One-on-One with SAP: Digital Networks and the New Face of Procurement

One-on-One is a new Q&A series with leaders in the SIG community. Cost savings. Process efficiencies. They’re synonymous with procurement and among the terms most used to describe its role within the enterprise. And with good reason. Over the last decade, procurement has transformed itself from a back-room function to a strategic capability by delivering them. But a new term has entered the lexicon: innovation. There’s no doubt that procurement today is a different game. It’s more connected, informed and some might even say “social” than ever. Just as consumers tap into personal networks to learn, share and shop better, procurement is beginning to tap into business networks. To learn more on how these digital communities are transforming the function, SIG sat down with Dr. Chakib Bouhdary, President of Business Networks for SAP.

SIG: Social tools much like those used to manage our personal lives have infiltrated the enterprise. How is this changing procurement?

Bouhdary: There are officially more mobile devices than people in the world. More than a billion of us participate in social networks. Over 15 billion web-enabled devices connect us to the people and information we need to manage our daily lives. And data is exploding—doubling about every 18 months. So we are mobile, and apps on our phones and tablets give us new ways to discover and collaborate with our peers and trading partners. Just as consumers tap into social networks to keep tabs on their relatives and friends, procurement is now leveraging business networks to manage trading relationships and commerce activities.

SIG: There seems to be a complete shift in the way trading partners communicate, transact and collaborate. How are business networks driving this?

Bouhdary: In their initial phase, business networks were all about connecting companies more efficiently to perform a discreet process such as buying, selling and invoicing. Today’s networks are smarter, faster and more global than ever. And companies are harnessing the connectivity and insights they provide not only to optimize these processes, but also to enable new ones that drive innovation and value across the entire enterprise. Processes have emerged like “dynamic discounting” that allow them to secure discounts that can be reinvested in research and development, and provide funding to expand their business. Or contingent workforce management through which they can identify and manage highly specialized resources needed to develop that next-generation product. Or spot buying where they can find and immediately buy contracted and non-contracted items in accordance with their procurement policies and procedures. Business networks are rapidly evolving. And while initially, they were all about connecting buyers and sellers, they are now about making them smarter.

SIG: How so?

Bouhdary: Business networks have sparked an explosion of a new class of “unstructured” data — texts, tweets, blog posts, web-based videos and other social postings. And it is this data — along with all the interactions, transactions and commentary — that will drive the next wave of procurement transformation. Traditional “structured” data such as information on production, marketing, sales and pricing, HR, finance, facilities and operations, and transaction-level data from supplier, customer, and partner relationships may serve as the foundation for analytic efforts, but by combining it with this unstructured information, companies can gain additional, deeper level insights that enable them to make better business decisions.

SIG: What role will procurement play in this?

Bouhdary: Procurement will lead the way. Leveraging the hundreds of billions of dollars of financial transactions and transactional data, along with relationship history that resides in business networks, buyers and sellers can make more informed decisions by detecting changes in buying patterns or pricing trends – providing confidence and qualifying information on a potential, yet unfamiliar, trading partner. When combined with community-generated ratings and content, they can glean not only real-time insights, but also recommended strategies for moving their businesses forward. Many companies are also beginning to recognize that they can gain new insights by being connected to a community of their partners and peers. And they are using this information to anticipate trends and risks in their supply chain and adapt their processes to act in ways that create market advantage.

SIG: So what does the future of procurement hold?

Bouhdary: I think you’re going to see a few things. Many procurement organizations are still on the sidelines watching as innovative companies embrace business networks as a new model for business. These lurkers are going to join the game and make collaborating via networks a priority. And this collaboration will drive innovation. Fueled by the connectivity that networks provide, companies will enable new processes that are only possible at scale in a networked environment and drive innovation across their operations. And in the process, buyers and sellers are going to get closer. They will use networks to buy, sell or manage their cash more efficiently, but also to find the right partners and optimize their spend and supply chain. Or to engage with customers when, how and where they want to be engaged to increase satisfaction and wallet share. And companies are going to get smarter. They will move beyond transactions and tap into the new insights and data that business networks provide to drive competitive advantage…to not only sense the present, but to see the future and proactively shape it to their advantage. They will leverage networked environments to anticipate risks and trends in the market, developing plans and adapting processes to execute on them before anyone else. And they will create disruption that fuels innovation and delivers their companies to new worlds of excellence.

SIG: Thank you Dr. Bouhdary for your insightful commentary on the future of procurement.