Envisioning procurement technology and techniques in 2025: The future looks bright

The advent of increased automation, data-driven decisions, powerful business networks, and the firepower of artificial intelligence (AI) and blockchain are combining to elevate procurement -- and the professionals who drive it -- to a new plane of greater influence and impact.

To learn more about how rapidly evolving technology changes the future of procurement, the next BriefingsDirect panel discussion explores how and why innovation-fueled procurement will fill an increasingly strategic role for businesses.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy. 

Our future of procurement panelists are Julie Gerdeman, Vice President of the Digital Transformation Organization at SAP Ariba; Shivani Govil, Vice President of Artificial Intelligence and Cognitive Products at SAP Ariba, and Matt Volker, Vice President of Supply Chain at NatureSweet in San Antonio, Texas. The discussion is moderated by Dana Gardner, Principal Analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: Julie, SAP Ariba recently published a point-of-view on what procurement will look like in 2025, and it shows procurement as far different from how we know it today. Paint a picture, if you would, of what we should expect from procurement over the next several years?

Gerdeman: We are on the brink of more change than ever before in procurement. We think procurement organizations are going to rethink everything -- from technology to resource allocation to talent and skill-sets. This all can entirely remake the function.

Gerdeman

And how they will do that means a few things. First, they are going to leverage new and emerging technologies to automate the mundane tasks to refocus on more strategic-level work, and that will allow them to become key drivers of corporate goals and business innovation.

How are they going to do that? It will be through use of intelligent systems that are self-learning and that provide a consumer-like, highly personalized user experience that makes purchasing easy.

We also believe that procurement strategists will become ambassadors of the brand for their companies. Unlike in the past, all companies want to do well financially, but we believe procurement can help them also do good, and we are going to see more-and-more of that in the future. Procurement will become the stewards of the corporate reputation and brand perception by ensuring a sustainable supply chain.

In the future, procurement will become even more collaborative -- to achieve cost-savings goals. And that means companies will be connected like never before through leveraged networks. They are going to take the lead in driving collaboration and using networks to connect buyers, partners, and suppliers globally for efficiency. On the tech side we believe super networks may emerge that create value. These super networks will network with other networks, and this hyper-connected ecosystem will become the standard.

Finally, data is the new currency and buyers and sellers are going to leverage things that I believe Shivani will be talking about, like predictive analytics, real-time insights, AI, blockchain, and using all of that to move the business forward. We are really excited about the future of procurement.

Gardner: The adoption and the pace at which people can change in order to acknowledge these technical changes -- and to also put in place the organizational shifts -- takes time, it’s a journey. What can companies be doing now to think about how to be a leader -- rather than a laggard -- when it comes to this procurement overhaul?

Gerdeman: That’s such a great question. Adoption has to be the key focus, and every company will begin at a different place, and probably move at a different pace -- and that’s okay.

Adoption [of modern procurement] has to be the focus, and every company will begin at at different pace, and probably move at a different pace -- and that's okay.

What we see first is a focus on business outcomes. This is the difference for having successful adoption. So that’s focus -- on outcomes. Next comes supporting that through organizational design, resource allocation, and developing the talent that’s needed. Finally, you must leverage the right technology to help drive that adoption at the pace that’s desired. This is key. Those are some of the core components for improved adoption.

Gardner: Matt at NatureSweet, you are well on your way to making procurement a strategic element for your company. Tell us about your transformation, what your company does, and how procurement has become more of a kingpin to how you succeed.

Greenhouse growth with IT

Volker: We have more than 9,000 associates across our operations and we consider them our competitive advantage. That’s because people create the expertise at the greenhouse -- for the best growing and harvesting techniques.

With that said, our intention is to bring more innovation to the table, to allow them to work smarter versus harder -- and that entails technology. As an example, we currently have five different initiatives that are linked to automation and systems solutions. And SAP Ariba Snap happens to be one of those initiatives. We are creating a lot of change management improvements around processes. As a result, our people’s accountability shifts from a transactional solution in procurement to a strategic sourcing play.

Gardner: Tell us more about NatureSweet. You are an innovative grower of vegetables and other organic produce?

Volker: Yes, we grow fresh-produced products, predominantly in tomatoes, cucumbers, and peppers; both conventional and organic. We service North America -- so Canada, Mexico, and the US -- with a brand of products across a spectrum of small and large tomatoes, varieties of peppers, and varieties of cucumbers.

Gardner: Now that you’ve put strategic procurement into place, what are the demonstrable benefits?

Volker: Being in the mid-market, we were in a position where the sky was the limit. In a transactional sense, we still had basic processes that were not fully in-place -- down to identifying item numbers and stock items across a broad range of purchases across 8,000 different commodity items.

Volker

That led us to do the due diligence to be able to identify what those items were, which then drove us to category management, siloing specific purchases into categories, and then applying our resources against those categories.

The net result was that we moved from transactional to strategic sourcing. We didn’t know what we didn’t know. But once we brought SAP Ariba Snap internally into our operations, we gained access to three million-plus vendors. It provided us the visibility into worldwide opportunities across each of those purchase categories. It was a benefit -- both on spend as well as services and products available.

Gardner: Just to be clear, SAP Ariba Snap is a new, packaged solution to help small and medium-sized businesses (SMBs) become purveyors of the top-line technology, processes, and networks when it comes to procurement. In this case size really doesn’t matter.

Shivani, SMB companies like NatureSweet want to be thinking about the top-line capabilities of AI and machine learning, but perhaps they don’t want to take that on as a core competency. It’s really outside of their wheelhouse. How can an organization like SAP Ariba tackle the complexities of these technologies, get the deep data, and then help companies like NatureSweet better accomplish their goals?

Govil

Govil: At SAP Ariba, we are enabling transactions across more than three million buyers and suppliers, and for more than $1.6 trillion in value across the network. If you think about that statistic, and you think about how much data resides across our network and in our systems, what we are looking at is applying AI- and machine learning-type technologies to unlock the value of that data and deliver actionable insights to companies, such as NatureSweet, so that they can perform and do their functions better.

