Diversity Spend: When Doing Good Leads to Doing Well

Transcript of a discussion on how companies are improving supplier diversity and the new tools that make attaining inclusive supply chains easier than ever.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: SAP Ariba.

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast, coming to you from the 2017 SAP Ariba LIVE conference in Las Vegas.

I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host the week of March 20 as we explore the latest in collaborative commerce, and learn how innovative companies are leveraging the network economy.

Our next digital business insights panel discussion focuses on the latest path to gaining improved diversity across inclusive supply chains. We’ll examine why companies are seeking to improve supplier diversity, the business and societal benefits, and the new tools and technologies that are making attaining inclusive suppliers easier than ever.

To learn more about the increasingly data-driven path to identifying and achieving the workforce that meets all requirements, please join me in welcoming our guests, Rod Robinson, Founder and CEO of ConnXus. Welcome, Rod.

Rod Robinson: Thank you, Dana. Great to be here.

Gardner: We’re also here with Jon Stevens, Global Senior Vice President of B2B Commerce and Payments at SAP Ariba. Welcome, Jon.

Jon Stevens: Thank you, I look forward to it.

Gardner: And we’re here with Quentin McCorvey, Sr., President of M and R Distribution Services. Welcome, Quentin.

Quentin McCorvey, Sr.: Thank you, Dana.

Gardner: Jon, why is it important to seek diversity in procurement and across supply chains? What are the reasons for doing this?

Stevens: It’s a very good question. It's for few reasons. Number one, there is a global war for talent, and when you can get a diverse point of view, when you can include multiple different perspectives, that usually helps drive several other benefits, one of which could even be innovation.

We often see companies investing deeply inside their supply chain, working with a diverse set of suppliers, and they are gaining huge rewards from an innovation standpoint. When you look at the leading companies that leverage their suppliers to help drive new product innovation, it usually comes from these areas.

We also see companies more focused on longer-term relationships with their suppliers. Having a diverse perspective -- and having a set of diverse suppliers -- helps with those longer-term relationships, as both companies continue to grow in the process.

Gardner: Rod, what are you seeing in the marketplace as the major trends and drivers that have more businesses seeking more inclusivity and diversity in their suppliers?

Diversity benefits business

Robinson: As a former chief procurement officer (CPO), the one thing that I can definitely say that I have witnessed is that more diverse and inclusive supply chains are more innovative and deliver high value.

I recently wrote a blog where I highlighted some statistics that I think every procurement professional should know: One is that 99.9% of all US firms are in a small business category. Women- and minority-owned businesses represent more than 50% of the total, which is responsible for employing around 140 million people.

Robinson

This represents a significant portion of the workforce. As we all know, small businesses really are the economic engine of the economy – small businesses are responsible for 65% of net new jobs.

At the end of the day, women and minorities represent more than 50% of all businesses, but they only represent about 6% of the total revenue generated.

The only thing that I would add is that diversity is vitally important as an economic driver for our economy.

Gardner: Rod points out a rich new wellspring of skills, talent and energy coming up organically from the small to medium-sized businesses. On the other hand, major national and international brands are demanding more inclusivity and diversity from their suppliers. If you are in the middle of that supply chain, is this something that should interest you?

Targeting talent worldwide

Stevens: You are spot-on. We definitely see our leading customers looking across that landscape, whether they are a large- or medium-sized company. The war for talent is only going to increase. Companies will need to seek even more diverse sources of talent. They are really going to have to stretch themselves to look outside the walls of their country to find talent, whereas other companies may not be doing so. So you're going to see rising diversity programs.

Stevens

We have several customers in emerging parts of the world; let's take South Africa for example. I spend a lot of time in South Africa, and one of our customers there, Nedbank, invests a lot of time and a lot of money in the growth and development of the small businesses. In South Africa, the statistics that Rod talked about are even greater as far as the portion of small companies. So we are seeing that trend grow even faster outside of the US, and it's definitely going to continue.

Gardner: Rod, you mentioned that there are statistics, studies and research out there that indicate that this isn't just a requirement, it's really good business. I think McKinsey came out with a study, too, that found the top quarter of those companies seeking and gaining gender, racial and ethnic diversity were more likely to have a better financial return. So this isn't just the right thing to do, but it's also apparently demonstrated as being good business, too. Do you have any other insights into why the business case for this is so strong? 

