from Gartner’s latest ‘Predicts’ report – entitled “Predicts 2018: Procurement
and sourcing technology will benefit from advances in AI, data visualization
and B2B marketplaces” – show how procurement and supply chain are well
positioned to reap the benefits of major technological advances.
Released late last year, the report details how the technology associated with the procurement and sourcing fields is fast-moving and ushering in huge changes, and it argues that “IT application leaders modernizing procurement technology need to plan for the impact of virtual assistants, cloud-based business intelligence tools and B2B marketplaces”.
The year ahead
According to the Gartner report, the major expectation for this year, for chief procurement officers (CPOs) who are prepared to aggressively experiment and learn from advances in procurement software, is greater ‘ease of use’ of both procurement and sourcing technology. This is enabled by major advances in artificial intelligence (AI), cloud-based business intelligence (BI) solutions, virtual employee assistants (VEA), and chatbots.
The report authors break this down further, into three major predictions: First, legacy software will (and indeed ought to) be scrapped or updated to keep pace with the advancements made in AI. Second, online platforms like Amazon Business and Alibaba will dominant the business-to-business (B2B) market. Finally, third, chatbots and VEAs will become standard in peer-to-peer (P2P) software, providing real benefit to both business and user.
The case for scrapping legacy software
Ideally procurement software allows the user to source what he/she is looking for at the best available price. However, as the Gartner report notes, “legacy spend analysis software has failed to deliver on its promise” , arguing that it is “time-consuming and error-prone” which limits sourcing’s ability to respond quickly to “changing market conditions”.
The report notes continues: “Legacy solutions are also characterized by what Gartner calls ‘narrow AI’. Narrow AI consists of highly scoped machine-learning solutions that target a specific task, such as classifying spend … The algorithms chosen are optimized for that task. These solutions are limited. They are designed to answer a predefined set of questions, but do not unearth insights the end user didn’t know to ask about … [In addition,] some legacy spend analysis vendors have opted to build the data visualization layer themselves. And these proprietary visualization and reporting engines embedded in the spend software have fallen vastly behind what’s available in today’s cloud-based BI solutions.”
The bottom-line is that existing legacy software is too rigid, and often too complex to fulfil its aim.
A predicted solution and its consequences
Thankfully, the Gartner report argues, from this year onwards, advances in technology, especially in AI, will ease these concerns.
“The next generation of tools will build on this foundation with general AI. This refers to the use of machine learning to handle a broad range of use cases. These systems will be able to successfully perform any intellectual task that a human could perform …”
This AI will simplify the user experience by guiding the user through a transaction, asking a series of simple questions which help the user find what he/she is looking for at the best possible price by running comparison checks. In addition, “natural-language processing can automatically find, visualize and narrate important findings … the solution will be able to not only classify the data but also interpret it to draw out trends and recommend actions”.
The predicted dominance of Amazon Business and Ablibaba
The Gartner report also predicts that the rise of cloud-based business intelligence (BI) means that by “2022, 75% of all B2B tail spend goods will be purchased in an online marketplace like Amazon Business or Alibaba's 1688.com”. This is due to the rapid growth of these platforms over the last few years, which increases their visibility; the ease of access to these platforms; and the “intuitive nature of purchasing” on these platforms.
Chatbots and VEAs, the predicted benefits
Online interactions will also be greatly improved through the integration of technologies like chatbots and VEAs. These will simplify and guide the user “through the buying process”. As the report notes:
“The advantage is that the complexity of business rules determining the best buying channel and payment method are hidden from the end user. This results in a more streamlined and compliant process. By interacting with the end user and also predicting needs, the VEA can create the requisition with the right supplier(s) and in the right system.”
To maximise the benefits of this technological advancement, Gartner suggests the following three interventions:
- The first step is to determine “which spend analysis tool your company’s sourcing organization uses today”. Having done so, ask the following question: “Has it kept pace with market advancements in data visualization, AI, natural-language processing for spend classification and pattern recognition? If not, [your] IT application leaders should begin exploring other options.”
- The second, is to “determine how much of your company’s money is already being spent in B2B marketplaces like Amazon Business and Alibaba”. The report suggests that: “[i]f the amount is significant (i.e., greater than 5% of total spend), look to consolidate the spend under an enterprise account. Start with the most common spend categories like office supplies, IT and maintenance, repair and operations (MRO). In parallel, run a project looking at three to six months of spend.”
- Finally, the report suggests getting “educated on the short-term uses of chatbots and the mid- to longer-term applications of virtual assistants”. In terms of this, they write that “IT application leaders can then help educate CPOs on the possibilities of the technology”, and recommend that teams “run a pilot … to showcase how procurement is rising to the challenge of creating a digital business”.
For more on Gartner and the report, Visit www.gartner.com/technology/research/predicts
Contributed by: Nikolai Viedge, an academic and regular writer for Bespoke Bulletin
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