Our focus is really looking at the technology and how can we apply those technologies to be able to deliver value to the end-user. Our goal is to bring together better connections between the people, the processes, the systems, the data, and the context or intent of the user in order to enable them to do their jobs better.

Gardner: And looking to this initiative about predicting through 2025 how procurement will change, tell us how you see technology supporting that. What is it about these new technologies that you think will accelerate change in procurement?

The future is now 

Govil: I see the technology as being a key enabler to help make the transformation happen. In fact, a lot of it is happening around us today already. I think some of us can point to watching science fiction movies or looking at cartoons like The Jetsons where they talk about a future age of flying cars, robot maids, and moving roadways. If you look around us, that’s all happening today. We have self-driving cars, we have companies working on flying cars, and we have the robot vacuums.

Our goal is to bring together better connections between the people, the processes, the systems, the data, and the context or intent of the user in order to enable them to do their jobs better.

Technology has already become the enabler to allow people to think, act, and behave in very, very different ways than before. That’s what we’re seeing happening around us.

Gardner: For end-users who are not data scientists, or are even interested in becoming data scientists, the way mainstream folks now experience AI, bots, and machine learning is often through voice-recognition technologies like Siri and Alexa.

What is it about those technologies that allow us to educate people on AI? How can your average line-of-business person appreciate the power of what AI and a cloud business network can do?

The conversational AI advantage 

Gerdeman: Alexa and Siri have become household names, and everyone is familiar with those types of technologies. Those are the conversational interfaces that enable us to have interactions with our applications in a seamless manner, as if we are talking to a friend or trying to get something done.

When we think about this whole space of technology, AI, and machine learning, we actually span multiple different types of technologies. The natural language processing, the speech-to-text, and text-to-speech -- those are the types of technologies that are used in the conversational interactions. You also have things like machine learning, deep learning, and neural networks, etc., that provide the insights that span across large amounts of data and deliver insights and uncover hidden patterns to enable better business outcomes.

Let me give you an example. We think about Siri and Alexa in our everyday life. But imagine an intelligent assistant on the business sourcing solution, one that is guiding a category owner throughout the processes of running a sourcing event. This can really help the category owner better understand and get intelligent recommendations as to what should they be doing -- all through conversational type of interactions.

We are applying techniques such as deep learning and convolutional neural networks ... We see that it saves people from what used to take days to less than 11 minutes to do the same task.

Now, you can take that even further, to where I talk about some of the other types of technologies. Think about the fact that companies get thousands of invoices today. How do you actually go through those invoices and then classify them so that you can understand what your spend categories are? How do you do analysis around it to get a better handle on your spend?

We are now applying techniques like deep learning and convolutional neural networks (CNNs) to be able to automatically start classifying those invoices into the right spend categories. By doing so, we have seen that it saves people from what used to take days to less than 11 minutes to do the same task.

Gardner: Matt, now that you have heard about some of these AI capabilities, does this resonate with you? Are you excited about it, and do you prefer to see a company like SAP Ariba tackle this first and foremost?

AI for excellence 

Volker: Our long-term strategy is to become a consumer package goods company and that places us in the same conversation as folks like Proctor and Gamble, Hershey, and PepsiCo. That strategy is ambitious because if you consider produce traditionally, it’s been a commodity market driven on temporary workforces that are migratory by nature. But that’s not who we are.

We are a branded company. Our claim to fame in the marketplace is that we have the best products in the market. They are always the best products on the market, always at the same price, always available, 100 percent vertically integrated and in a direct relationship with the consumer. Why I mentioned that is for us to continue to excel at our growth potential, the need of automation, AI, and digitizing processes are critical to our success.

We are building toward an end-to-end integrated supply chain, and we must have that link of a qualified tool in procurement to make that a successful transformation.

In my mind, from a supply chain perspective, we are building toward an end-to-end integrated supply chain, and we must have that link of a qualified tool in procurement to make that a successful transformation.

Gardner: Shivani, we’ve also heard that people are concerned that their jobs are going to get taken over by a robot. We don’t expect necessarily that 100 percent of buying is going to be done automatically, by some algorithm. There has to be a balance. You want to automate as much as you can, but you want to bring in people to do what they do best.

Is there anything about your view towards 2025 that addresses this idea of the right mix of people and machines to leverage each other to the mutual benefit of the business?

Human insights add value 

Govil: We don’t think technology is going to replace humans. In fact, what we think is happening is that technology is augmenting the abilities of the humans to be able to do their jobs better. The way we look at these technologies is asking are they really allowing the procurement professionals to be smarter, faster, and more efficient in terms of what they are doing? Let me give you an example.

We all know that digitization has happened. Paper invoices, for example, are a thing of the past. Now, imagine if you can, also adding in what’s stored in many digital records? You’d get the insights from all of that together. Let’s say there’s a drop in commodity prices, you’ll be able to intelligently give the contract negotiator the advice that it’s time for them to negotiate a contract, as well as provide benchmarks and insights into what kind of prices they should be looking for.

The way we’re approaching this is looking at the type of user, the type of task that they are performing and based on that, evaluating different ways that these types of technologies can help. For example, if you have a casual user and the task is very repetitive, like a customer support-type activity, where the questions are fairly generic, commonly asked questions, can you look at automating those tasks? In this case, we would look at automation-type functions.

On the other hand, if you have an expert user doing a very deep, complex task, which is highly variable, such as a contract negotiation, how can you then best help?  How do you then use these technologies to help that contract negotiator to amplify what they are doing and get even better results for the business?

Depending on the type of user, whether a casual or an expert user, and whether it's a repetitive task or a highly variable unique customized task, we can look at these types of technologies to enable in very different ways.

Depending on the type of user, whether they are casual or an expert user, and the type of task, whether it’s a repetitive task or a highly variable unique customized task, we can look at these types of technologies to enable in very different ways.

