AI-driven sourcing: Why the speed of change is going to only accelerate

The adoption of AI is accelerating, with impressive results. According to the Stanford AI Index 2024, 55% of organizations are now using AI in at least one function.

This has led to notable cost reductions and efficiency gains, with 42% of organizations reporting decreased costs due to AI, up significantly from the previous year. Moreover, 59% of organizations have seen increased revenues attributed to AI. In 2023, AI was mentioned in 394 earnings calls, representing nearly 80% of all Fortune 500 companies.

Seth Catalli

And, in a recent keynote session at the 2024 Gartner CFO & Finance Executive Conference from that organization’s Nisha Bhandare and Clement Christensen, boards are asking about AI 3.4 times more than cloud and 2.5 times more than digital transformation.

By automating the repetitive, manual elements of tasks and adding data-driven intelligent spend insights, organizations are already achieving substantial cost savings, improving their productivity, and ensuring greater compliance and risk management.

Clearly, from sourcing and supplier management to price negotiation and compliance, procurement leaders are waking up to the power of AI-powered spend management in their daily operations. Someone in the field who exemplifies this growing realization about the extensive capabilities of AI is highly experienced senior corporate procurement practitioner Amanda Prochaska.

Prochaska has had extensive procurement success at a range of Fortune 500 companies, including MGM Resorts International, The Kraft Heinz Company, and Kellogg. As she puts it, she knows what she’s talking about, having survived not one, but three SAP implementations. Fueled by her ambition to share the best practices she’d learned through her experiences, Prochaska recently chose to leave another internal corporate job to establish her own digital transformation advisory organization, Wonder Services.

I sat down with this expert to discuss her views on the evolving procurement function and how new technology is enabling it to achieve more, even with fewer resources. Here’s what she told me.

Change management is job No 1

For Prochaska, “Over my career, I came to realize that the projects that went really well did so because of change management, and a project that did not go very well was because of change management or a lack thereof.” She notes that even now, for all the terrific technology we have, 70% of procurement digital transformation projects end up being seen as disappointments—which she puts down to a continuing lack of focus on this:

“At the end of the day, if people don’t use the wonderful new solution you have introduced the way that it’s expected to be used, you won’t get the value from it. If you have imposed a technology not integrated into my day-to-day processes, and if someone has to go out of their workflow to another technology to do something, that’s a large challenge.”

Stripping out inefficiency

In the Wonder Services playbook, she emphasizes that change management is accompanied by work on defining agreed metrics of success and undertaking crucial work in defining policies—an area which can often be a third rail in procurement process change.

Moreover, she shares my enthusiasm for AI-driven platforms as the key differentiator for procurement organizations that want to make all their company spend more efficient, more inclusive, and less costly.

“AI can enable you to identify what your process truly is—which is just amazing to me, how much time we’ve spent documenting processes, and then they end up on a shelf, and nobody ever looks at them. Instead, there’s new technologies such as Globality where the process is right in front of you on-screen in the technology itself. It’s going to be a game-changer.”

And this isn’t just a passing comment. “AI is going to completely change what we think about procurement technology,” she enthuses. “It’s going to allow us to embed our processes into the business’s processes, which is going to take out so much of the inefficiency that happens today.”

A new Richter Scale

Which brings us back to the importance of effective change management. “I think we have a change challenge for sure here,” she warns. “As leaders, we have to be thinking how we make sure that AI is truly adapted to our organization.”

She has a great analogy for this: it’s like the transition from humans cashing your paycheck to robots doing it. “When I am instructing our clients around the adoption of AI, I always ask them to think about how ATMs were adopted; we started with a handful of them, and then we rolled it forward slowly, and it became more and more normalized over time when people started to trust that the machines were actually working and not losing their money.

“To me, it’s the same concept within AI; let’s start with small use cases, get some wins under our belt, and then build from there.”

It’s not too hard to quantify this. Previously, we worried about projects being delayed because we had to get the data right first. Now with generative AI, you can provide data that’s 70 or 80% complete and it’s going to try to interpret what the data is saying. This allows people to interact with it and make corrections, and learn from the process. Consider all those lengthy 50-page RFP documents that circulate. AI can now accurately read and summarize dozens of them for the chief procurement officer, providing precisely what they need to know.

Other examples of low-hanging fruit that AI can address, she says, include sourcing where she anticipates faster and more effective drafting of RFPs, enhanced analysis of results, and improved supplier identification and contract management that will substantially increase productivity while reducing costs for procurement teams.

Already becoming business as usual?

In its day-to-day operations, Wonder Services is already knee-deep in all of this. “For quite some time, I’ve been telling our clients that gone are the days of 18-month projects. We’re going to be able to move much more quickly on the deployments of these technologies, because AI will help us along the way.

“And these are not taking 18 months to deploy, so I think that the speed at which change is going to happen will intensify. AI is reshaping how we think about and do everything and it’s streamlining work along the way, which is so exciting to me,” she continues. “But the cool thing is that we get to experiment with it now. We get to be those people who are imagining the future and starting to build it today.”

Amanda and I both agree that the next 10 years are going to be an incredible journey. However, I also fully agree with her that AI-driven procurement change isn’t something for a decade from now: “People think that all this is a future thing, but most of what I’ve described here is production-ready—whether you want to build it yourself or buy it, it’s available right now,” she said.

I couldn’t have said it better myself.

About the author

Seth Catalli is chief revenue officer at Globality, an AI-empowered autonomous sourcing platform. This article draws from Catalli’s recent Spend Sessions podcast with Prochaska, available here.

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