Procurement budgets to see slower growth in 2019

15 April 2019

Procurement budgets are set to see slower growth this year than in 2018 with staffing growth also stagnating, according to new research.

However, compensating these trends are the effects of digital transformation, which is beginning to make it easier for procurement organisations to “do more with less,” according to Procurement Key Issues research from the Hackett Group.

The survey canvassed about 150 executives in the US and abroad, mostly at large companies with annual revenues of $1bn or more.

Respondents expect budgets to grow at 1.3% in 2019, compared to 2.7% last year, and for staffing to grow by 0.9%, compared to 2.8% in 2018.

However, revenue growth is set to rise from 5% in 2018 to 5.7% for 2019, creating significant productivity and efficiency gaps that procurement organisations must overcome.

Between 30% and 40% of respondents said digital transformation has had a high impact on areas such as achieving enterprise objectives, enhancing performance, optimising the service delivery model, and addressing roles, skills profiles, and needs.

Over the next two to three years, procurement organisations expect the impact of digital transformation to dramatically increase.

A third (32%) of organisations believe that digital transformation has a high or very high impact on the achievement of enterprise objectives today, compared to 60% that think it will do so within two to three years.

A quarter (24%) of respondents had plans to adopt data visualisation, while master data management and advanced analytics will see adoption grow by 57% and 60% respectively.

Spend optimisation analytics and dashboarding adoption rates are expected to grow by 61%. Broad-based adoption of e-procurement technology is expected to almost double.

Mobile computing and robotic process automation (RPA) are expected to be in use at 67% and 70% of organisations respectively, within the next two years, which will lead to a focus on more efficient, agile processes across the procurement lifecycle.

Meanwhile the adoption of e-procurement, spend optimisation analytics, and supplier relationship management systems is almost universal, with only slightly lower adoption rates for e-invoicing and contract lifecycle management.

“This represents a major shift toward customer-centricity, designed to enable organisations to simplify and streamline processes, and improve agility,” said the report.

However the research also expressed concern that procurement’s transformation is not focused where it should be.

It said procurement had less influence over other areas of critical importance such as the development of analytical capabilities, which was only a transformation focus for 50% of procurement organisations.

And only 32% of all procurement organisations had a major initiative in place to improve skills and talent with business needs.

“Procurement organisations are clearly making investments in digital transformation and are seeing real benefits,” said Chris Sawchuk, principal & global procurement advisory practice leader at Hackett.

“The focus on improving analytics for 2019 is particularly encouraging. But the laundry list of critical areas where they have very limited ability to make improvements is very disconcerting.”

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