Gardner: Julie, for organizations to prepare themselves to make that right call between what machines can do well and what people do best at a strategic level requires a digital transformation of the organization, the people, process and the technology. Is there anything that you can offer from what you’ve seen in the Procurement 2025 vision that would help organizations get to a digital-first advantage?

Gerdeman: What we have seen in doing the research is that it’s at three structural levels. First, at the corporate procurement level, and addressing risk and security, and thinking about the experience of satisfaction. And then, at the business unit level, we’re seeing procurement get more embedded into the business unit, and actually work more closely in a line of business, in a production or manufacturing facility to be closer to the line of business, and that then helps a transformation.

And then finally, at the shared services level, a lot of what Shivani was referring to, some of those more mundane tasks being digitized. They become more arbiters of satisfaction to the end users -- really to be overseeing the digitization rather than performing the task themselves.

To get on that journey at the corporate level, then the business unit, and the line-of-business level, procurement gets more embedded.

To get on that journey at the corporate level, then the business unit, and then line-of-business level, procurement gets more embedded. Finally, shared services were viewed as things in the future as like complete lights-out facilities, which then would change the dynamic.

Gardner: It’s interesting to me that this can be quite easily customized. You could be a smaller organization, or a giant enterprise across different vertical industries with different geographies. You can enter this transformation on your own trajectory and begin to layer in more use of AI and automation. It can be done at your own pace.

But one of the things we have seen is the pace has been slower than we expected. Matt, from your organization’s experience, what can increase the pace of adoption when it comes to digital transformation, automation, and ultimately robots and AI and artificial intelligence benefits?

Increase the speed of adoption 

Volker: As an organization we pride ourselves on being transformational. In our world, there are 9,000 people for whom we want to improve the living standards, and from that it develops a strategy to say, “How do you go about doing that?” Well, it’s about transformation.

So, through automation and system solutions we intend to get there by December 31, 2019. It was referenced earlier by Shivani that you move folks away from transactional to strategic sourcing through categorizing your vendor community and allowing them to say, “Now I can move away from requisitions and purchase orders to really searching globally for partners that will allow us to accelerate our spend the right way, both from a cost, service and quality perspective.”

Gardner: Shivani, we have been looking at this in the future, but let’s just go short-term for a second. In my experience with software development and moving from traditional software to the cloud, it’s really important to demonstrate upfront the benefits that would then accelerate adoption.

While we are still looking several years out, what could be done around AI, machine learning, and data analysis now that would become a catalyst to the adoption and the benefits in the future?

The value-add bucket list 

Govil: We are seeing the values of these technologies manifest in many different ways. I actually largely put them into four buckets. The first one is really around driving deeper engagement and user adoption. So, if you imagine having these types of conversational interactions, intelligent assistants that really drive the engagement and adoption by the end user of using the systems, that then means bringing more spend under your management, getting the better outcomes for the business that you are trying to deliver. So that’s number one.

If you imagine having these types of conversational interactions, intelligent assistants that really drive the engagement and adoption by end users, that then means bringing more spend under your management.

The second is in terms of being able to unlock the data and discover hidden patterns or insights that you don’t have access to otherwise. If you think about it, there’s so much data that exists today -- whether it’s in your structured enterprise systems or your unstructured systems out in the web, on social media, from different sources – that by being able to bring those data elements together and understanding the context and what the user is trying to achieve, you can actually help discover patterns or trends and enable the user to do their jobs even better.

I talked about the sourcing, contract negotiations, you can think about it in terms of ethical sourcing, too, and how to you find the right types of suppliers that are ethically appropriate for your business. So, that’s the second one, it’s around unlocking the data and discovering hidden patterns and insights.

The third one is around driving retention of talent and knowledge. A lot of companies are facing an ageing workforce where people are beginning to retire, and you don’t want the knowledge that they have to go with them; you want to retain that in your business and your applications.

These types of technologies enable that to happen. Also, being data-driven allows you to track new talent because everyone wants to work with the latest and greatest technologies, and so this becomes a way for new talent to get attracted to your business.

And the fourth, and the most important, is around driving better business outcomes. This can be in the form of efficiency, it can be in the form of automating repetitive tasks, or it can be in the form of driving increased accuracy. Together these all allow you to create strategic value for procurement as a function and become a value creator for the business.

Gardner: Julie, you had some other thoughts on accelerating adoption?

Support at the top

Gerdeman: Because so much of what we are about is amazing technology, it can only be successful through effective change management at the organization level. So, it’s in that process and the people side that if you embrace the technology, that’s fabulous. But structuring the organization and supporting and enabling folks -- whether they are users, category managers, sourcing managers -- to then adapt to the change and lead through that change -- and gain the support at the highest levels – that’s what we have seen be really effective in driving successful digital transformation. It’s through that high level of change management.

Gardner: We’ve often seen patterns where it takes longer for change to happen than we thought, but the impact is even greater than we anticipated.

So, looking out several years for an understanding of what that greater impact might be, my final question to you all is, what’s it going to be like in 10 years? What will astonish us in 10 years?

Outstanding People and processes

Volker: In our world of produce, it’s about the investment. As land and resources become more scarce, we need to be much more productive from the standpoint of being able to deliver a highly perishable mix of products with speed to market. Part of the solution is automation, AI, and digitizing processes, because it’s going to allow us the opportunity to consistently reinvent ourselves, just like any other organization. This will allow us to maintain our competitive advantage in the marketplace.

We are extremely well-suited to pull the consumer and customer along with us in an emerging economy where speed to market and flexibility are mandatory.

Organizations will look completely different, and people in them will be data scientists and strategic consultants.

Gerdeman: I actually think it’s about the people, and I’m most passionate about this. Organizations will look completely different, and the people in them will be data scientists, strategic consultants, and people that we never had the opportunity to use well before because we were so focused on executing tasks associated with procurement. But how the new organizations and the people and the talent are organized will be completely astonishing to us.

Gardner: A workforce of force multipliers, right?

Gerdeman: Absolutely.

Gardner: Shivani, same question, what’s going to astound us 10 years out?

