in the loop, this standard of execution can be maintained even in the smallest negotiations. This will unlock tremendous value and it will become apparent to CPOs that their CoE must be expanded as the need for tactical sourcing management in older eSourcing tools recedes.

Third Party Data to enrich Sourcing

Sourcing excellence benefits from leveraging market intelligence that is either internal or acquired externally. For example, if an enterprise subscribes to benchmark price data from a modern vendor with APIs then automated sourcing workflows could pluck ‘good’ or ‘great’ prices from this and lean on it to provide feedback during a negotiation in order to push suppliers to improve quoted rates. Likewise, if data is acquired that signals risks with certain supply lines that could vary from weather related disruptions to challenges a supplier is encountering, then it is possible to automatically initiate sourcing processes for backup supplies. This year we will see the first examples of how we combine a rich array of data sources with sourcing excellence to reason automatically and help enterprises become more competitive and agile than their competitors.

Artificial intelligence (that’s not GenAI) transforms business-critical tasks with Intelligent Reasoning and Control

Presently, Autonomous Sourcing Bots are automating tens of thousands of sourcing processes and leveraging aspects of optimization in the analysis. This equates to Level 4 Autonomous Sourcing whereby the process is on rails and it follows predictable workflows that were orchestrated by subject matter experts. AI enables adaptive sourcing processes whereby the bots learn over time and are offered the freedom to experiment and learn within defined windows for parameters that are unfixed and made variable. Subfields of Artificial Intelligence such as Algorithmic Mechanism Design, Recommender Systems and Machine Learning can be tuned for specific tasks within procurement so that they perform better than a general solution such as Large Language Models that don’t have reasoning. For a deeper dive on AI in Procurement, see a recent webinar here.

GenAI finds its niche in ProcureTech

GenAI will continue to be explored and tested. It is ultimately likely to find some niche tasks where it complements existing processes neatly but it will focus upon non-critical areas where reliability and accuracy are non-essential. Enterprise procurement tends not to have many tasks where trustworthiness and reliability aren’t extremely important. Large language models will be most useful in summarizing text, pointing to clauses in documents requiring human inspection or gathering requests from internal customers who have difficulties articulating or classifying their needs but can benefit from AI to move them into a more structured data gathering process that captures their needs.

Summary

As the tide remains out for tech investments and may remain so for quite some time, we are seeing a new set of leaders emerge in Procurement Technology that are strong and shaping the future. Those with clear plans, deep understanding of customers needs and the capacity to deliver quickly will continue to reshape the landscape during 2024. The easiest prediction of all is that in twelve months time the ecosystem for enterprise ProcureTech will look considerably different.