AI’s Effort To Pull Hidden Costs (And Risk) Into The Light

Corporate expansion – in size and geographic reach – is a complicated beast. Of course, business growth goes hand in hand with increased revenues, but that growth also means the enterprise is likely spending a lot more money.

When multiple departments across multiple business units under the umbrella of a single organization make purchases, wasted spend – and other risks – can haunt the books. Worse, because spend data is kept within siloed systems, departments, units and markets, CFOs and treasurers often struggle to connect the dots across the enterprise to gain an accurate vision of where money is going.

Digitization, in some ways, is complicating the matter even further, explained Gregg Makuch, head of marketing at artificial intelligence startup Suplari. He told PYMNTS that the explosion of Software-as-a-Service (SaaS) and the sea of data streaming from cloud-based platforms is leaving companies in the dark about their true procurement spend.

Hidden Costs

“In larger companies, there is decentralization – multiple business units, multiple organizations within a single company – and they might all be provisioning and procuring the same service, sometimes from the exact same vendor,” Makuch told PYMNTS in a recent interview highlighting how corporates struggle to track spending trails. “It could be a lot of SaaS, provisioned in a decentralized manner in many places by many people without coordination.

“With this lack of an enterprise-wide view, you could really be leaving a lot of money on the table,” he added.

He’s not exaggerating. Data released in 2016 from 1E revealed that U.S. businesses waste a combined $28 billion on SaaS tools they never actually use. That doesn’t include, however, the potential for these organizations to procure the same SaaS tools across multiple units within the enterprise.

According to Eric Christopher, CEO of spend management company Zylo, only 40 percent of SaaS spend can be tracked by a company’s IT department, largely as a result of rogue SaaS procurement and unmanaged purchases.

Rogue procurement isn’t limited to SaaS spend, however. According to 2015 data from supply management and expense reduction analysts, only 51 percent of surveyed procurement officials said they have influence over procurement of professional services and business processing outsourcing – let alone have visibility into the numbers behind that spend.

Hidden Risks

Rogue procurement and the struggle to track company spend across departments and business units doesn’t just mean wasted money. Makuch explained that a lack of visibility into procurement practices is also exposing the enterprise to an array of risks linked to the supply chain.

One of the largest challenges with supply chain and supplier risk, he said, is that much of the data about risk exists outside of the organization itself, and instead is linked to a supplier’s financial standing and other, less quantifiable factors.

“It can be labor unrest, financial discrepancies or difficulties a company is going through, a natural disaster that impacts sources of supply,” he said. “These are external viewpoints and data that could impact a company.”

Accelerated digitization and innovation, plus regulatory shifts and geopolitical factors, are all challenging the enterprise’s ability to identify and assess these risks, too, Makuch said.

A Sea of Data

That digitization also means organizations are flooded with data, from the SaaS solutions they’ve procured to the cloud-based solutions in accounts payable, expense management, enterprise resource management, eProcurement and other platforms, located across departments and geographic markets.

For large, multinational corporations (MNCs), this business environment has created a jigsaw puzzle of data that should be used to analyze both corporate spend and supplier risks.

“What we’re seeing is companies are swimming in a sea of data,” said Makuch. “That’s not going away, and that won’t reduce in the future – it’s instead likely to continue to accelerate. So the question is, what is the best way to leverage this world and these assets of internal data that a company has?”

For Suplari, the answer lies in artificial intelligence.

“Artificial intelligence is very good at looking through different sources of data and putting pieces together in ways that may not be self-evident,” continued Makuch. “It’s very good at bringing disparate data sources together, piecing together patterns, and being able to describe predictive elements and prescriptive elements.”

By “predictive” and “prescriptive,” he means that AI technology not only has the ability to identify wasted spend or points of supplier risk, but it also has the potential to offer possible remedies for the issue, such as suggesting that an organization diversifies its supplier base to reduce risk, or advise on where to cut spending if multiple subscriptions or services are procured from the same vendor.

Suplari recently landed investor support for its AI technology that addresses these issues in the form of $10.3 million in Series A funding, led by Shasta Ventures with participation from Two Sigma Ventures, Workday Ventures, Madrona Venture Group and Amplify Partners. The company deploys AI to analyze data across contracts, accounts payable, purchasing, T&E, corporate card accounts and other sources throughout the enterprise to enhance visibility into the spend and supplier management.

According to Makuch, while some organizations are better than others at obtaining a bird’s eye view of procurement data, today’s MNCs face a barrage of hurdles when it comes to unifying data flows.

“Some companies, especially ones that have had many acquisitions and have many business units, may have a lot of legacy systems that reside within the enterprise, and all of those things need to be unified,” he said. “You also have lots of data assets in multiple areas throughout the enterprise. There is an opportunity here to leverage that for greater impact and efficiency.”