Govil: I agree with Julie on the people’s side of it. I also think that the technologies are going to enable new things to happen in ways that we can’t even imagine today. If you begin thinking about we talked a lot about -- AI and machine learning, blockchain and the possibilities that opens, you think about 3D printing, drones -- you can imagine sometime in the near future rather than sourcing parts and materials, you might be sourcing designs and then printing them locally. You might have a drone that’s delivering goods from a local 3D printer to your facility in an as-needed manner, with no advanced ordering required.

I think that it’s just going to be amazing to see where this combination of technology and skills will take the procurement function.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy. Sponsor. SAP Ariba.

You may also be interested in:

• Bridging the educational divide - How business networks level the playing field for those most in need
• Diversity spend: When doing good leads to doing well
• SAP Ariba and MercadoLibre to consumerize business commerce in Latin America
• How a large Missouri medical center developed an agile healthcare infrastructure security strategy
• How The Open Group Healthcare Forum and Health Enterprise Reference Architecture cures Process and IT ills 
• How a Florida school district tames the wild west of education security at scale and on budget
• How SAP Ariba became a first-mover as Blockchain comes to B2B procurement 
• Awesome Procurement —Survey shows how business networks fuel innovation and business transformation
• Seven secrets to highly effective procurement: How business networks fuel innovation and transformation
• Pay-As-You-Go Models for Acquiring IT Provide Multiple Cost and Operations Advantages for Northrop Grumman

Bridging the educational divide–How business networks level the playing field for those most in need

The next BriefingsDirect panel discussion explores how Step Up For Students (SUFS), a non-profit organization in Florida, has collaborated with SAP Ariba to launch MyScholarShop, a digital marketplace for education that bridges the information gap and levels the playing field for those students most in need.

Now assisting some 10,000 K-12 special needs and low-income students, the user-friendly marketplace empowers parents and guardians to find and purchase the best educational services for their children. In doing so, it also helps maximize availability of scholarship funds to enhance their learning.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy.

Here to share more about how this first-of-a-kind solution actually works, are panelists Jonathan Beckham, Vice President of Technology Strategy and Innovation at Step Up For Students in Jacksonville, Florida; Mike Maguire, Global Vice President of New Market Development at SAP Ariba, and Katie Swingle, a Florida Gardiner Scholarship Program recipient. The discussion is moderated by Dana Gardner, Principal Analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: Mike, there’s no doubt that technology has transformed procurement. We’ve gone from an emphasis on efficiency and spend to seeking better user experiences and more analytics capabilities. We’re also entering a new era where we see that businesses are trying to do “good,” in addition to doing “well.”

You had a very personal revelation about this a few years ago. Tell us about why doing well and good can go hand-and-hand?

Maguire: I was thrilled to have the opportunity to work with Jonathan and the SUFS team for both personal and professional reasons. First, I am a parent of a special needs young adult. My wife, Carole, and I have a 19-year-old daughter, Allyson, and we have lived with having no special needs solutions out there that help optimize the spend for such extra things as tuition, educational supplies, and services.

Maguire

If you go to a hospital for surgery or you need medications, there’s always somebody there to help you with the process. But when you go into this world of tuition reimbursement and educational optimization, there’s no guidance for how that spend should be effectively executed. So now, many years later in my professional life, it is terrific to have the opportunity to use a solution like SAP Ariba SNAP to help SUFS in their mission and open that up to parents through the Ariba supplier network.

Gardner: Tell us how cloud applications and the SAP Ariba business network platform are structured and architected that lends them to this kind of marketplace-plus benefit?

Maguire: Networks and cloud apps at their very core are about connecting people, processes, and information in a way that’s simple and transparent to all those who are involved -- with the outcome of making smart choices. We’ve done this for multinational corporations for years. They end up saving money on their bottom lines by having good information to make smart choices. Now we’re doing the exact same thing to optimize the bottom line for families.

Gardner: Jonathan, at SUFS, you probably faced the same kinds of challenges that many businesses do. They don’t want manual processes. They don’t want to be bogged down with time-consuming approaches. They need to broaden their horizons, to see all available assets, and then analyze things better. But were there particular problems that you were trying to solve when it came to using marketplaces like Ariba’s?

Optimized Opportunities

Beckham: We’re trying to solve a lot of problems by optimizing processes for our families. It’s very important to us that we choose a partner that provides a really great user interface (UI) and user experience (UX). You know, we’re all about not just optimizing our bottom line -- like you think of for traditional corporations -- we’re about optimizing the experience.

Beckham

Any funds or any resources that we gain, we’re about putting those back into the families, and investing those, and helping them to accelerate their educational path or learning goals. So that was really something that we were looking to do and use this process for.

Gardner: Tell us about your organization and MyScholarShop. Was this something that depended on electronic digital marketplaces at the outset, or was it something you have now greatly enhanced?

Beckham: At SUFS, we provide scholarships for low-income and special needs students in kindergarten through grade 12. As part of that, we administer a program called an educational savings account. That allows parents and students to customize their learning options, to go out and buy instructional materials, to go out and buy curriculum or use tuition fees or technology and as part of that process. It’s largely been a reimbursement process for families. They go out, purchase services -- using their own funds -- and then seek reimbursement.

We were then really searching for a platform -- something to change that model for us. The number one need was to not have to take money out of our families’ pockets. And then number two was to connect them with high-quality providers and suppliers so they can find better options.

Gardner: In a business environment, it’s about matching buyers and sellers -- and then bringing a value-add to that discussion, with collaboration. This powerfully also enhances the ability for people who are looking to find the right place to donate scholarships and to provide educational support. How has the network helped on the seller side, if you will, when it comes to non-profits and charitable organizations? Do they see this as something as beneficial, too?

Suppliers Sought, and Found

Beckham: Absolutely. We’ve had a lot of great conversations with suppliers that have approached us, and with some that we’ve approached directly. There are a lot of terrific products that are out there for students with special needs that we wanted to bring into this network. And some of them are already on the Ariba Network, which was great for us.

