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Home » The Procurement Tech Market in 2 Years: How Will It Look?

The Procurement Tech Market in 2 Years: How Will It Look?

This week’s piece was inspired by a LinkedIn post from well respected industry commentator Jon W. Hansen.

He’s predicting that 75% of AI (procurement tech) solution providers today will be gone by the end of 2025.

That’s a pretty bold statement.

Just for context, he made this back in September, so I appreciate I’m looking at this with a bit of hindsight.

I’ve known Jon for a while, and he’s very knowledgeable about the procurement tech space, being one of the original bloggers and analysts. However, I fundamentally disagree with him on what he’s saying here. I want to break it down a little bit and walk through why that’s the case.

I’ll also touch on where I think there may be some nuggets of truth in what he’s trying to say.

 

How much procurement tech consolidation should we expect?

The first point is that there will be some existing procurement tech companies that won’t make it. There are definitely some “zombie” companies out there.

But “some” is definitely not 75% of the market! And they definitely won’t all disappear in just over a year.

So, where do I think Jon is right?

The ones that will struggle or could disappear will likely be those companies who have slapped references to AI all over their website, but can’t articulate what the AI delivers in terms of measurable results. At least not in simple language.

I’m not a computer scientist, and neither are most CPOs and CFOs. If they can’t articulate ROI in plain English, without reverting to marketing buzzwords, then they’ll be in trouble.

 

The new procurement tech players: agile and configurable

My prediction is most of the solutions that disappear will be replaced on a one-to-one ratio by new market entrants.

New procurement tech companies are entering the market with a new solution, a new concept, or a new vision and way of technological development. All of these will solve a specific, existing challenge in a different way to the legacy tech firms.

The example I will hold up here is the one of Agentic AI, which I tackled in my podcast covering 2025 predictions.

Some of these new solutions that enter the scene may not necessarily be on the radar for the big analyst firms and event organisers. There will be more solutions that are focused on SMEs and mid-market businesses.

Analyst firms and conference organisers often don’t play in this space. They focused their attention on the more traditional enterprise software suites for the last 10 or so years.

There are only a certain number of enterprises out there to sell enterprise software to. Nowadays, there is very little greenfield digital procurement transformation opportunity across large corporates.

This ultimately means that some of the traditional analyst firms may miss out on the more innovative players entering the market. But just because they’re not making it into famous quadrants or waves doesn’t mean they don’t exist, and aren’t acquiring customers – and funding – quickly.

How will this all play out?

Quite simply, the Source-to-Pay suites are likely to lose some market share. A few of them who are particularly vulnerable may also disappear or be acquired.

Providers who focus more on mid-market, or on specific geographies or industry sectors, will likely see more rapid growth. Those with a dated interface, targeting enterprise users, will be forced into survival mode. That will mean slashing prices and competing in the mid-market.

They’ll be holding onto existing customers for dear life. Inevitably, some of their existing customers will jump ship.

So, who will gain from this?

Process orchestration tools and Agentic AI solutions.

For specific problems, these vastly improve UI/UX for stakeholders, suppliers and procurement users alike. More rigid, end-to-end suite products can’t do that without redesigning them from the ground up. One option, already the strategy of Coupa and SAP, is to follow the marketplace / app store model, as a way to enable customers to access these new best-of-breed tools.

I predict that in more greenfield digital transformation environments, where no legacy tech exists, these solutions will replace S2P suites as the technology of choice.

 

Software providers will adapt Sales and Marketing strategies

Newer solutions may in future also invest a lower marketing presence across the procurement media and events space.

Let’s take, for example, an intake or Agentic AI-based PO tracking platform that’s aimed at the mid-market. Procurement will be part of the overall decision process. However, if I was the Chief Revenue Officer, I would be targeting the CFO first and foremost. They’re the decision-maker; they’re the one that ultimately has the sway, the political power, and the decision-making power within that organisation.

In SMEs and in the mid-market – generally speaking – Procurement is still less mature. Often, it’s still viewed as being more of a tactical, administrative function. The economic buyer in this case is undoubtedly going to be the CFO. The Head of Procurement isn’t going to have his / her own software budget: let’s be frank.

Not only that, but if these new platforms are going to act as AI agents and to orchestrate processes and workflows, they will impact other areas of the business too.