Diversity delivers innovation

Robinson: Speaking from first-hand experience, having been responsible for procurement and supplier diversity within a large company, there were many drivers. We had federal contracts that required us to commit to a certain level of engagement (and spending) with diverse suppliers.  We had to report on those stats and report our progress on a monthly and/or quarterly basis. It was interesting that while we were required by these contractual mandates -- not only from the government but also customers like Procter and Gamble, Macy's, and others -- we started to realize that this is really creating more competition within categories that we were taking to market. It was bringing value to the organizations.

We had situations where we were subcontracting to diverse suppliers that were providing us with access to markets that we didn't even realize that we were missing. So again, to Jon's point, it's more than just checking a box. We began to realize that this is really a market-imperative. This is something that is creating value for the organization.

We began to realize that this is really a market-imperative. This is something that is creating value for the organization.

The whole concept of supplier diversity started with the US government back in the late ’60s and early ’70s. That was the catalyst, but companies realized that it was delivering significant value to the organization, and it's helped to introduce new, innovative companies across the supply chain.

At ConnXus, our big break came when McDonald's gave us an opportunity five years ago. They took a chance on us when we were a start-up company of four.  We are now a company of 25. Obviously, revenues have grown significantly and we've been able to attract partners like SAP Ariba. That's the way it should work. You always want to look for opportunities to identify new, innovative suppliers to introduce into a supply chain; otherwise we get stagnant.

Small but mighty

Stevens: I'll add to what Rod said. This is just the sort of feedback we hear from our customers, the fact that a lot of the companies that are in this inclusive space are small -- and we think that's a big advantage.

Speed, quickness and flexibility are something you often see from diverse suppliers, or certainly smaller businesses, so a company that can have that in its portfolio has better responsiveness to their customer needs, versus a supply chain with very large processes or large organizations where it takes a while to respond to market needs. The quick in today's world will be far more successful, and having a diverse set of suppliers allows you to respond incredibly quickly. There is obviously a financial benefit in doing so.

Gardner: A big item of conversation here at SAP Ariba LIVE is how to reduce risk across your supply chain. Just like any economic activity, if you have a diversified portfolio, with different sizes of companies, different geographic locations, and different workforce components -- that can be a real advantage.

Now that we've established that there is a strong business case and rationale for seeking diversity, why do procurement professionals have trouble finding that diversity? Let's go to Quentin. What's holding back procurement professionals from finding the companies that they want?

McCorvey

McCorvey: Probably the biggest challenge is that the whole trend of supply chain optimization, of driving cost out of the supply chain, seems to be at odds with being inclusive, responsive, and in bringing in your own diverse suppliers. A company may have had 20 to 30 suppliers of a product, and then they look to drive that down with to just one or two suppliers. They negotiate contract prices for three-year contracts. That tends to weed out some of the smaller, more diverse organizations for several reasons.

For example, Rod talked about McDonald’s taking a chance on him. Well, they took a chance on him being a four-person organization; if he had to [grow first] he never would have had the opportunity.

For a company that requires a product in the market for every location nationally -- as opposed to regionally -- at a certain price, that tends to challenge a lot of the inclusion or the diversity in the supply chain.

Gardner: Right. Some companies have rules in place that don't provide the flexibility to attract a richer supplier environment. What is being done from your perspective at SAP Ariba, Jon, to go after such a calcification of rules that leads to somewhat limited thinking in terms of where they can find choices?

Power through partnerships

Stevens: That short-term thinking that Quentin talked about is absolutely one of the big barriers, and that generally comes down to metrics. What are they trying to measure? What are they trying to accomplish?

The more thought-leading companies are able to look past something in the first year or two, and focus on not just driving cost out, as Quentin talked about, but discovering what else their suppliers can help with, whether it’s something from a regulatory standpoint or something from a product and innovation perspective.

Certainly, one challenge is that short-term thinking, the other is access to information. We see far too many procurement organizations that just aren't thinking on a broader scale, whether it's a diverse scale or a global scale. What SAP Ariba is now bringing to the table with our solutions is being able to include information about where to find diverse suppliers, where to search and locate suppliers, and we do that through many partnerships.

