Digital procurement in major Italian companies

Today’s new and evolved technologies are rapidly reshaping the way the various stages of procurement are handled. Cloud services, data visualization and analysis, artificial intelligence and machine learning will have an ever-greater impact on all procurement processes, profoundly transforming how CPOs and their teams work. But how far have Italian companies gone along the path of procurement digitalization? Which technologies will become the most relevant in the coming years (blockchain, big data, augmented reality, or artificial intelligence)? What projects are these companies putting in place to contend with digitalization in the stages of procurement processes? What challenges have come up? What results have they attained? Even though the general consensus is that companies across different sectors need to go digital, not all of them have managed to bring their internal processes up to speed yet. Cultural and technological delays, unprepared personnel, and the challenge of change seem to be the most common causes. To explore this issue, the SDA Bocconi School of Management in collaboration with SAP Ariba and Accenture conducted a study entitled The Current Status of Digital Procurement in Italy – 2019.

The aim of our research was to provide an overview of the state of procurement in Italy today through the direct participation of CPOs from 101 Italian firms (individual companies, group headquarters, Italian business units and business divisions). All of the companies in our study had over 400 million euro in average turnover in the past three years and operate in 11 different industrial sectors. Our findings present a clear snapshot of procurement for the entire Italian market, offering insights on the evolutionary trajectory this function may follow.

Cutting costs, managing risk, enhancing product/service quality, and supporting growth: these are the top priorities listed by the CPOs in our study with regard to procurement management (Figure 1). In most cases, companies seek to achieve these goals by revamping their current operational model, either by expanding or readapting it.

Figure 1: Priorities in managing relationships with suppliers (three choices per company, data in % of sampled companies)

With regard to the perception of how digital procurement and the role of the buyer will evolve in the next five years, 64% of the CPOs we interviewed said that technologies for data visualization and analysis will play a key role. Also crucial in the near future are predictive analytics (54%), robotic process automation (35%) and mobile technologies (33%). In contrast, only 21% consider blockchain a promising technology, and just 10% cited artificial intelligence (AI) or machine learning (Figure 2).

Figure 2: The 3 new technologies that will have the biggest impact on procurement and the role of buyers in the next 5 years

Taking into account the 618 digital procurement projects initiated or concluded in recent years by the companies we sampled, what emerged is that overall, every stage in the procurement process is impacted. Although 29% of the participating firms did not make use of any new technologies, many others only adopted application software for handling procurement processes, most often vertical applications, with a preference for cloud services over on-premises. As for obstacles to digitalization, the biggest proved to be organizational dynamics. In fact, 50% of interviewees saw as their most obvious challenge a corporate culture that had little inclination for innovation; 42% emphasized the inability to calculate the return on investments, while 41% pointed out the clearest gap in the complexities of integrating and managing new technologies with outdated company processes.

On one hand, we shouldn’t underestimate the efforts that companies are making to invest in digital procurement projects that align with their internal priorities. But at the same time, we must stress that the degree of coverage these initiatives have achieved still comes up far short, with negative repercussions on the level of maturity of these companies in utilizing new technologies in the procurement sector.

There are a number of challenges facing CPOs, challenges which also call other business functions into play. One example is IT, where a convergence of objectives with procurement seems indispensable at this point. What’s more, Chief Procurement Officers are tasked with laying the groundwork for a corporate culture that expands the playing field to include organizational levers that are more and more digitalized. CPOs also have to take the lead in the end-to-end procurement process. And finally, they need to have the capacity to recognize the full potential of cloud services, ascertaining their adoptability in terms of company processes.