Procurement software—software platforms that help organizations automate the complete source-to-pay cycle—is used to analyze spend, manage contracts, pay invoices and manage other functions in an otherwise spreadsheet- and/or paper-intensive department. By automating some or all of these processes, procurement software helps buyers focus on their core tasks versus getting bogged down by paperwork and phone calls.
As with many other technology platforms that promise to streamline operational activities, procurement software’s year-over-year adoption rates continue to rise steadily. According to a new Maximize Market Research report, the global procurement market is expected to reach $10.2 billion by 2026, up from $4.7 billion in 2017. This represents a compound annual growth rate of 10.17%.
What’s Driving the Market?
The major factors that will positively affect the procurement software market over the next six years include a growing need to automate the procurement process and the materialization of e-procurement technology, both of which will open up new opportunities for market growth in the coming years. The research firm says on-premise software deployment models will continue to dominate the market for the next few years. This could shift as more companies lean toward investing in cloud-based software solutions.
“However, the market is anticipated to decline in the coming years as the enterprises have started adopting cloud procurement software solutions [for] its cost efficiency, agility, and flexibility,” it points out. “Additionally, the essential for heavy initial and ongoing investments in hardware, software updates, servers, and hiring of skilled professionals—in terms of on-premises deployment—will drive demand for cloud procurement software solutions.”
Geographically, North America is the biggest user of procurement software, with some of that attributed to the fact that most of this software sector’s vendors (e.g., IBM and Oracle) are based in North America. “Apart from this, the Asia Pacific region with developing countries such as China and India are still lagging in terms of adoption of the software,” the company reports, noting that even those companies that have adopted the software outside of North America lack “sufficient knowledge on how to use it to its optimum efficiency.”
E-Sourcing Reigns
The process of obtaining bids from various suppliers via a consolidated, online portal, e-sourcing helps to streamline the sourcing process, creates a data repository and helps cut costs through improved supplier competition. These and other benefits have helped push e-sourcing to the top of the procurement software list.
“The e-sourcing segment is dominating the market,” Maximize Market Research notes in its report. “E-sourcing provides valuable pricing and non-pricing information with an attachment from sourcing event into a contract.” These platforms also feature built-in platforms that recognize key suppliers (for negotiation purposes), and that maintain accurate records of those negotiations.
Making the Right Choice
In Forbes’ “What's Behind the Growth Of the Procurement Software Industry?,” Tarek Alaruri highlights the software’s “irreversible influence on virtually every business sector,” and points out that everyone from the traditional players within the cloud-based service industry to newcomers involved in the SaaS marketplace are now riding the software boom to unprecedented heights.
To CPOs making their first foray into the procurement software market, Alaruri advises a smart, informed approach that incorporates both the company’s current capabilities and the areas in need of improvement. “It is essential that any software you purchase is functional within your current architecture,” he writes.
Alaruri also recommends a thorough review of the procurement department’s internal data situation; a knowledge of which data streams you do and don’t have; and an idea of your data quality. “Finally,” he concludes, “I would determine the business process and workflow changes that would go into this new software purchase.”
