Stop Underselling Procurement and View it as an ‘Ecosystem Builder’

Stop underselling
procurement and view it as
an 'ecosystem builder'
DECEMBER 2021
Saurabh Gupta, President, Research and Advisory Services
Ram Rajagopalan, Consulting Director

Procurement’s value has progressed
significantly over the last two decades: first, it
was rubber-stamping spend, then we focused
on cost take out, then spend reduction, then
category management and planning, and then
procurement turned to external forces and
addressed risk, regulation and sustainability. So
what have we learned from this evolution of
value creation?
Procurement is now actively
involved in building your
company's infrastructure,
positioned at the heart of most
significant business decisions,
strategic shifts, and critical
investments.
Most often, procurement lets the business be the
boss and adds support only where it has specific
expertise. But what if procurement changes its
mindset and becomes proactive? What if
procurement were the boss and took more
urgency in all that it influences? Procurement
leaders could tell themselves, "I am building the
ecosystem of this company!"
HFS believes that ambitious procurement
organizations of the future will act as "ecosystem
builders" for the enterprise that drive
collaboration across multiple organizations with
common objectives to generate entirely new
sources of value. Procurement itself also requires
an “ecosystem mindset” to orchestrate a
collaborative network of multiple interconnected
elements to drive enterprise transformation. This
point of view shows how procurement leaders
from fast-paced organizations apply this
ecosystem thinking with their organizations to
build more influence and create more value.
Exhibit 1: Procurement needs an ecosystem mindset to be relevant as a
strategic business partner
Vendors
Policy &
process
Platform and
emerging
technologies
Market
awareness
& alertness
Consultative
business partner
Brokers of
capability
Business
stakeholders
Build a
procurement
ecosystem…
…to become the
ecosystem-builder
for the enterprise
Change
agent
Operations
Sourcing &
category
experts
Internal &
external
data
Hyperefficient
and
intelligent
operations
Enterpriselevel
governance
Collaborative
partnerships
Source: HFS Research, 2021
© 2021, HFS Research
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“By design, procurement is a reactive function. People in the organization will
come to you and ask for help. When procurement gets these questions
and requests thrown at them, you automatically turn into a reactive
function and there is limited time to think, stop, and plan. That’s why it’s
important to build the right operating model and develop strategic
talent to earn the trust of the organization and be proactive in your
work. In this way, you can guide your stakeholders through the
principles of procurement earlier.”
– Alpar Kamber, Executive Leader, WNS Denali
How procurement can emerge as an
ecosystem builder for the organization
Ecosystem thinking has become the model for
today's business leaders. HFS recently
surveyed 150 C-level executives on the current
state of their ecosystem and 95% agree that
the potential value generated by an ecosystem
working in balance will be exponentially higher
than a single function can achieve.
Businesses exist in a web of
interconnected relationships with
their employees, customers,
suppliers, partners, and even
competitors creating an evolving
and ever-fluctuating ecosystem.
Increasingly, a business's success is determined
by this ecosystem's strength and the ability to
adjust as the market and other conditions
change, sometimes dramatically, as we saw with
the pandemic shock in 2020. However, building a
thriving and balanced business ecosystem is
challenging. According to our research, the top
five hurdles to establishing a successful
ecosystem include security, privacy, incentive
alignment, technology backbone, and a
collaborative organizational mindset or culture.
While procurement has been mostly missing from
this broader business ecosystem discussion,
there is no other function within an enterprise
with the skills, experience, exposure, or
placement to help strengthen the enterprise
ecosystem. Procurement in the future should act
as the link between external expertise and
internal business functions to maximize their cocreation
potential.
© 2021, HFS Research
Here are the traits for the future of procurement
as the "ecosystem builder" for the enterprise:
• Brokers of capability: Procurement becomes
the "broker" of competencies across
ecosystem participants to drive the network
effect required to make the ecosystem
valuable for all.
• Change agent: Instead of fighting change,
procurement professionals need to embrace
and demand change from the rest of the
organization to evangelize collaboration
benefits – both internally and externally.
• Collaborative partnerships: Beyond
negotiating the best deals for buying products
and services, procurement focuses on
developing partnerships that drive innovation,
end customer experience, business outcomes,
and enterprise demand.
• Ecosystem governance: Procurement expands
beyond the siloed view of individual supplier
relationships to set strategy and policies for
enterprise-level governance of the ecosystem
and focuses on incentive alignment across
multiple participants
• Consultative business partner: Procurement
works with businesses to find new sources of
value that cannot exist without an ecosystem
approach.
• Market awareness and alertness: Beyond
spend and category intelligence, procurement
becomes the home for collecting enterprise
and competitive intelligence.
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“Our purpose is to champion people to be well and thrive. We do this by living
our values. One value that sticks with me is ‘always do the right thing’ –
and I always put people at the center as well. We show up to win with
our head, heart, and guts. This means we must know where we are
going, be determined to get there and help each other get there. We
put all of the pieces together to live our purpose here. And we have
worked with WNS Denali for a number of years now. We have always
acted as one team. So, all of our stakeholders and end-users are used
to working with our WNS Denali partners.”
– Senior Procurement Manager, a global consumer and packaged goods company
Building an efficient and effective
procurement ecosystem is a prerequisite to
power the future role of procurement
To rise to the challenge of enterprise ecosystem
building, procurement itself needs to take an
ecosystem view to build its competencies to
power our future procurement vision. The
procurement ecosystem consists of
interconnected stakeholders, technologies,
processes, and data that are often invisible,
misaligned, and unoptimized. Business
stakeholders consider procurement a necessary
evil while suppliers want to override procurement
to deal directly with the business. Internal
performance measures are cost and compliancefocused
versus strategically aligned with
enterprise priorities. Poor internal data visibility,
lack of external market intelligence, and a
patchwork of tools and technologies that don't
often talk to each other lead to inefficient and
ineffective processes leading to frustrating
stakeholder experiences. As a result,
procurement professionals spend most of their
time firefighting versus trying to use their skillsets
to help the organization meet its strategic goals.
It would be appropriate to refer to the following
quote from a senior professional in procurement.
1. Procurement needs a mindset shift to stop
thinking linearly and start thinking of
interconnected networks comprising internal
stakeholders, procurement professionals,
suppliers, internal and external data,
processes and policies, and systems &
technologies.
2. Procurement needs to invest in building a
data infrastructure that provides internal
visibility into spending patterns and external
intelligence of market trends and risks.
3. Procurement needs to optimize operational
frameworks by implementing emerging talent
and technology strategies. Despite promising
use cases, less than 5% of procurement and
sourcing initiatives across most emerging
technologies have scaled and industrialized.
But it can't rely on the talent and
infrastructure of the past. Procurement
organizations need to embrace new
operating models and emerging technologies
(see Exhibit 2).
Procurement needs an efficient and effective
ecosystem that allows operations to run like "tapwater"
and strategic resources to focus on valueadded
work. To build the ecosystems of
tomorrow, procurement leaders today must
prioritize these three areas:
© 2021, HFS Research
4