We have a solution in South Africa called Tradeworld, which addresses this very topic for that market. We have a solution called SAP Ariba Spot Buy, which allows us to bring diverse suppliers automatically into a catalog for procurement organizations to leverage. And at SAP Ariba LIVE 2017 we announced that we are partnering with Rod and his firm, ConnXus, to expand the diversity marketplace by linking the ConnXus database and the SAP Ariba Network, which opens the door to more opportunities for all of our customers.

Robinson: If I could add to Jon’s point, one thing I also look forward to as a part of our partnership with SAP Ariba is thought leadership. There are opportunities for us to share best practices. We know companies who are doing it really well, we know the companies that maybe struggling with it, but within our joint customer portfolios, we will be able to share some of those best practices.

For example, there may be situations where a company is doing a big maintenance, repair and operations (MRO) bid and you have some large players involved, such as W.W. Grainger. There may be opportunities to introduce Grainger to smaller suppliers that maybe provide fewer stock keeping units (SKUs) that they can leverage strategically across their accounts. I have been involved in a number of initiatives like that. Those are the types of insights that we will be able to bring to the table, and that really excites me about this partnership.

Gardner: Those insights, that data, and the ability to leverage a business network to automate and facilitate that all at scale is key. From what we are hearing here at SAP Ariba LIVE, leveraging that business network is essential. Rod, tell us aboutConnXus? What’s being announced here?

Seek and ye shall find in the connected cloud

Robinson: ConnXus is a next-generation procurement platform that specializes in making corporate supply chains more inclusive, transparent, and compliant. As I mentioned, we serve several global companies, many of which we share relationships with SAP Ariba.  Our cloud-based platform makes it easy for companies to track, monitor, and report against their supplier diversity objectives.

One of the major features is our supplier database, which provides real-time searchable access to nearly two million vetted women-, minority- and veteran-owned businesses across hundreds of categories. We integrate with the SAP Ariba Network. That makes it simple for companies to identify vetted, diverse suppliers. They can also search on various criteria including certifications, category, and geography. We have local, national and global capabilities.  SAP Ariba already is in a number of markets that we are looking to penetrate.

Gardner: I was really impressed when I looked at the ConnXus database, how rich and detailed it is, and not just ownership of companies but also the composition of those companies, where those people are located. So you would actually know where your inclusive supply chain is going to be, where the rubber hits the road on that, so to speak.

Jon, tell us about the news here on March 21, 2017, a marriage between SAP Ariba and ConnXus.

Stevens: The SAP Ariba Network has a community of over 2.5 million companies, and it’s companies like M and R Distribution Services that we have been able to help grow and foster over time, using some of the solutions I talked about and Ariba Discovery.

Adding to the information that Rod just talked about, we are greatly expanding that. We have the world’s largest, most global business network and now we have the world’s most diverse business network, due to the partnership with ConnXus being able to provide that information through various processes.

The partnership with ConnXus will allow us to provide a lot more education, a lot more awareness.

Fortune 2000 companies are looking all the time through requests for proposal (RFPs), through sourcing events, and analyzing supplier performance on the SAP Ariba Network. The partnership with ConnXus will allow us to provide a lot more education, a lot more awareness to them.

For the suppliers that are on our network and those who will be joining us as a part of being in ConnXus, we expect to drive a lot more business.

Gardner: If I am a purchasing agent or a procurement officer and I want to improve my supplier inclusion program, how would something like, say, SAP Ariba Spot Buy using the ConnXus database, benefit me?

Stevens: As you decide to search for a category, we will return to you several things, one of which is now the diverse supplier list that ConnXus has. One of the things we are going to be doing with SAP Ariba Spot Buy is to have a section that highlights the diversity category so that it’s front and center for a purchasing agent to use and to take advantage of.

Gardner: Clearly there is strong value and benefit here if you are a procurement officer to get involved with the ConnXus database and Ariba Network. Quentin, at M and R Distribution Services, tell us from the perspective of a small supplier like yourself, what you're hearing about Ariba and ConnXus that interests you?

