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As companies across all industries invest in technology tools that help them work smarter, better and faster, procurement departments are increasingly turning to software that streamlines their activities, eliminates manual processes, reduces errors and allows team members to work on more important projects.
The proof is in the numbers: According to a new report from Maximize Market Research, the global procurement software market is expected to reach nearly $10 billion by 2027—up from $5.8 billion in 2020. This corner of the software market is posting a compound annual growth rate (CAGR) of 8% and expected to continue that trajectory over the next five years. The largest software providers in this sector are Basware, IBM, Oracle, PROACTIS and SAP.
Key Demand Drivers
Software that automates the operations of procuring supplies and tracking inventory, procurement solutions allow users to request and approve purchase orders (POs), match invoices to received items, send bills online and produce payment verification documents, among other activities.
When combined with e-procurement—the process of buying and selling supplies and services via a closed supplier system generally available only to registered users—procurement software helps shorten procurement lifecycles, increase productivity and reduce human errors. It also provides visibility into expenditures, serves as a central repository, promotes coordination between external and internal teams, and eliminates approval bottlenecks, according to the research firm.
“All of these factors are driving up demand for procurement software market growth,” it adds.
Another reason more companies are investing in procurement software right now is the increased demand for procurement process automation, which simplifies processes and provides better operational visibility across the whole enterprise.
According to Maximize Market Research, manufacturers are the biggest users of procurement software. Within that sector, it says companies are “progressively adopting procurement outsourcing and technology-driven solutions” that help them focus on their competence areas (i.e., manufacturing skills, production and on-time delivery).
The retail industry is another big user of procurement software, which helps these organizations automate procurement tasks and get better rates from their vendors. These “wins” are essential for retailers whose very business models center on buying and selling a large volume of goods.
Measuring the Benefits
Procurement software handles supply chain tasks related to the central management of purchasing, sourcing, vendors and suppliers, invoicing, maintaining optimal inventory amounts and more. “Like many supply chain focused solutions, the features present in these platforms can vary,” SelectHub states. “Software [programs] that encompass all processes are more commonly referred to as ‘procure-to-pay’ solutions.”
Procurement solutions also support better external and internal communications for the companies that are using them. “Running smooth and optimized processes requires clear lines of communication between stakeholders like vendors, suppliers, procurement officers and more,” SelectHub adds. “[These systems] also leverage automation to cut down on time-intensive tasks that can bog down valuable employees.”
Once in place, procurement software helps improve inventory control, increase visibility over spend, standardize workflows and cut costs. Some of the other benefits of digitalizing the procurement process include access to a single source of truth that doesn’t require associates to sift through spreadsheets, emails and other documents to find the information that they need. “Instead of piecemeal modules,” SelectHub notes, “a single source of truth takes all disparate procurement and sourcing information and disseminates it across the platform.”
Procurement Analytics Comes of Age
The use of quantitative and analytical methods to tap into procurement data and create actionable insights, procurement analytics is also helping companies improve operations, save money and drive value. According to Verified Market Research, the procurement analytics market was valued at $2.52 billion in 2021 and is projected to exceed $19 billion by 2030 by growing at a CAGR of 25.21% between now and then.
This anticipated growth is driven by the need to better anticipate losses and risks, enhance productivity, reduce operational costs and achieve steady business growth. “Business organizations can lower their total procurement costs and raise service levels by using data-driven intelligence provided by procurement analytics,” the research firm says. “Planning, design, production, delivery, and service processes in procurement have all improved as a result of the growing use of analytics tools.”
