Evolving Business Needs & Technologies Reshaping Procurement

Companies worldwide are revisiting their approaches to procurement as business requirements and technologies rapidly change, according to ISG's report

The 2024 ISG Provider Lens' global Procurement Services report shows that enterprises are moving beyond traditional cost-centric approaches to procurement, focusing on agility, efficiency, and resilience amidst economic and geopolitical changes. Strategic sourcing and long-term supplier partnerships are gaining traction to unlock value beyond cost savings and mitigate supply chain risks.

How procurement is evolving

The report adds that organisations that have already transformed their procurement systems once, often outsourcing some functions and implementing new software platforms, are now considering new approaches. The series of disruptions that began with the COVID-19 pandemic continues to shape companies’ procurement strategies and the services providers offer, ISG says.

“Procurement consulting and outsourcing have changed significantly since 2022,” says Robert Stapleton, partner and Business Outsourcing Services lead for ISG.

“Many state-of-the-art solutions adopted before the pandemic do not serve companies well today or prepare them for the future.”

ISG report adds that effective procurement now needs to do more than keep costs low, with companies and providers working closely to build procurement systems which are agile, efficient and resilient amid changing economic and geopolitical conditions.

These systems use data-driven decision-making and smoothly interoperate with finance and supply-chain management departments, vendors and suppliers.

AI’s crucial role in transforming procurement

Artificial Intelligence (AI) is now vital in the evolving landscape of procurement processes, automating tasks, predicting market trends, and improving decision-making.

As approaches update, many companies are also adopting strategic sourcing, unlocking value beyond cost savings by collaborating more deeply with key suppliers, the report says. Long-term supplier partnerships can increase trust and mitigate supply chain risks, enabling better product development and faster innovation.

AI is also beginning to transform procurement processes as enterprises implement end-to-end solutions that can automate repetitive tasks, predict market trends and optimise the choice of suppliers, ISG says. Along with improving efficiency, this development is reducing errors and allowing procurement teams to focus on strategic initiatives instead of routine work.

“The rise of AI and ML represents a fundamental shift in procurement practices,” adds Jan Erik Aase, partner and global leader, ISG Provider Lens Research.

Jan Erik Aase, partner and global leader, ISG Provider Lens Research

“It has the potential to improve decision-making and foster better supplier relationships," adds Jan.

Increasing interest in environmental, social and governance factors among consumers and investors has turned enterprise and service-provider attention toward sustainable and ethical sourcing, ISG says. Anticipating more stringent requirements and penalties in some regions, companies are investigating these concerns as an aspect of risk management.

The report also explores other trends affecting procurement strategies and services, including rising interest in blockchain technology and evolving relationships between providers and clients.

How providers capabilities stack up

The ISG Provider Lens global Procurement Services report evaluates the capabilities of 26 providers across three quadrants: Procurement Operations Modernization Services, Strategic Sourcing and Category Management Services and Direct Procurement Enablement and Modernization Services.

The report names Accenture, Deloitte, Genpact, GEP, HCLTech, IBM, Infosys, Wipro and WNS Procurement as Leaders in all three quadrants. It names TCS as a Leader in two quadrants and Capgemini and Tech Mahindra as Leaders in one quadrant each.

In addition, Tech Mahindra is named as a Rising Star -- a company with a “promising portfolio” and “high future potential” by ISG’s definition -- in two quadrants. Corcentric, PwC and TCS are named as Rising Stars in one quadrant each.

In the area of customer experience, PwC is named the global ISG CX Star Performer for 2024 among procurement services providers. PwC earned the highest customer satisfaction scores in ISG's Voice of the Customer survey, which is part of the ISG Star of Excellence™ program, the premier quality recognition for the technology and business services industry.

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