Be fruitful and multiply business opportunities 

McCorvey: You referenced a marriage between SAP Ariba and ConnXus, and part of a marriage is to be fruitful and multiply. So I want them to be fruitful so I can multiply my business opportunities. What that does for a company like ours is, we are looking for opportunities. It’s tougher for me to compete as a small business against a Grainger, or against a Fastenal, or against other larger companies like that.

So when I am going after opportunities like that, it’s going to be tough for me to win those large-scale RFPs. But if there is a target spot opportunity that I am looking for or within a region, it’s something that I can begin to do if a company is looking for someone like me.

We’ve talked a lot about corporations and the benefit of corporations, but there is also a consumer benefit, too, because we are in an age where the consumer is socially responsible and really wants to have a company that they are either investing in or they’re buying products from and they look for inclusion in their supply chains.

Folks are looking at that when they are make their investment and consumer decisions. Every company has an extremely diverse consumer base, so why should they not have a diverse supplier base? When companies look at that business ethic and corporate social responsibility as a driving tool for their organization, I want them to be able to find me among the Fortune top 20 companies. The relationship that ConnXus and SAP Ariba are driving really catalyzes these opportunities for me.

Gardner: Rod, if a company like M and R Distribution Services is not yet in your database and they want to be, how might they get going on that process and become vetted and be available to a global environment like the Ariba Network?

Robinson: It’s really simple. One of the things that we have striven to provide is a fantastic, simple user experience. It takes about six minutes to complete the initial supplier profile. Any supplier can complete a profile at no cost.

Many suppliers actually get into our database because of the services that we already provide to large enterprise customers. So if you are a McDonald's supplier, for example, you are already going to be in our database because we scrub their vendor data on an annual basis. I think Quentin is already in because he happens to be a vendor of one of our customers, or of multiple customers.

There is a vetting process where we integrate with other third-parties to pull in data, and then you become discoverable by all of the buyers on our platform.

Gardner: Before we close out, let’s look to the future. Jon, when we think about getting this rich data, putting it in the hands of the people who can use it, we also are putting it in the hands of the machines that can use it, right?

So when we think about bots and artificial intelligence (AI) trends, what are some of your predictions for how the future will come about when it comes to procurement and inclusive supply chains?

The future is now

Stevens: You talked about trends. One is certainly around transparency and visibility; another one is around predictive analytics and intelligence. We believe that a third is around partnerships like this to drive more collaboration.

But predictive analytics, that’s not a future thing, that's something we do today and some of the leading procurement companies are figuring out how to take advantage of it. So, for example, when a machine breaks down, you are not waiting for it. Instead, the machine is telling our systems, “Hey, wait a minute, I've got a problem.”

Not only that, but they are producing for the buyer the intelligence that they need to order something. We already know who the suppliers are, we already know what potentially should be done, and we are providing these decisions to procurement organizations.

The future, it’s here, you see it in our personal lives, on our phones, when you get recommendations in the morning, on the news, and everything else. It’s here today through some of our solutions.

We began to realize that this is really a market-imperative. This is something that is creating value for the organization.

And this trend around diversity, it’s also here. You mentioned SAP Ariba Spot Buy and we also have some of these other solutions like SAP Ariba Discovery where a procurement person is starting to create a sourcing event. We have the ability in our solutions to automatically recommend suppliers and based off of the goals that that procurement organization has, we can pre-populate and recommend the diverse MRO suppliers that you might want to consider for your program.

You’re seeing that today through the Ariba Network and through things like Guided Buying, where we are helping facilitate many of those steps for procurement organizations. So it's really fun and the future in many respects is here right now.

Value-driven supply chains

Robinson: I envision a future in procurement of being able to make informed decisions on supplier selection. Procurement professionals are in a great position to change the world, and the CPO of the future; they are going to be Millennials. They want more control, and they want more transparency, and, to Quentin’s point, they want to buy from organizations that share their same values.

Our partnership with SAP Ariba will create this environment where we can move closer to fulfilling this vision of whenever you have a specification that you’ve put into the system, you’ll be pushed supplier options, and you can actually configure your criteria such that you create this optimal supplier mix – whether diversity is important to you, green/environmental issues are important you, if ethical practices are important to you. All of this can be built-in and weighted within your selection. You will create an optimal supplier portfolio that balances all of the things that are important to you and your organization.

