Market Challenges: Data Security Concerns

Data security concerns is one of the major challenges restraining the growth of procurement as a service market. Procurement as a service involves handling and sharing of sensitive organizational data like financial data, employee records, customer information, and others with third party service providers over the cloud. This raises significant compliance and security risks for organizations. Many organizations are hesitant to adopt procurement as a service solutions due to fear of data breaches and lack of control over sensitive data. Cyberattacks targeting cloud-based services are increasing rapidly over the years. For example, according to the Federal Bureau of Investigation (FBI) internet crime report of 2022, cyberattacks targeting cloud infrastructure increased by over 65% from 2020 to 2022. Ransomware attacks rose by over 150% during the same period compromising critical infrastructure like healthcare and transportation according to the report. Such incidents have eroded customer trust in the security of cloud platforms.

Compliance with stringent data protection regulations also poses challenges for procurement as a service provider as well as customers. Regulatory mandates like General data protection regulation (GDPR) in Europe impose hefty fines and penalties for non-compliant data handling practices. Ensuring adherence to such regulations increases operational complexity and costs for procurement as a service vendors. Many small and medium enterprises hesitate to switch to cloud procurement solutions due to inability to meet regulatory audit requirements. This risk averse attitude has restricted the proliferation of procurement as a service adoption across industry verticals.

Thus, data security and compliance risks associated with sharing sensitive organizational data over the cloud are significant roadblocks in the growth of procurement as a service market. Strong measures to bolster cloud security controls, establish robust data governance practices and build customer trust would be critical for vendors to address these concerns and unlock the market's true growth potential going forward.

Market Opportunities: Enhanced Visibility & Control

Enhanced visibility and control have the potential to significantly boost efficiencies in the procurement as a service market. Procuring goods and services is a complex process that involves coordinating with multiple internal departments and external suppliers. Lack of visibility into the end-to-end procurement workflow often results in delays, cost overruns and compliance issues. However, emerging cloud-based procurement platforms now offer analytics and governance tools that provide real-time visibility and control across the source-to-pay process. These platforms aggregate and analyze spend data from ERP systems and e-procurement portals, flag anomalies and compliance gaps, and present actionable insights to procurement managers.

Furthermore, such solutions integrate with supplier databases and contract lifecycle management systems. This enables procurers to remain updated on supplier capabilities, performance parameters, insurance/tax compliances in a structured digital format. It also automates tasks like raising purchase orders, three-way matching of invoices and receipts, and tracking deliveries. The centralized dashboard provides a single point of control and oversight to monitor procurement KPIs across geographical boundaries. Various government and NGOs have reported significant benefits from deploying these platforms.