But, at the same time, one of the things that we looked for is optimizing our spend. From a reporting standpoint, we wanted insights to help negotiate better pricing. And using the Ariba Network does that for us. So when we engage with suppliers, we know if we can get free shipping, or if we get discounts and better payment terms. Those are all things that we can pass on directly to our families and to the students. We’re a non-profit. We’re not looking to make extra money. We’re looking to reduce the cost, labor, and the processes for our families in our program.

Gardner: Katie, your son, Gregory, is a Florida Gardiner Scholarship Program recipient. Tell us how you came to learn about these services, and how they have been beneficial and impactful for you and your family.

Swingle: As a Gardiner Scholarship recipient, we are under the special needs side of what SUFS does. My son is diagnosed with autism. He has been since he was three years old. So it’s been quite a journey for us, lots of ups and downs.

Swingle

And what we came to find through our journey was needing the right educational environment. We needed the right educational tools if we were going to make progress. And unfortunately public school was just not the right option at that time, especially in those early years when you’re trying to help them the most.

SUFS is the administrator of our scholarship, and that’s how I became involved with them. So we go and we spend our money on tuition, products, and different therapies for Gregory. We pay for them. And then SUFS -- because he’s a recipient of the scholarship -- reimburses us for those. It’s been absolutely life changing for us.

Once we got Gregory into the right environment, with the school that he is in, with the right therapists, and with the right products -- it felt like everything started to come together. All of the disappointment that we had had over and over and over again over the years was starting to go away, and it was exciting.

I was meeting my son for the first time -- to be quite honest. We had had so many roadblocks, and all of the sudden this child was blossoming. And it was because we had the financial means from SUFS and from the scholarship to put him in the right environment where he could blossom.

And it’s been amazing ever since then. The trajectory for my child’s life has changed. We went from a pretty dire prognosis to …  I don’t know where he’s going to be, but I know it’s going to be great. And we’re just really excited to be a part of this on the ground level.

Gardner: And for those in our audience who might not be that familiar with autism, there can be a great amount of improvement when the right processes, services, and behavioral therapies are brought to bear. For those who don’t understand autism, it is a different way of being “wired,” so to speak, but you can work with that. These young folks can learn new ways to solve many problems that they might not have been able to solve on their own. So, getting those services is huge.

Jonathan, are we just talking about scholarships or you are also allowing families and individuals to find the services? Are we at the point where we’re linking services in the marketplace as well as the funding? How does it work?

Share the Wealth of Data

Beckham: That’s a great question. At SUFS we have an amazing department called the Office of Student Learning, and these are tried-and-true educators who have been in classrooms, and administrators that also work with professional development with teachers throughout the State of Florida.

As part of that, they’re helping us to identify some of these high-quality suppliers that are available. They’re really helping us with the SAP Ariba’s Guided Buying capabilities to curate and customize that platform for our individuals. So, we have great visions that we share with SAP Ariba, and we’re very happy to have a partner that is helping to make recommendations around the products and services.

All of the sudden, this child was blossoming. And it was because we had the financial means from SUFS and from the scholarship to put him in the right environment.

For example, if Katie and her family identify a great therapist, or a great technology tool that can help her son, then why can’t we make those recommendations to other families in similar situations? It becomes a sort Amazon-like buying experience -- you know, where people who purchase one thing may be interested in purchasing other similar things.

Identifying those suppliers that are high quality, whose products and services are working for our families – we can now help make recommendations around those.

Gardner: Mike, as we know from the business world, marketplaces can develop organically -- but they can then go viral. So that the more buyers there are then the more sellers come up, and the more sellers there are, the richer the environment – and the more viable the economics become.

Are we starting to see that with autism support services? Some of the recent studies show that somewhere close to one in 40 boys are autistic, and perhaps one in 190 girls are autistic. We’re talking about a fairly large portion of our society, around the world. So, how does this work as a marketplace? And is it large enough to be sustainable?

Autism-Support Savings

Maguire: I think it absolutely is. When we think about the Ariba Network, we’re about like-minded people and like-minded causes optimizing their goals. And in the area of disabilities that I’ve seen, technology is a godsend for these kids growing up in this generation.

When you think about technologies and connectedness -- which the Ariba Network is all about  -- in the disabled community, the use of such technologies as driverless cars can bring new levels of freedom to this population of differently abled people. As these children become adults, this is just going to open up to complete independence that the prior generations never knew.

Ariba Network is about like-minded causes optimizing their goals. In the area of disabilities, technology is a godsend for these kids growing up in this generation.

Gardner: It seems to me that if this works for an autism marketplace that there are many other flavors or variations on the theme -- whether it’s other sorts of disabilities or learning challenges.

Maguire: An example: I am a board member of the Massachusetts Arc and we spend most of our time working out policy and legislation for independent skills and options for the full spectrum of a lifespan.

When you become 18 and you are out of the school system, you have the same exact requirements to optimize Social Security disability payments. The same exact challenges around an entitlement that a young adult gets at 18 years old, probably with some help from their parents. It goes to their own account because they are young adults.

How do you optimize that spend, right? How do you optimize that for the different things to make for better life skills and tools? I believe that MyScholarShop could be extended well beyond K-12 because there’s a need for a lifetime of spend optimization for intellectually challenged people.

Gardner: Jonathan, this was introduced in January 2018, and your larger implementation is slated for the 2018-2019 school year. What should we expect in the next year or two?

Beckham: The program we’re talking about with Katie is the Gardiner Scholarship Program, and we have about 10,000 students there. It’s about $100 million in scholarships that we utilize. But next year we’re actually looking to bring in the Florida Tax Credit Program as well.

These are lower-income families, and about 100,000 students, and we’re actually at some $630 million in spend this year. As we grow with this program, and we look for high quality suppliers and providers, we look to bring both of those together ultimately so that we can use all of that data, use all those recommendations to help many, many more families.

Gardner: And the scope beyond Florida? Is this going to be a state, regional, or national program, too?