McCorvey: Why I am excited? This conversation has come full circle for me. I started off taking about supply optimizations and some of the challenges that they pose for businesses like me. We know that people do business most often with people they know, like and appreciate. What I want to do is turn a digital connection into a digital handshake and use predictive analytics and the connections between Jon and Rod that propose an opportunity for folks to know me, for me to grow as a new organization, and for me to be in the forefront of their minds. That is a challenge that this kind of supply chain optimization helps to overcome.

I’m really happy for where this is going to go in the future. In the end, there are going to be a lot of organizations both large and small that are going to benefit from this partnership. I look forward to the great things that are going to come from it, for not only both organizations -- but for people like me across the country.

Gardner: I’m afraid we will have to leave it there. We have been talking about the latest path to gaining improved diversity across inclusive supply chains. And we’ve learned how improved supplier diversity along with business and societal benefits can be achieved easier than ever thanks to new tools and technologies.

So a big thanks to our guests, Rod Robinson, Founder and CEO of ConnXus;

Jon Stevens, Global Senior Vice President of B2B Commerce and Payments at SAP Ariba, and Quentin McCorvey, Sr., President of M and R Distribution Services.

A big thank you as well to our audience for joining this latest BriefingsDirect discussion coming to you from the 2017 SAP Ariba Live conference in Las Vegas. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of SAP Ariba-sponsored BriefingsDirect digital business insights discussions. Thanks again for listening, and do come back next time.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: SAP Ariba.

Transcript of a discussion on how companies are improving supplier diversity and the new tools that make attaining inclusive supply chains easier than ever. Copyright Interarbor Solutions, LLC, 2005-2017. All rights reserved.

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How AI, IoT and Blockchain Will Shake Up Procurement and Supply Chains

Transcript of a discussion on how artificial intelligence, the Internet of things and machine learning will shake up procurement and supply chain optimization.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: SAP Ariba.

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast, coming to you from the 2017 SAP Ariba LIVE conference in Las Vegas.

Gardner

I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host the week of March 20 as we explore the latest in collaborative commerce and learn how innovative companies are leveraging the networked economy.

Our next digital business thought leadership panel discussion focuses on how artificial intelligence (AI), the Internet of things (IoT), machine learning (ML), and blockchain will shake up procurement and supply chain optimization. Stay with us now as we develop a new vision for how today's cutting-edge technologies will usher in tomorrow's most powerful business tools and processes.

To learn more about the data-driven, predictive analytics, and augmented intelligence approach to supply chain management and procurement, please join me in welcoming our guests, Dinesh Shahane, Chief Technology Officer at SAP Ariba. Welcome, Dinesh.

Shahane

Dinesh Shahane: Thank you, Dana.

Gardner: We are here with Sudhir Bhojwani, Senior Vice President of the Product Suite at SAP Ariba. Welcome, Sudhir.

Sudhir Bhojwani: Thanks, Dana. It’s nice talking to you.

Gardner: And we are here with Sanjay Almeida, Senior Vice President and Chief Product Officer of Network Solutions at SAP Ariba. Welcome, Sanjay.

Sanjay Almeida: Thank you, Dana. I’m very excited about being here.

Gardner: Dinesh, it seems like only yesterday we were confident to have a single view of a customer, or clean data, or maybe a single business process end–to-end value. But now, we are poised to leapfrog the status quo by using words like predictive and proactive for many business functions.

Why are AI and ML such disrupters to how we've been doing business processes?

Shahane: If you look back, some of the technological impact  in our private lives, is impacting our public life. Think about the amount of data and signals that we are gathering; we call it big data.

We not only do transactions in our personal life, we also have a lot of content that gets pushed at us. Our phone records, our location as we move, so we are wired and we are hyper-connected.

Similar things are happening to businesses. Since we are so connected, a lot of data is created. Having all that big data – and it could be a problem from the privacy perspective -- gives you an opportunity to harness that data, to optimize it and make your processes much more efficient, much more engaged.

