If any finance process is overdue for innovation, it’s procurement. For decades, the many steps and stakeholders in large enterprise purchasing meant procurement teams had to rely on heavyweight, expensive solutions, while mid-market companies either had to adopt one of those overly cumbersome solutions or throw some ad-hoc procedures together to try to control spend. This left this segment underserved and exposed to risk and unnecessary costs.
But that’s now changed — much to the delight of:
1. Employees who need access to company funds,
2. Finance teams who must accurately record all transactions,
3. Procurement teams who need to ensure company-wide compliance for new purchases.
Exciting innovations in procurement solutions are highlighted in leading analyst firm International Data Corporation (IDC)’s Spotlight paper “The Value of Guided Procurement Applications.”
IDC is well-positioned to recognize innovation. With a team of over 1,300 analysts, IDC offers expertise on technology trends and opportunities. One of their overarching goals is to help technology buyers make informed decisions to achieve their business goals.
This recognition by IDC marks a turning point for procurement solutions. But what do these recent innovations mean for mid-market companies on a practical level? Let’s take a look at IDC’s research and what it means for finance teams.
Changes to the procure-to-pay landscape.
The events of recent years have increased awareness of the strategic potential of procurement to fuel growth. Even before COVID-19 led to a wholesale shift to remote work, business spending was becoming increasingly decentralized. For example, in the subscription economy, employees typically purchase their own SaaS subscriptions without oversight from a central procurement department. The result was poor visibility and insufficient control over spending. As this problem grew, so did interest in solutions to fix it, with more software companies introducing procurement solutions. The global market for procurement software grew by over 6% from 2019 to 2020 and is projected to grow to $13.80 billion by 2029, at a CAGR of 10.9%.
Airbase has witnessed this thirst for solutions with widespread and rapid uptake of our new Guided Procurement module since it was released earlier this year.
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The evolution of procurement solutions.
Procurement has traditionally been a centralized function developed out of a need to control the purchase of the items that go into COGs — the materials used in making products or the inventory that retailers purchase for resale. Software designed to meet the needs of traditional procurement has focused on support for the RFQ process, vendor management, supply chain management, logistics, and delivery against contract issues.
Traditional procure-to-pay software addresses many of the steps that do not apply to decentralized spending.
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Closing visibility gaps.
The rising demand for procurement solutions arose in part from the need to eliminate the visibility gaps in the purchasing process, particularly when it comes to looping in all stakeholders that should be relied on to influence spend. At a minimum, this visibility is required to control risks and reduce costs. But gaps in visibility can have far-reaching unintended consequences. An employee could buy a software product that creates security risks, for example, or a company could waste thousands in duplicate subscriptions.
Despite the influx of spend management software products, all designed to make employee spending easier to manage, many of these gaps remained. While developing Guided Procurement, Airbase realized that the problems began at the very beginning: with inconsistent intake management — the “front door” of the purchasing process.
What is intake management?
In procurement, intake is seen to be the initial request to make a purchase. Recently, new intake management solutions like Zip appeared on the scene. The concept behind these solutions was a common interface for automating purchase requests, and stakeholder collaboration and communication in response to that request. Originally bolted on to either a procure-to-pay or an invoice-to-pay solution, intake solved the problem of meeting multi-stakeholder requirements in the purchasing process.
Still, this intake approach only handles one aspect of what is required in a full a procure-pay-close process. This is why we’re seeing intake solution providers adding accounts payable automation to their offering. For many, the price point often isn’t realistic, so mid-market or early-enterprise companies remained underserved. At the same time, the business environment became increasingly difficult to manage, with a greater emphasis placed on cost control, which raised the bar for all procurement solutions.
The innovation of Airbase Guided Procurement.
Conditions were ripe for change, and the IDC recognized the importance of the next step. Their “The Value of Guided Procurement Applications” paper notes the next step in the evolution of procurement: Airbase’s Guided Procurement module.
Given the complex interface of so many legacy procurement solutions, and the complexity of the problems to be solved, one of the key innovations in Airbase’s approach is also one of the simplest: usability. IDC recognizes the importance of this new approach:
“Guided procurement applications provide an inviting approval workflow that is easily understood by all stakeholders in the approval chain. It is immediately obvious where the action lies, and parallel approvals are supported. Smart notifications facilitate even greater efficiency and reduce the overall time to completion.”
Airbase customer Medely is an enthusiastic user of Guided Procurement. Controller Eoin Hession confirms the importance of usability:
“Airbase is an impeccably streamlined, user-friendly spend management system designed for all employees. It significantly optimizes the entire purchase-to-pay process delivering immense value to its users — saving them time and effort. They really enjoy using the system.”
Accounts payable and procurement.
But Airbase’s platform takes the impact of intake one step further by adding it to our sophisticated accounts payable functionality. The Guided Procurement module seamlessly integrates with a best-of-breed accounts payable platform which ensures that all approved requests flow from request to reconciliation.
With the addition of Guided Procurement, Airbase bridges the gap between the legacy procure-to-pay and newer spend management markets. It empowers mid-market to early-enterprise companies with a comprehensive, scalable, and integrated solution through a platform that connects upstream intake and approval workflows with downstream payment processing and ERP systems.
This integration between AP and procurement is crucial for getting more spend under management. Because company policies can be built into the system through easy, no-code workflows, spend is signed off by all stakeholders before it happens. And when more spend is properly managed with this oversight, companies have a reduced risk of fraud, improved compliance, and less wasted spend.
Eoin Hession sees the impact in his company’s control over spending.
“From a procurement perspective, Guided Procurement by Airbase is fantastic. It’s extremely flexible, no-code, and gives the company a lot of control over the procurement process in general. It will complete our procurement process here at Medely.”
Procurement has not historically focused on things like travel expenses, marketing costs for ad buys and conferences, contract work, or subscriptions for software. These expenses (referred to as decentralized spend) are most often carried out by the employees who will consume them. Yet the oversight, control, and compliance that procurement brings to purchasing decisions are highly relevant to manage costs and protect an organization from risks.
Software that addresses the specific needs of procurement has historically focused on managing parts of the process that are not relevant in a decentralized model. That’s why this new approach to procurement is so innovative. It’s the first time that a procure-to-pay solution has been built to handle the type of spending done in organizations that don’t rely as heavily on centralized material and inventory purchases. Service organizations, SaaS companies, healthcare, and education are just a few sectors that would benefit from a more modern approach to procurement. The multi-functional steps welcomed by large enterprises are overly engineered and difficult to learn for many organizations, and these solutions were missing the initial intake part of the spend cycle.
Process supported by reimagined procure-to-pay.
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Procurement innovators recognized.
Airbase was recently named an IDC Innovator in the IDC Innovators: Procurement Applications, 2023 (doc #US51214523, September 2023) report. An IDC Innovators report presents a set of vendors – under $100M in annual revenue at the time of selection – chosen by an IDC analyst within a specific market that offer a new technology, a groundbreaking solution to an existing issue, and/or an innovative business model. It is not an exhaustive evaluation or a comparative ranking of companies, but rather a document that highlights innovative companies in a specific market segment. IDC INNOVATOR and IDC INNOVATORS are trademarks of International Data Group, Inc.In
Read the complete Spotlight paper, “The Value of Guided Procurement Applications.”