National Expansion

Beckham: We already have a subsidiary in Alabama. We also work with the State of Illinois. We’ve worked with other states in the past, and we absolutely have plans to help provide this service and help expand this nationwide so we can help many, many more students.

Gardner: Mike, any more to offer in terms of how this expands beyond its base?

Maguire: One of the things that expands is the connectedness to the network. And this is going to unleash availabilities and capabilities for not only the people of intellectual needs but for the elderly. I mean, we can talk about this for every piece of the population that has a need for assistance in this space.

Gardner: Katie, any thoughts about where you like to see it go, or how you think be people should be aware of it?

Swingle: SUFS and other organizations are trying to spread the word about educational choice and education savings accounts specifically like mine, the Gardiner or the Florida Tax Scholarship. There are states that don’t have anything at all available to families like this. I’m so blessed to live in Florida, which has been one of the more progressive states to offer this kind of service.

I hope the success of the network gets people talking across the nation. They can then push their legislators to start looking into this. I’m just a Florida mom. But there’s a mom in California or Washington State who has no options, and I hope that she would hear about this and be able to push her legislators to open this up to even more families.

Gardner: Jonathan or Mike, this also strikes me as a really great example of a public-private cooperation -- of leveraging a little bit of what government can offer but also financial support in a marketplace in the private sector. Let’s tease that out a little bit.

Parent-friendly purchasing 

Maguire: I think through this a lot. Traditionally, when a company buys procurement software, it is being justified based upon all the savings of getting rid of maverick spend, that all spend comes under management, and that’s what the Return on Investment (ROI) is based on.

The key piece of that ROI is adoption by end-users. What we’re finding now as we go into the mid-market with good partners like Premikati and SUFS is that you can’t force adoption. But the only way you get the savings in the ROI is if everyone is a procurement services user. And that means you need a good user buying experience that is very natural -- and actually fun.

The end-users are thousands of moms and dads. If their user experience is not much fun, if it's not that easy, it's not going to be used -- and the whole pyramid of results will break down.

We’re now in an environment with SUFS where it’s not about, “Hey, our people in human resources are using the SAP Ariba system,” or, “The sales guy is using the SAP Ariba system.” Their end-users are thousands of moms and dads. And those moms and dads have to have an experience just like they’re buying from home, buying at any website. And if it’s not much fun, if it is not that easy, it’s not going to be used -- and the whole pyramid of results will break down.

Gardner: It’s like Metcalfe's Law, whereby the network is only as powerful as the number of the people on the network. You have to have the right user experience in order for adoption to take off.

Let’s go back to Jonathan to that public-private sector issue. How does this work in terms of local governments and also in the private sector?

Empowered Education 

Beckham: This is the way that we see educational choice throughout the country happening right now. You see a lot of states that don’t have any options out there for the students. You see some that are running them from the government side of things. And then you see some that are very successful like SUFS -- legislated to have an opportunity for these educational choice programs.

But it’s running as a very slim non-profit. We only take 3 percent of our funds to administer our program. We’re a very high Charity Navigator-rated program, so we have an organization that’s really looking to empower our families, empower our students, and use our funds the best way that we can.

And then we’re able to find really high-quality partners like SAP Ariba to help us implement these things. So you put all those things together and I think you have an amazing program that really helps families.

Gardner: Katie, on the practical matter for other parents who might be intrigued, who have a special needs student, how might they start to prepare themselves to get ready? Where would you say, with 20-20 hindsight, that you should begin this process? 

Raise your Voice 

Swingle: Let me start with if you’re a Florida parent, or an Arizona parent, or a parent already in a state where this is starting to move. You need to know what services your child is going to need. If, for example, they are going to need occupational therapy, you’re going to need to read those reviews, and read up a lot on behavior analysis and get some ideas about what your child might need.

As any autism parent who has shopped for products on multiple websites knows, our kids need all kinds of products. You now have an idea of where you can buy those via learning exchanges. You begin having an idea of what your child’s going to need with their funds. And you can really begin getting your keywords -- occupational therapy (OT), Applied Behavioral Analysis (ABA) therapy, and physical therapy. You’re going to be reading reviews on the network about them and see how they might be able to help.

Don't be afraid to tell your story, but the people who need to hear it are your legislators, your local and state representatives.

For people who are in states that don’t have options like we do, you need to be writing your state representatives; you need to be telling your story just like I am. Sometimes there’s a little bit of shame, sometimes there’s a little bit of embarrassment. I’ll be honest. My husband still has hard time saying the word “autism.”

We’ve been in this game now for seven years and he still sometimes can’t spit it out. It’s time to spit it out, it’s time to be honest and it’s time to tell your story. Don’t be afraid to tell your story, but the people who need to hear it are your legislators, your local and state representatives need to know about this.

They need to know about states like Florida that use SAP Ariba and MyScholarShop. They need to ask, “Excuse me? I live in California or I live in Colorado, why don’t I have this option? Look at what this woman is getting in Florida; look at what this family has in Arizona. I need this here and why don’t we have this?”

Put the pressure on, and don’t be afraid. You have a voice, you’re a voter, and they are there to represent you. Also give them some enthusiasm, let them meet your child, bring pictures. I brought pictures of my son, I said you know, “Look this is my child, please help me!” And if the legwork has been done by states like Florida and our organizations like SUFS and SAP Ariba, then the legwork is done. Now get your voice up there.

Gardner: What Katie is pointing to is that this is a very repeatable model. Mike, we know that doing well and doing good are very important to a lot of businesses now. How is this not only repeatable but also has extensions to other areas of doing well and good?

Principled Procurement

Maguire: Everyone has a purpose and every organization has a purpose. If you don’t, then you’re just wandering around in the woods. What are the pieces of your organization that you really want to have an ethical and moral stand with?

And that’s why we’ve worked with United Nations, the Global Compact for Fair and Decent Work. We work with Made in a Free World to stamp out human trafficking and people like Verisk MapleCroft and EcoVadis for sustainable and ethical supply chains.

