At its best, sophisticated, targeted analytics powered by big data can benefit everyone from individuals to governments by shaping services and policies that place the wellbeing of those they serve at their core. On the other hand, Brexit, Trump, Russia.
Even so, transparency has a net positive benefit for society. If you’re hiding something, maybe you have something worth hiding. Procurement in a corporate setting is an excellent example of this. Procurement departments now have the capability to gain a granular view of all company purchases, from investments in new factories down to the invoices for individual toilet rolls. This would have given yesterday’s Chief Procurement Officers (CPOs) nightmares. Today’s CPO, on the other hand, sees this as an opportunity to improve.
However, transparency within a corporate setting by itself is not enough – information needs to be received, interpreted and understood by those affected by it. Luckily, Sievo founder and CEO Matti Sillanpää has been speaking this language since 2004.
Nordic Business Report: Hi, Matti. Sievo has managed to productize advanced procurement solutions for large corporations with billions of euros of procurement expenditure. Was that your goal when the company was founded?
Sillanpää: When I met Sievo cofounder Sammeli Sammalkorpi at university in 1998, we delivered some cool projects to our lecturers – we liked each other, we worked very well together. We were also both interested in starting a business.
We worked at a small Finnish management consulting company during our studies and after we graduated. We delivered a couple of procurement development projects for big Finnish clients, so we came to understand how procurement works in big corporations.
We began to think: Could we build a scalable software product business that specialized in procurement – a real growth business – not just two guys doing some consulting? Normal practice at the time was for the consultant to come in, work with the data, deliver analyses and recommendations. What’s left for the company?
Their data goes stale after a year (or sooner), and a whole follow-up process is needed to see if things have actually improved. We aimed to provide a continuous software product that gave them full visibility of their spending. Back in 2003, the whole concept of “Software-as-a-Service” was new to these large corporations, so we were quick to spot the opportunity in the market.
NBR: You’ve worked with large corporations since the company’s inception. How has procurement’s role in corporations changed since you first set out?
Sillanpää: Procurement today is certainly recognized by big enterprises for the value it can provide, but 15 years back it was a neglected function. At that time, we were able to meet with Chief Procurement Officers (CPOs) as they were not receiving that much attention back then. Two young guys coming in to talk with them and bringing new ideas were well received!
Even so, it took a while to land our first customer, which just so happened to be a large multinational corporation. This really shaped our direction going forward. The company was in a really bad financial situation, and procurement was one area where they needed to realize significant savings – and a way of measuring those savings.
We eventually helped the company avoid losing 50% of their savings through our work. We started out with the idea of creating a basic spend analysis tool, but ended up doing something much more advanced – realized savings, looking at how the market fluctuations affect prices etc.
If I think about Sievo nowadays, procurement has a much higher status in corporations. There’s a lot of investment in that area, and people want to create value and savings there. Today, we are in a great market with a lot of demand for procurement analytics. We try to take it a step further by finding out how to use data to drive both procurement and the business in general forward.
NBR: Your company is releasing a book, Procurement Loves Finance. Does finance love procurement?
Sillanpää: In any relationship, if communication is problematic, trouble tends to arise. The CFO of our first customer was actually the main driver behind our project, as he needed to see exactly where the company’s money was going in terms of spending.
There are many instances in which procurement thinks it has saved the company 50M€ – and finance can’t see it anywhere on its profit and loss statement. For example, the effects of markets impacting prices and currency fluctuations are not visible to finance, who tend to see things in terms of profit and loss. We help procurement measure their performance and savings in a way that is clearly understood by the CFO.
NBR: What do you see on the procurement horizon?
Sillanpää: I’m quite interested to see how companies can deliver in terms of the hype surrounding the digitization of everything. We have worked with big data, AI, and the rest of these buzzword technologies for a long time, and we have concrete use cases where we actually provide real value.
At the moment, lots of companies know they have to do something in these areas, but they aren’t quite there yet in terms of unlocking true value from these technologies. I think more and more companies will look to trusted partners to share their accumulated expertise and accelerate the deployment of these technologies within their organization in a way that delivers real value.
Transparency is a data issue and a communication issue. By helping corporations unearth what they need to know in terms of procurement expenditure, and packing this information in a format that is understood by all, Sievo has helped build bridges between departments that have not had the means to effectively communicate with each other for a long time. It’s good to talk if you have something to say – it’s even better to be understood.