If you think about dealing with big data, you try and find patterns in that data, instead of looking at just the raw data. Finding those patterns collectively as a discipline is called machine learning. There are various techniques, and you can find a regression pattern, or you can find a recommendation pattern -- you can find all kinds of patterns that will optimize things, and make your experience a lot more engaging.

If you combine all these machine learning techniques with tools such as natural language processing (NLP), higher-level tools such as inference engines, and text-to-speech processing -- you get things like Siri and Alexa. It was created for the consumer space, but the same thing could be available for your businesses, and you can train that for your business processes. Overall, these improve efficiency, give delight, and provide a very engaging user experience.

Gardner: Sanjay, from the network perspective it seems like we are able to take advantage of really advanced cloud services, put that into a user experience that could be conversational, like we do with our personal consumer devices.

What is it about the cloud services in the network, however, that are game-changers when it comes to applying AI and ML to just good old business processes?

Multiple intelligence recommended

Almeida

Almeida: Building on Dinesh’s comment, we have a lot of intelligent devices in our homes. When we watch Netflix, there are a lot of recommendations that happen. We control devices through voice. When we get home the lights are on. There is a lot of intelligence built into our personal lives. And when we go to work, especially in an enterprise, the experience is far different. How do we make sure that your experience at home carries forward to when you are at work?

From the enterprise and business networks perspective, we have a lot of data; a lot of business data about the purchases, the behaviors, the commodities. We can use that data to make the business processes a lot more efficient, using some of the models that Dinesh talked about.

How do we actually do a recommendation so that we move away from traditional search, and take action on rows and columns, and drive that through a voice interface? How do we bring that intelligence together, and recommend the next actions or the next business process? How do we use the data that we have and make it a more recommended-based interaction versus the traditional forms-based interaction?

Gardner: Sudhir, when we go out to the marketplace with these technologies, and people begin to use them for making better decisions, what will that bring to procurement and supply chain activities? Are we really talking about letting the machines make the decisions? Where does the best of what machines do and the best of what people do meet?

Bhojwani

Bhojwani: Quite often I get this question, What will be the role of procurement in 2025? Are the machines going to be able to make all the decisions and we will have no role to play? You can say the same thing about all aspects of life, so why only procurement?

I think human intelligence is still here to stay. I believe, personally, it can be augmented. Let's take a concrete example to see what it means. At SAP Ariba, we are working on a product called product sourcing. Essentially this product takes a bill of material (BOM), and it tells you the impact. So what is so cool about it?

One of our customers has a BOM, which is an eight-level deep tree with 10 million nodes in it. In this 10 million-node commodity tree, or BOM, a person is responsible for managing all the items. But how does he or she know what is the impact of a delay on the entire tree? How do you visualize that?

I think humans are very poor at visualizing a 10-million node tree; machines are really good at it. Well, where the human is still going to be required is that eventually you have to make a decision. Are we comfortable that the machine alone makes a decision? Only time will tell. I continue to think that this kind of augmented intelligence is what we are looking for, not some machine making complete decisions on our behalf.

Gardner: Dinesh, in order to make this more than what we get in our personal consumer space, which in some cases is nice to have, it doesn't really change the game. But we are looking for a higher productivity in business. The C-Suite is looking for increased margins; they are looking for big efficiencies. What is it from a business point of view that these technologies can bring? Is this going to be just a lipstick on a pig, so to speak, or do we really get to change how business productivity comes about?

Humans and machines working together

Shahane: I truly believe it will change the productivity. The whole intelligence advantage -- if you look at it from a highest perspective like enhanced user experience -- provides an ability to help you make your decisions.

When you make decisions having this augmented assistant helping you along the way -- and at the same time dealing with large amount of data combined in a business benefit -- I think it will make a huge impact.

Let me give you an example. Think about supplier risk. Today, at first you look at risk as the people on the network, and how you are directly doing business with them. You want to know everything about them, their profile, and you care about them being a good business partner to you.

But think about the second, third and fourth years, and some things become not so interesting for your business. All that information for those next years is not directly available on the network; that is distant. But if those signals can be captured and somehow surface in your decision-making, it can really reduce risk.

Reducing risk means more productivity, more benefits to your businesses. So that is one advantage I could see, but there will be a number of advantages. I think we'll run out of time if we start talking about all of those.