We try to make sure that procurement with a purpose is actually in action at SAP Ariba because we like to oversee what’s actually happening, and we have the capability through the network -- and through the transparency the network brings -- to actually look, see, measure, and make some change.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy. Sponsor: SAP Ariba.

You may also be interested in:

• Diversity spend: When doing good leads to doing well
• SAP Ariba and MercadoLibre to consumerize business commerce in Latin America
• How a large Missouri medical center developed an agile healthcare infrastructure security strategy
• How The Open Group Healthcare Forum and Health Enterprise Reference Architecture cures Process and IT ills 
• How a Florida school district tames the wild west of education security at scale and on budget
• How SAP Ariba became a first-mover as Blockchain comes to B2B procurement 
• Awesome Procurement —Survey shows how business networks fuel innovation and business transformation
• Seven secrets to highly effective procurement: How business networks fuel innovation and transformation
• Pay-As-You-Go Models for Acquiring IT Provide Multiple Cost and Operations Advantages for Northrop Grumman
• Philips teams with HPE on ecosystem approach to improve healthcare informatics-driven outcome

Pay-as-you-go IT models provide cost and operations advantages for Northrop Grumman

The next BriefingsDirect IT business model innovation interview explores how pay-as-you-go models have emerged as a new way to align information technology (IT) needs with business imperatives.

We’ll now learn how global aerospace and defense integrator Northrop Grumman has sought a revolution in business model transformation in how it acquires and manages IT.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy.

Here to help explore how cloud computing-like consumption models can be applied more broadly is Ron Foudray, Vice President, Business Development for Technology Services at Northrop Grumman. The interview is conducted by Dana Gardner, Principal Analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: What trends are driving the need to change how IT is acquired? People have been buying IT for 40 or more years. Why a change now?

Foudray: Our customers, who are primarily in the government sector across the globe, understand the dynamic nature of how IT and technology innovation occurs. It can be a very expensive investment to maintain and manage your own infrastructure as part of that.

Foudray

In parallel, they see the benefits of where technology is going from a cloud perspective, and how that can drive innovation -- and even affordability. So there is a cultural transformation around how to do more relative to IT and where it’s going.

That gets to the things you were just using in your opening comments as to how do we transform the business model and provide that to our customers, who traditionally haven’t thought about those business models.

Gardner: I suppose this is parallel to some creative financing trends we saw 10 or 15 years ago in other sectors – manufacturing and transportation, for example – where they found more creative ways of sharing and spreading the risk of capital.

Pay-as-you-go or buy?

Foudray: I think it’s a great analogy. You can look at it as if you are going to lease a car instead of buying one. In the future, maybe we don’t buy cars; maybe we just access them via Uber or Lyft, or some other pieces. But it’s that kind of transformation and that kind of model that we need to be willing to embrace -- both culturally and financially -- and learn how we can leverage that.

Gardner: Ron, tell us about Northrop Grumman and why your business is a good fit for these new models.

Foudray: I have been in the aerospace and defense market for 36 years. Northrop Grumman clearly is a market-leading, global security company, and we focus primarily on building manned and unmanned platforms.

We have as part of our portfolio the sensors that go along with those platforms. You may have heard of something called C4ISR, for Command, Control, Computers, Communications, Intelligence, Surveillance and Reconnaissance. It’s those types of sensors and systems that we bring to the table.

In my portfolio, on the technology services side, we are also providing differentiated capabilities for how we support, maintain, upgrade and modernize that infrastructure. That includes the capabilities of how we can provide the services more broadly to our customers. So we focus primarily on five core pillar areas: autonomous systems, strike platforms, logistics, cyber-security, and C4ISR.

Gardner: You are not only in the delivery of these solutions, but you are an integrator for the ecosystem that has to come together to provide them. And, of course, that includes IT.

Foudray: Exactly. In fact, sometimes when I go talk to a customer, it’s like we’re Northrop Grumman Information Technology. They are trying to connect the dots. So, yes, I think of Northrop Grumman not only as the platforms, sensors and systems, but the enterprise IT infrastructure as well.

The edge for our war fighters is anywhere that their systems and sensors are being deployed.

That comes with the digital transformation that’s been ongoing inside of our war-fighting apparatus around the world for some time. And so when you hear about the [transformation] of things in the data center or at the edge -- well, the edge for our war fighters is anywhere that their systems and sensors are being deployed.

We need to be able to do more of that processing, and that storage, in real time, at that closer point-of-need. We therefore need to be driving innovation with enterprise IT on how to connect into and leverage that all back across those systems, sensors, and platforms.

When you put it in that context, the digital interconnectedness that we have -- not just a society -- but in a war fighting sense as well, it becomes more and more clear as to why an integrator, a company like Northrop Grumman, wants to drive enterprise IT innovation and solutions. By doing so, we can drive essentially the three things I think all customers are looking for, which are mission effectiveness, mission efficiency, and affordability.

Gardner: The changes we have seen in IT and software over the past decade -- of Software-as-a-Service (SaaS) and other cloud-driven models -- make a lot of sense. You pay as you consume. You may not own the systems; they are in somebody else's data center, typically referred to as the cloud.

But I’m going to guess that in your business, public cloud isn't where you are going to put your data centers – this is probably more of an on-premises, close to the point of value, if you will, deployment model. So how do you translate SaaS consumption models and economics to an on-premises data center?

Control and compliance in the cloud?

Foudray: You are astute in pointing that out, because government customers traditionally have had a greater need for a level of control and compliance. With those types of data and applications -- whether it's the clearance level of the information or just the type of information that’s being collected -- there is sensitivity.

That said, there are still some types of information -- back office type of things – that may be appropriate for a public cloud that you could commingle with today. But very clearly there is more and more of a push for that on-premises solution set.

When our customers begin thinking about cloud -- and they are modeling their enterprise on a cloud capability -- they tend to use the model of, “Well, how can I get the same affordability outcomes that a public cloud provider is going to be able to offer?” They are amortizing their cost and those elements across all those other customers versus an on-premises solution that is only theirs.

