I interviewed Andrea Stroud who discussed Modernizing Procure-to-Pay Processes that Enable Indirect Spending.
It’s good to speak with you again, Andrea. I’m looking forward today to hearing your views on the topic of modernizing procure-to-pay processes, which enable indirect spending.
Thank you, Dustin; it’s a pleasure to speak with you, as always.
Thanks. My first question is: Can you talk a little bit about APQC’s recent procure-to-pay research study?
Absolutely. APQC’s recent research study, we actually partnered with Oracle to look at procure-to-pay practices at organizations and how they’re improving their indirect spending by modernizing efforts with different technologies. The primary focus of the research, as I mentioned, is indirect spending, which, for those not familiar, is the procurement of the payment for goods and services commonly bought for consumption by internal stakeholders rather than external customers or clients. For this study, we actually surveyed senior executives working in procurement and accounts payable at 132 large, global firms.
Are organizations today investigating the benefits of streamlining their procure-to-pay processes?
Dustin, that’s a good question. Here at APQC, we’ve seen an increase in interest from organizations that are looking to improve their procure-to-pay process. After seeing this surge—and we get a ton of requests from our members, because we are a membership organization. We had a ton of requests, so we decided to dig deeper into the topic, so we conducted this study. Every day we see a growing number of organizations that we talk to and work with and look to investigate the benefits of streamlining their process models that enable them to modernize by adopting technologies like e-invoices or self-service portals for employee requisitions; some are adopting workflows to accelerate invoice processes.
A good example, one of the organizations that we interviewed that actually went about investigating the benefits of taking steps to streamline its process was Woodward, Inc., just to kind of give you an example.
Woodward actually integrates technologies into fuel-combustion fluid and electronic control systems for aerospace and energy markets around the world. When interviewing this organization, we found out their financial management and indirect services groups planned to shift from paper-based invoice management to automated invoice processing using software from OpenText. We also found out that they’re working to implement an e-procurement system, which involves cloud technology that would be used by their 22 sites worldwide. This will provide better visibility into the process and, therefore, get better visibility on bottlenecks. It also improves the experience for their internal customers. That’s just one example of the many organizations that we talked to and that we see making changes every day.
I mentioned some of Woodward’s motivating factors, like the bottlenecks and visibility and internal customers, but we found some other factors in our research as well. Our research has shown that factors behind modernization of procure-to-pay processes are driven by organizations that are wanting to improve service to internal customers, as I had mentioned with Woodward customers, cost efficiencies—and that means reducing cost, which is always important to the process owner—staff productivity, policy enforcement and controls, the ability to identify and reduce maverick spending, and the collaboration with vendors. Those are very important factors.
When organizations are looking to decide when they want to modernize their procure-to-pay processes, where do they start?
The vast majority of organizations we survey are moving to modernize their procure-to-pay processes; they actually begin their journey in the realm of indirect procurement, so that’s why this study actually focused on indirect procurement, because many start at that very point. It actually makes sense as a good starting point for a lot of organizations, because the process of developing a proof of concept is pretty straightforward in the area of indirect procurement or indirect spend.
Are organizations using cloud-based solutions that enable their procure-to-pay?
This is an interesting question. I’ve actually been asked about cloud-based technologies so much in the past couple weeks, and it continues to come up in our research. Whether I’m looking at procurement, logistics, procure-to-pay, it doesn’t matter; cloud-based technologies continue to come up.
What we’ve seen is, although some organizations have moved to the cloud, based on our research, we’ve found that the vast majority of organizations do not currently use cloud-based technology or solutions to enable their procure-to-pay process. Many procurement and finance executives remain concerned about the data security. The majority of survey respondents who said they do not now use cloud technology, they actually said the perception of security risk was a barrier they couldn’t even overlook. Organizations are very terrified and they collect so much customer information that data security is an area of concern.
I do, however, think that over the next few years, you’re going to start to see organizations being a lot more open to cloud solutions, especially since cloud-based solutions can play a key role in modernizing an organization’s procure-to-pay process. It not only reduces the cost of deploying enterprise application, but it also incorporates modern technologies that provide capabilities that were not previously available in legacy systems. A lot of it has to do with things like social collaboration, intuitive user experiences, embedded analytics—which is actually really important to organizations; they’re looking more at analytics these days—and support for mobile devices. Mobility is becoming more important as well.
Cloud-based solutions are going to continue to be an important factor that are going to enable procurement and accounts payable to collaborate more effectively. It’s going to help not only collaborate more effectively, but work efficiently and reduce overall operation costs. As time goes on, the lower cost of ownership of cloud solutions is also going to be appealing to many organizations. I think that fear factor is going to decrease, and the organizations who are lacking the experience or the knowledge to get started are going to get with third-party vendors to actually help them get there and get on their feet and get started and get the help they need.
We’re actually really excited about organizations that are looking to improve their procure-to-pay processes. We see that collaboration is going to be a very important factor in this. One of the things that really came out of our research—because, again, we were looking at modernizing and automation and those different aspects, but we were also looking at the collaboration aspect of everything, so it was always interesting to see at the different organizations how much the financial-services group—or accounts payable group, rather—was actually talking to the procurement group. How often they were actually communicating, whether the process owner was in the procurement space or financial-services space, or if someone was actually playing in both areas.
I mentioned we had 132 respondents. Some of those were in procurement, and some of those were in accounts payable. Some of those were actually in both groups. I think you find a lot more standardization when you have someone who has oversight of both processes, both the procurement and accounts payable process, whether you’re looking at indirect procurement or direct procurement.
Thanks, Andrea, for sharing today.
Any time, Dustin. I really appreciate speaking with you. I’m always happy to talk to you about new topics and new research, and it’s always a pleasure. I look forward to future conversations.
About Andrea Stroud
Research Program Manager APQC