Exhibit 2: Adoption of emerging technologies in sourcing & procurement
What are the emerging technologies that you are leveraging as a part of your procurement outsourcing
engagement? Please provide the current stage of implementation. (Percentage of respondents)
Robotic Process
Automation (RPA)
15%
23%
19%
27%
15%
Predictive analytics
54%
25%
8%
4%
8%
Machine learning
60%
12%
20%
4% 4%
Cognitive assistants
63%
21%
8%
4% 4%
IoT
0.68
20%
4% 4% 4%
NLP
70%
9%
9%
9%
4%
Computer vision
83%
4% 4% 4% 4%
Blockchain
88%
8%
4%
Augmented and
virtual reality
92%
4% 4%
Not leveraging Proof of concept Pilot Limited in-production Scaled and industrialized
Predominant use-cases for emerging technologies in sourcing and procurement (illustrative, not exhaustive)
●
●
●
●
Automation: Touchless payables process; PR to PO triage; invoice matching; and expediting goods and services
Artificial intelligence (AI): Assisted buying using digital associates to answer queries, provide updates, and resolve
issues; extracting meaningful metadata from unstructured documents (Text/PDF/Word) using NLP and deep
learning; KYV (know your vendor) for supplier risk management
Smart analytics: CPO dashboards for savings opportunity identification and tracking; dynamic category
intelligence driving near-real-time decisions; advanced spend analytics leveraging NLP, semantic and text
analytics to read and extract relevant information; fraud detection leveraging AI to identify malicious activity
Blockchain: Blockchain- and IoT-based track-and trace; supplier onboarding and contract management leveraging
smart contracts; trust and transparency in the P2P process across invoicing, 3-way matching, payments, and cash
application
Sample: 28 analyst interviews with clients of procurement outsourcing
Source: HFS Research, 2021
“In Procurement Operations, you know everything is going well when you have the
least amount of noise. Rarely do people tap you on the shoulder and say –
‘that process is awesome – you rocked it,’ which means the engagement
with your stakeholders has been positive and that breeds trust. When you
have trust, it helps you with change management so you can take an idea
to the table with a proven track record and stakeholders are more likely to
open up and listen – we have worked well with WNS Denali in that area
and how we run our business.”
– Head of Global Procurement Operations Infrastructure, a global high-tech company
© 2021, HFS Research
5