Gardner: Sanjay, help us better understand. When we take these technologies and apply them to procurement, what does that mean for the procurement people themselves?

Almeida: There are two inputs that you need to make strategic decisions, and one is the data. You look at that data and you try to make sense out of it. As Sudhir mentioned, there is a limit to human beings in terms of how much data processing that they can do -- and that's where some of these technologies will help quite a bit to make better decisions.

The other part is personal biases, and eliminating personal biases by using the data. It will improve the accuracy of your strategic decisions. A combination of those two will help make better decisions, faster decisions, and procurement groups can focus on the right stuff, versus being busy with the day-to-day tasks.

Using these technologies, the data, and the power of the data from computational excellence -- that's taking the personal biases out of making decisions. That combination will really help them make better strategic decisions.

Bhojwani: Let me add something to what Sanjay said. One of the biggest things we're seeing now in procurement, especially in enterprise software in general, is people's expectations have clearly gone up based on their personal experience outside. I mean, 10 years back I could not have imagined that I would never go to a store to buy shoes. I thought, who buys shoes online? Now, I never go to stores. I don't know when was the last time I bought shoes anywhere but online? It's been few years, in fact. Now, think about that expectation on procurement software.

Currently procurement has been looked upon as a gatekeeper; they ensure that nobody does anything wrong. The problem with that approach is it is a “stick” model, there is no “carrot” behind it. What users want is, “Hey, show me the benefit and I will follow the rules.” We can't punish the entire company because of a couple of bad apples.

By and large, most people want to follow the rules. They just don't know what the rules are; they don't have a platform that makes that decision-making easy, that enables them to get the job done sooner, faster, better. And that happens when the user experience is acceptable and where procurement is no longer looked down upon as a gatekeeper. That is the fundamental shift that has to happen, procurement has to start thinking about themselves as an enabler, not a gatekeeper. That's the fundamental shift.

Gardner: Here at SAP Ariba LIVE 2017, we're hearing about new products and services. Are there any of the new products and services that we could point to that say, aha, this is a harbinger of things to come? 

In blockchain we trust

Shahane: The conversational interfaces and bots, they are a fairly easy technology for anyone to adopt nowadays, especially because some of these algorithms are available so easily. But -- from my perspective -- I think one of the technologies that will have a huge impact on our life will be advent of IoT devices, 3D printing, and blockchain.

To me, blockchain is themost exciting one. That will have huge impact on the way people look at the business network. Some people think about blockchain as a complementary idea to the network. Other people think that it is contradictory to the network. We believe it is complementary to the network.

Blockchain reaches out to the boundary of your network, to faraway places that we are not even connected to, and brings that into a governance model where all of your processes and all your transactions are captured in the central network.

I believe that a trusted transactional model combined with other innovations like IoT, where a machine could order by itself … My favorite example is when a washing machine starts working when the energy is cheaper … it’s a pretty exciting use-case.

This is a combination of open platforms and IoT combining with blockchain-based energy-rate brokering. These are the kind of use cases that will become possible in the future. I see a platform sitting in the center of all these innovations.

Gardner: Sanjay, let’s look at blockchain from your perspective. How do you see that ability of a distributed network authority fitting into business processes? Maybe people hadn't quite put those two together.

Almeida: The core concept of blockchain is distributed trust and transparency. When we look at business networks, we obviously have the largest network in the world. We have more than 2.5 million buyers and suppliers transacting on the SAP Ariba Network -- but there are hundreds of millions of others who are not on the network. Obviously we would like to get them.

If you use the blockchain technology to bring that trust together, it’s a federated trust model. Then our supply chain would be lot more efficient, a lot more trustworthy. It will improve the efficiency, and all the risk that’s associated with managing suppliers will be managed better by using that technology.

Gardner: So this isn’t a “maybe,” or an “if.” It’s “definitely,” blockchain will be a significant technology for advancing productivity in business processes and business platforms?

Almeida: Absolutely. And you have to have the scale of an SAP Ariba, have the scale from the number of suppliers, the amount of business that happens on the network. So you have to have a scale and technology together to make that happen. We want to be a center of a blockchain, we want to be a blockchain provider, and so that other third-party ecosystem partners can be part of this trusted network and make this process a lot more efficient.