The business model innovation is that consumption-based, on-premises solution that gets more creative on how you look at the residual values.

And so the business model innovation that we are talking about and driving is that consumption-based, on-premises solution that gets more creative on how you look at the residual values. And in our space, there’s a lot of digital data that won't come back into the equation that is not able to realize residual value. It's like when you bring back the leased car, that we talked about earlier, if you go over 30,000 miles, it still has value after your lease period.

In a lot of cases in the government environment, depending on where it lives, those digital fingerprints are going to have to stay on the customers’ side or get destroyed, so you can't assume that into the model.

There are a lot of different variables driving it. That's where the innovation comes in, and defines how you work as an integrator. With partners -- like we see with Hewlett Packard Enterprise (HPE) and others in the marketplace -- we can drive that innovation.

Gardner: In a case where there’s a major government or military organization, they may want to acquire on a pay-per-use basis, but the supply chain that supports that, they might want to be paid upfront on a CapEx basis. How are you able to drive this innovation in end-pricing and in economics for entire solutions that extend back into such supply chains? Or are you stuck in the middle?

Trusted partners essential

Foudray: That hits on a very core part of the challenge, and why having a partner that is going to help you provide the IT infrastructure is so important -- not just in terms of managing that supply chain holistically but in having a trusted partner, and making sure that the integrity and the security of that supply chain is maintained. We haven't talked about the security element yet, but there is a whole cybersecurity piece of that supply chain from an integrity perspective that has to be maintained as well.

The more trust you build up in that partnership, and across those relationships with your downstream suppliers, the better. That trust extends to how they are getting paid and the terms associated with that, with working those terms and conditions and parameters upfront, and of getting those laid in so that the desired expectations are met. Then you must work with your customer to set the right expectations on their terms and conditions to provide them a new consumption-based model. It’s all from an agreement perspective, all very closely aligned.

Gardner: Is there something about newer data center technology that is better tuned to this sort of payment model change? I’m thinking of software-defined data center (SDDC) and the fact that virtualization allows you to rapidly spin-up cloud infrastructure applications. There’s more platform agility than we had several years ago. Does that help in being able to spread the risk because the IT vendors know that they can be fleet and agile with their systems, more than in the past?

Hardware clearly is an enabling feature and function, but software is what's really driving digital transformation ... not just on the technology side, but also on the business side and how it's consumed.

Foudray: We do a lot from a software perspective as a systems integrator in the defense market space. Software is really the key. Hardware clearly is an enabling feature and function that’s driving that, but software is what’s really driving digital transformation. And that element in and of itself is really what’s helping to transform the way that we think about innovation -- not just on the technology side, but also on the business side, and in how it’s consumed.

We are putting a lot of energy into software transformation, as part of the digitization aspect -- not just in terms of how quickly we can provide those drops from an agile development, DevOps, development-security-operations (SecOps) perspective, but in terms of the type of services that are delivered with it, and how you look at it.

Changing the business model in parallel needs to avoid offending engineering principle 101: Never introduce more than one key change at a time. You have to be careful that culturally, depending on the organization that you are interacting with, that you are not trying to drive too much change and adoption patterns at the same time.

But you are right to hit on the software. If I had to pick one element, software is going to be the driver. Next is the culture -- the human behavior, of where someone lives, and what he or she is used to. That’s also going to be transformative.

Gardner: For mainstream enterprises and businesses, what do you get when you do this? What are some of the payoffs in terms of your ability to execute in your business, keep your customers satisfied, and maybe even speed up innovation? What do you get when you do this acquisitions model transformation thing right?

Scale in, scale out, securely

Foudray: First, it’s important to recognize that you don’t lose control, you don’t lose compliance, and you don’t lose those things that traditionally may have caused you not to embrace [these models].

What you get is the ability to leverage innovation from a technology perspective as it happens,

because your provider is going to be able to scale in and scale out technology as needed. You are going to be able to provision more dynamically in such an environment.

You get the ability to leverage innovation from a technology perspective as it happens.

If you have the right partner in your integrator and their provider, you should be able to anticipate and get in front of the changes that drive today’s scalability challenges, so you can get the provisioning and get the resourcing that you need. You are also going to be in a much better predictability state of where you need to be for the financial elements of your system.

There are some other benefits. If you implement it correctly, not only are you going to get the performance that you need, your utilization rates should go way up. That’s because you are not going to be paying for underutilized systems as part of your infrastructure. You will see that added affordability piece.

If you do it right, and if you pick integrators who are also tying in the added dimension of security, which we very much are focused on providing, you are going to get a high level of compliance with the National Institute of Standards and Technology (NIST) Risk Management Framework (RMF). On the US side, there is also the National Defense Authorization Act, which requires organization and agency heads to certify that their enterprise is at a certain level of hygiene. If you have implemented this correctly, you should be able to instrument your environment in such a way that at any given time you know what level of security you are at, from a risk perspective.

There are a lot of benefits you get for cost, schedule, and performance -- all of that tied together in a way that you never would have been able to see from an ecosystem perspective, all at the same time. You may get one or two of those, but not all three. So I think there are some benefits that go along those lines that you are going to be able to see as a customer, whether you are in the defense space or not.

Gardner: Yes, I think we’re going to see these models across more industry ecosystems and supply chains. Clearly vendors like HPE have heard you. They recently announced some very innovative new flex-capacity-types of pricing, and GreenLake-branded ways to acquire technology differently in most markets.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: Hewlett Packard Enterprise.

You may also be interested in:

• A tale of two hospitals—How healthcare economics in Belgium hastens need for new IT buying schemes
• How modern storage provides hints on optimizing and best managing hybrid IT and multi-cloud resources
• How VMware, HPE, and Telefonica together bring managed cloud services to a global audience
• As enterprises face mounting hybrid IT complexity, new management solutions beckon
• How a large Missouri medical center developed an agile healthcare infrastructure security strategy
• Get ready for the Post-Cloud World
• Philips teams with HPE on ecosystem approach to improve healthcare informatics-driven outcomes