The Bottom Line: Stop thinking linearly and
conservatively and under-selling your procurement
credentials
Procurement needs an appetite for change that can break it out of its silos. It requires creativity and
problem solving to unleash its potential. According to LinkedIn behavioral data, creativity is the most indemand
soft skill in short supply – and a skill that machines can't easily replicate. Procurement professionals
also need data literacy and digital fluency to bridge the blurring lines between IT and business and
understand ecosystem data flows.
Procurement refers to obtaining something that is of value to the enterprise. And increasingly, that value
should go way beyond negotiating with suppliers to procure goods and services at the lowest possible
price. While these qualities are the root of our function, we have evolved and mastered new skills.
Procurement skills, experience, and competencies can be expanded to help the enterprise build
hyperconnected ecosystems across many different organizations to potentially unearth entirely new
sources of value. It would be appropriate to refer to the following quote from a Strategic Sourcing Manager
in a global social media company.
The WNS Denali team has proven to be a great partner as they understand and share our passion for
growing our organization. WNS Denali’s openness and willingness to address feedback has allowed
us to enable great change and progress to continually expand WNS Denali’s role. WNS Denali
continues to look for new ways to add value to our Sourcing organization.
– Senior Manager, Strategic Sourcing Program Manager, a global social media company
To reach this next step and once again recontextualize the organizational role of procurement, the function
will need to undergo a dramatic mindset shift.
Regardless of their industry, CPOs of the future will move forward if they:
1. Stop resisting change. Demand it
2. Acquire new skillsets – creativity, data literacy, and digital fluency
3. Position procurement as strategic "ecosystem builder" for the enterprise
In essence, procurement will need to stop thinking of itself as a cost and compliance-focused back-office
function and start thinking about itself as a center of an interconnected web of internal and external
stakeholders, data, processes, and technologies.
© 2021, HFS Research
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HFS Research authors
Saurabh Gupta
President, Research and Advisory
Services
Saurabh Gupta is President, Research and
Advisory Services at HFS. He oversees HFS'
global research function managing the global
team of analysts and operations across US,
Europe, and Asia-Pac. He works closely with
the CEO to set the strategic research focus
and agenda for HFS Research, understanding
and predicting the needs of the industry and
ensuring that HFS maintains its position as
the strongest impact thought leader for
business operations and services research.
Ram Rajagopalan
Consulting Director
Ram is based in Bangalore and brings with
him over 19 years of experience that spans
strategy consulting, business development
and market research. He has worked on
opportunity growth consulting, issue-based
consulting, market research and business
development assignments with clients in
Europe, North America, Japan and India..
© 2021, HFS Research
7

Acknowledgment
A special thanks to the WNS Denali team for their valuable inputs and feedback throughout the research
and publication of this report.
About WNS Denali
Outcome-driven companies partner with WNS Denali to operationalize their Procurement function and
improve financial performance and efficiency. We work alongside our clients to co-create, implement, and
execute next-generation Procurement operating models tailored to their specific needs and designed to
increase the strategic impact of Procurement for their business. WNS Denali’s experts provide a range of
advisory and managed services, along with enabling technology and support, to help our Clients build an
integrated Procurement Ecosystem that empowers them to outperform the market. Contact WNS Denali to
learn how we help our Clients create greater business value by operationalizing Procurement.
© 2021, HFS Research
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About HFS
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