SOURCE: Xchanging

Xchanging

October 07, 2014 09:15 ET

Second Annual Industry Survey Reveals Big Jump in C-Suite Recognizing Procurement as Strategic to the Overall Business

Significant Reduction in Intended Spend on Procure-to-Pay Platforms Noted, While eSourcing Software Spend Predicted to Nearly Double

CHICAGO, IL--(Marketwired - Oct 7, 2014) - Xchanging plc, the business process, procurement and technology services provider, today revealed the results of a survey on procurement technology and spending trends, with a key outtake being increased recognition among the C-suite of procurement's strategic role for businesses.

The survey was distributed to Sourcing Interests Group's (SIG) Peer2Peer Network, an association comprised of sourcing, procurement and outsourcing professionals from Fortune 500 and Global 1000 companies.

Importance of Procurement Recognized by the C-Suite
Of the survey respondents, 68% said their C-suite views sourcing and procurement as strategic to the business. In a similar study conducted by Xchanging in 2013, only 38% of respondents said the C-suite viewed procurement in this way. This represents a major shift in perceptions about the procurement function and the value it can drive within an organization.

"To see the number of executive teams viewing procurement as strategic nearly double year-on-year is extremely promising," said Dave Bowen, Managing Director of Procurement, Xchanging Americas, and CEO of MM4, Xchanging's eSourcing business. "One of the reasons for shifting opinion is the increasing potential to source from new low cost markets, which is creating a compelling opportunity to impact the bottom line. But it's more than that. Recent, significant advancements in technology and service provider maturity have led to some really eye-popping business cases that make procurement's strategic value clearer than ever. We're seeing this in practice with customers and prospects."

Increasing Technology Adoption
Regarding planned investment in procurement and sourcing technologies, respondents reported notably different priorities in the 2014 survey, compared to 2013:

             
Technology   2013 survey outcomes   2014 survey outcomes   Year-on-Year shift
Solutions that track savings to business outcomes   31.3%   12.7%   -18.6%
Procure-to-Pay platforms   30.6%   16.9%   -13.7%
Supplier/contract management   23.7%   28.2%   +4.5%
Spend analytics   18.1%   22.5%   +4.4%
eSourcing   9.6%   16.9%   +7.3%
             

While interest in Procure-to-Pay platforms is ranked as a priority by only about half this year compared to those who ranked it as such last year, forecast increased investment in eSourcing nearly doubled. This aligns with reported market demand for such solutions. For example, Forrester Research's recent report, "Market Overview: 10% Growth In ePurchasing Software Market Makes 2014 A Year For Buyers," stated the ePurchasing market, under which eSourcing falls, would grow by 10% in 2014.

Reigning In Costs on Indirect
The Xchanging study also found:

  • The top priority for the sourcing and procurement function was cost reduction for indirect goods and services
  • While businesses allocate a vast amount of spend for indirect goods and services (53% reported annual indirect spend of $500 million+), no respondents stated the percentage of indirect spend that is centrally managed and influenced by procurement professionals to be 85% or more, the benchmark for world-class procurement organizations;
  • A significant percentage of respondents said controlling/managing indirect spend is a notable challenge for their procurement/sourcing departments.

Bowen commented on these findings: "The fact that many respondents reported the management of indirect spend as a notable challenge for their procurement/sourcing departments suggests organizations need to reconsider their approach. One way to do this is to outsource the spend management function to an expert third party. This frees up time for companies to focus on their core competencies while still driving increased savings.

"Aside from outsourcing, we are seeing many companies looking for a third party partner that can augment their existing personnel on an on-demand (or category-by-category) basis. This model can prove to be very effective in generating accelerated results and ensuring knowledge transfer while allowing for greater operational flexibility."

Find Out More
Numerous additional insights into corporate strategic sourcing and procurement trends and technology, as well as areas for investment in 2015 and beyond, were revealed by the survey. To view the complete results, email your request to: xchanging@finnpartners.com.

To learn more, visit www.xchanging.com/procurement.

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