{"id":44935,"date":"2022-07-18T10:25:41","date_gmt":"2022-07-18T15:25:41","guid":{"rendered":"https:\/\/simfoni.com\/?p=44935"},"modified":"2022-07-19T07:22:17","modified_gmt":"2022-07-19T12:22:17","slug":"composable-digital-procurement-technology-drives-maximum-value-creation-for-private-equity","status":"publish","type":"post","link":"https:\/\/simfoni.com\/procurement-technology\/composable-digital-procurement-technology-drives-maximum-value-creation-for-private-equity\/","title":{"rendered":"Composable Digital Procurement Technology Drives Maximum Value Creation for Private Equity"},"content":{"rendered":"
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\n\t\t\t\tSpecialized, low-code digital procurement<\/a> technology is changing the game for private equity \t\t\t<\/p>\n\t\t\t\t\t\t\t

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Stefan Dent<\/strong><\/a>, Chief Alliances <\/span>Officer,<\/span> and Co-Founder at Simfoni<\/strong><\/a>, led a discussion<\/span> at the Private Equity International (PEI) Operating Partners Forum, recently held in San Francisco. The session titled<\/span> “<\/strong><\/span><\/span><\/span>Driving Maximum Value Creation through Composable Digital Procurement<\/span>” <\/span><\/span><\/strong><\/span>explored<\/span> the evolving role of procurement in private equity and how it can <\/span>support<\/span> company valuation<\/span>.<\/span><\/span><\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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The presentation underlined<\/span> how procurement<\/strong><\/a> is an important value driver for Private Equity by<\/span> delivering rapid savings<\/span>, boosting financial performance, and digitizing local purchasing processes<\/span> which <\/span>ultimately improves<\/span> valuations<\/span>.<\/span><\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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Private Equity P<\/span>ortCos <\/span>benefit<\/span> from access to <\/span>a wide range of <\/span>products and services from preferred suppliers at discounted rates—from <\/span>IT (Information Technology)<\/span> equipment and consumables to software and professional services.<\/span> Spend <\/span><\/a>Analytics are used extensively across PortCos to identify synergies, with each PortCo able to review spend and self-manage performance, with internal procurement teams providing advice and access to supply deals spend management<\/span><\/a> tools to digitize purchase to pay processes<\/a><\/strong>.<\/span> Newly acquired companies are enrolled into the spend management<\/span><\/a> program, with Analytics used to identify immediate opportunities to optimize costs.<\/span><\/span> <\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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There are some Private Equity firms leading the charge in delivering value through centrally led procurement initiatives<\/span> and use of technology<\/span>. <\/span>However, <\/span>most PE firms have yet to fully realize the value of procurement. <\/span><\/span> <\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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Procurement has been neglected in PE, with PortCos “getting by” with limited procurement capability and narrow spend leverage<\/span>,<\/span> lacking the tools used by larger peers, putting PortCos at a distinct disadvantage.<\/span> Discussion<\/span> with the audience emphasized this point, with only one other identifiable PE firm having a centralized procurement<\/span> capability to support PortCos. <\/span><\/span> <\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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“It’s clear that<\/span> procurement is a source of value, so why aren’t more PE firms embracing <\/span><\/strong><\/em>tools and technology to drive savings?”<\/strong><\/em> asked Stefan<\/span>. <\/span><\/p><\/blockquote>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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He outlined<\/span> three barriers that PE firms and PortCos need to overcome <\/span>to<\/span> derive value from procurement:<\/span><\/span><\/span><\/strong><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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  1. Cost:<\/span><\/b> procurement solutions have high upfront license fees and integration costs, which has historically prevented firms from embracing technology. <\/span> <\/span><\/li>
  2. Time to Value:<\/span><\/b> traditional eProcurement<\/span><\/a> systems can take months, or even years to implement, but the issue is that PE firms want a fast return which becomes a sticking-point. <\/span> <\/span><\/li>
  3. User Experience:<\/span><\/b> this is fundamental – if the spend management<\/span> solution is not easy to use then the user goes elsewhere. The user will always take the path of least resistance to get what they need!<\/span> <\/span><\/li><\/ol>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t
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    The dialogue shifted to <\/span>providing practical <\/span>r<\/span>ecommendations <\/span>about <\/span>where PE firms should start when approaching a strategy to generate<\/span> value from procurement<\/span>. Three main points emerged:<\/strong><\/span><\/span> <\/span><\/strong><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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    1. Cost barriers are being removed<\/span><\/b>, which is great news with a raft of modern technology providers offering on-demand access to analytics and spend management<\/span> solutions with fees linked to consumption and savings – removing upfront costs<\/a><\/span><\/strong> which means that businesses of any size can access the technology used by larger enterprise organizations. The advice is clear – don’t suffer bad procurement! There really is no excuse not to digitize spend and drive savings as the solutions are available and attainable.<\/span> <\/span><\/li>
    2. Start with spend analytics<\/a><\/span><\/b>, which is quick to implement and identifies savings opportunities, which allows you to deliver rapid results, which funds the wider spend automation to sustain the value from procurement. <\/span> <\/span><\/li>
    3. Don’t overcomplicate things<\/span><\/b>, ensure that solutions offer users access to the goods and services they need with an ‘Amazon’ like B2C experience. The new breed of spend management<\/span> applications offer cost effective solutions that are perfect for mid-size PortCo businesses, delivering online content with users able to ‘click to buy’, which drives adoption and compliance to preferred suppliers, generating bottom-line savings.<\/span> <\/span><\/li><\/ol>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t
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      Lastly, <\/span>it’s<\/span> important for someone at the PE firm to ‘own procurement<\/strong><\/span>’<\/strong>.<\/span> If you <\/span>don’t<\/span> have a central procurement capability, then this should be championed by the CFO or COO<\/span> as the accountable owner. Modern spend management<\/span> solutions are both accessible and affordable, so there really is no excuse to overlook procurement—rather, firms need to embrace procurement as a source of value.<\/span><\/span> <\/span><\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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      Simfoni would like to thank Private Equity International and the audience for a lively and informative discussion around the evolving role of procurement in private equity.<\/span><\/span> <\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t

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      Speak with a procurement expert to learn more about Simfoni’s spend management<\/span> solution for private equity.<\/strong><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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