Gardner: Sudhir, for those who are listening and reading this information and are interested in taking advantage of ML and better data, of what the IoT will bring, and AI where it makes sense -- what in your estimation should they be doing now in order to prepare themselves as an organization to best take advantage of these? What would you advise them to be doing now in order to better take advantage of these technologies and the services that folks like SAP Ariba can provide so that they can stand out in their industry?

Bhojwani: That’s a very good question, and that's one of our central themes. At the core of it, I fundamentally believe the tool cannot solve the problem completely on its own, you have to change as well. If the companies continue to want to stick to the old processes -- but try to apply the new technology -- it doesn’t solve the problem. We have seen that movie played before. People get our tool, they say, hey, we were sold very good visions, so we bought the SAP Ariba tool. We tried to implement it and it didn’t work for us.

When you question that, generally the answer is, we just tried to use the tool -- tried to change the tool to fit our model, to fit our process. We didn’t try to change the processes. As for blockchain, enterprises are not used to being for track and trace, they are not really exposing that kind of information in any shape or form – or they are very secretive about it.

So for them to suddenly participate in this requires a change on their side. It requires seeing what is the benefit for me, what is the value that it offers me? Slowly but surely that value is starting to become very, very clear. You hear more companies -- especially on the payment side -- starting to participate in blockchain. A general ledger will be available on blockchain some day. This is one of the big ideas for SAP.

If you think about SAP, they run more general ledgers in the world than any other company. They are probably the biggest general ledger company that connects all of that. Those things are possible, but it’s still a technology only until the companies want to say, “Hey, this is the value … but I have to change myself as well.”

This changing yourself part, even though it sounds so simple, is what we are seeing in the consumer world. There, change happens a little bit faster than in the enterprise world. But, even that is actually changing, because of the demands that the end-user, the Millennials, when they come into the workforce; the force that they have and the expectations that they have. Enterprises, if they continue to resist, won’t be sustainable.

They will be forced to change. So I personally believe in next three to five years when there are more-and-more Millennials in the workforce, you will see people adopting blockchain and new ledgers at a much faster pace.

A change on both sides

Shahane: I think Sudhir put it very nicely. I think enterprises need to be open to change. You can achieve transformation if the value is clearly articulated. One of the big changes for procurement is you need to transition yourself from being a spend controller into a value creator. There is a lot of technology that will benefit you, and some of the technology vendors like us, we cannot just throw a major change at our users. We have to do it gradually. For example, with AI it will start as augmented first, before it starts making algorithmic decisions.

So it is a change on both sides, and once that happens -- and once we trust each other on the system -- nice things will happen.

Almeida: One thing I would add to that is organizations need to think about what they want to achieve in the future and adopt the tool and technology and business processes for their future business goals. It’s not about living in the past because the past is going to be gone. So how do you differentiate yourself, your business with the rest of the competition that you have?

The past business processes and people and technology many not necessarily get you over there. So how do you leverage the technology that companies like SAP and Ariba provide? Think about what should be your future business processes. The people that you will have, as Sudhir mentioned, the Millennials, they have different expectations and they won’t accept the status quo.

Gardner: I am afraid we will have to leave it there. We have been talking about how AI, IoT, ML, and blockchain are poised to shake up procurement and supply chain optimization. And we’ve learned how today’s cutting edge technologies will soon be ushering in tomorrow’s most powerful business tools and processes.

So a big thank you to our guests, Dinesh Shahane, Chief Technology Officer at SAP Ariba; Sudhir Bhojwani, Senior Vice President of Product Suite at SAP Ariba, and Sanjay Almeida, Senior Vice President and Chief Product Officer of Network Solutions at SAP Ariba.

And a big thank you as well to our audience for joining this special podcast coming to you from the 2017SAP Ariba LIVE conference in Las Vegas. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of SAP Ariba-sponsored BriefingsDirect Digital Business Insights Discussions. Thanks again for listening, and do come back next time.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: SAP Ariba.

Transcript of a discussion on how artificial intelligence, the internet of things and machine learning will shake up procurement and supply chain optimization. Copyright Interarbor Solutions, LLC, , 2005-2017. All rights reserved.

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