Procurement in the Cloud

Whatever model you choose for procurement, it’s important to remain aware of the tradeoffs involved and to approach the cloud as part of a larger digital strategy for procurement and the enterprise more broadly.

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Supply chain disruptions and uncertainty have driven many organizations to adopt cloud-based purchasing applications and platforms. Organizations that leverage cloud-based tools for procurement have found that the cloud allows for more flexible access and collaboration while helping to decrease costs and make solutions more easily scalable. However, organizations need to remain cognizant of the risks and tradeoffs involved with different cloud environments.

Using data collected in APQC’s Procurement Open Standards Benchmarking research with 1,181 global participants, this article provides a cross-industry perspective on the current state of cloud deployment for purchasing applications and the cloud environment currently in use in procurement.

Cloud Adoption is Growing Across Industries

Organizations today can choose for their purchasing applications to be hosted within on-premises servers, entirely in the cloud, or some combination of both. More than three quarters of respondents (79%) have indicated that their purchasing applications are either entirely cloud-based or a combination of on-premises and cloud. Only about a fifth of respondents (21%), by contrast, deploy their purchasing application or data entirely on-premises

ApqcdecAPQC Fig. 1

Drivers and Benefits of Cloud-Based Procurement

The findings shown in Figure 1 represent a shift from even five years ago, as organizations increasingly move procurement to the cloud. The biggest drivers of this transformation are the numerous supply chain disruptions—from a global pandemic to geopolitical instability to high-profile cyberattacks and more—that drove many organizations to shift to remote work and digitized processes. Cloud resources enable remote procurement processes by providing access to an organization’s applications and data from anywhere, which in turn drives greater flexibility and resilience in the face of disruption.

In addition to greater flexibility, APQC finds that organizations are switching to the cloud for benefits including:

  • Enhanced data security and resiliency—Reputable cloud vendors typically provide leading-edge, up-to-date security protection against an evolving cybercrime landscape.
  • Reduced costs—Cloud-based tools and platforms hand over all maintenance responsibilities—and fees related to licensing and updates—to the cloud provider, making cloud-based tools much more cost effective than in-house data centers.
  • Scalability—Organizations can increase or decrease capacity more easily depending on their needs, without having to buy more equipment or take equipment away.
  • Reliability—Cloud-based vendors offer greater protection against unexpected outages because they typically have multiple redundant systems in place.

An organization that exclusively uses on-premises servers, by contrast, would require in-house capabilities to maintain software and network servers, provide network security, and more—without the flexible access options provided by the cloud.

Benefits and Tradeoffs of Cloud Deployment Models

Organizations that use cloud-based procurement choose from one of three cloud deployment models:

  1. Public cloud—Services are offered by a provider over the public internet; Google, LinkedIn and Facebook are all examples of public cloud-based services.
  2. Private cloud—It only serves a single company and does not provide access for unauthorized uses.
  3. Hybrid cloudIt provides a mix of private cloud, public cloud and on-premises or “edge” infrastructure.

Of the 79% of organizations that leverage cloud-based procurement, APQC finds that half are using a combination of public and private cloud, 31% are using public cloud environments, and 19% are using entirely private clouds (Figure 2). 

Apqcdec2APQC Fig. 2

Each of these cloud deployment models come with their own tradeoffs. For example, the private cloud is the most secure of the three models but is also the least scalable and the least accessible. Even so, an organization might leverage this model because it handles highly sensitive data.

A hybrid cloud model, on the other hand, would allow an organization to handle sensitive or proprietary procurement data on a private cloud while customer-facing applications are delivered using shared resources in a public cloud. However, organizations that take this approach will need to ensure compatibility between systems and will grapple with a more complex systems environment. Organizations need to weigh tradeoffs like these and consider their needs as they decide which cloud deployment model is best.

Key Takeaways

Like many other critical parts of the organization, procurement is moving to the cloud. This is a transition that is still underway, with one in five organizations still using entirely on-premises computing for procurement. APQC anticipates that this percentage will change over time as organizations gain greater experience with cloud computing and its benefits and drawbacks.

As cloud computing becomes more prevalent in procurement, APQC anticipates an increase in the use of hybrid cloud approaches that can manage both proprietary procurement data and public-facing applications. Whatever model you choose for procurement, it’s important to remain aware of the tradeoffs involved and to approach the cloud as part of a larger digital strategy for procurement and the enterprise more broadly.