Example: Supplier Relationship Management (SRM)

SRM solutions will plug into an orchestration layer. This will enable seamless data integration from Supplier Quality Management (SQM) and Supplier Performance Management (SPM) systems to flow into single source of truth dashboards in an SRM solution.

Vendor Master Data, Contract Management and supplier onboarding tools will also plug in to SRM solutions. These will likely become full Vendor Lifecycle Management (VLM) platforms, pulling data from multiple different sources. AI, thanks to natural language processing (NLP), will be able to call up this data without extensive training on how to use the system.

Unstructured, qualitative data will become valuable like never before, as it complements hard KPIs. I had a great podcast conversation recently with Suppeco’s CEO – Sheldon Mydat – on this very topic.

In this specific example, the decision around what type of software to invest in will cover multiple teams. Operations, IT, Legal and Quality departments will likely all have some input into the choice of end-to-end solution that manages SRM. Ultimately, the CEO or the CFO will probably be the final decision maker.

So, will procuretechs continue to focus on procurement alone with their marketing budget? A lot of conversations I have with Founders and CEOs highlight how little overall influence and impact Procurement often has in their business. Sales cycles for procuretech are long. Procurement teams have to build the business case and chip away at persuading those who hold the budgets.

This obviously begs the question: why not spend some sales & marketing efforts charming the CFO in the first place?

 

The Immortal Make vs. Buy Question

The question that never seems to go away…

Top-performing procurement teams with Digital Garages or advanced Centre of Excellence departments will likely acquire the technical know-how. Their teams will be able to work with AI software development agencies directly.

Likewise, at the lower end of the market, there will be more teams using generic No Code tools. For simple, straightforward apps, you no longer need to purchase SaaS and commit to a contract. Contract repositories, supplier onboarding or savings pipeline tools can be built cheaply and easily.

That said, specialist software still offers the fastest and cheapest way to get ROI in many cases. I don’t see the overall number of procurement software solutions reducing considerably.

Jon has put his neck on the line and said 75% will disappear.

I’ll do the same.

I predict that maximum, we might see a 20-25% net consolidation. In other words, even if 50% of existing tech companies disappear, at least half of those will be replaced by new entrants.

 

Finally, which categories of Procuretech will disappear?

Of course, there will also be some procurement tools which become less relevant as time goes on.

I already touched on a general downsizing we’re likely to see in the Source-to-Pay suite space, especially at the lower end of the market.

Where else do I expect some consolidation?

Contract Management

I agree with Dr. Elouise Epstein on this one, who has spoken recently too about the likely demise of Contract Lifecycle Management tools. I see them having a place for Legal teams, for the contract negotiation and authoring piece. On the Procurement side, I anticipate that their core features will be amalgamated into Source-to-Contract, SRM and VLM tools.

Focus will instead shift to post-contract signature management, enabling adherence to contract terms. Platforms will enable Procurement to realise the savings promised or projected in a contract which often fail to materialise.

B2B Marketplaces

AI-powered supplier discovery software will eliminate the need for B2B Marketplaces. They will only be relevant if they have enhanced functionality, beyond just an e-commerce or catalogue interface.

I’m still reasonably bullish on tech that powers group purchasing organisations (GPOs) or any kind of Tail Spend-as-a-Service type of platform.

But B2B marketplaces as standalone tech offerings? I suspect their days are numbered.

Sustainability and ESG tools

I’m bullish on all larger companies eventually adopting a Scope-3 carbon emissions analytics platform. Likewise, software that is designed to help achieve compliance to supply chain transparency laws, such as those in Germany and Norway, will continue to see growth.

However, there certainly seems to be a glut of carbon analytics, sustainability, and wider ESG-related software on the market. I expect some consolidation here. There seem to be a lot of companies essentially doing the same thing. With the pushback on ESG under the Trump administration, this will also create some headwinds.

Having said that, for those software companies who win this battle and emerge as the market leaders, I think they will win BIG! I’m just not entirely convinced that Procurement will be the buyer of these software tools…

Should we be concerned?

The march of tech is certainly going to have an impact on the size and the make-up of procurement teams as we head into the future.

What remains to be seen is whether the new breed of tech will nudge procurement teams to completely re-think their organisational structure. Or whether procurement teams slim down due to economic realities, and then turn to tech to compensate for them being forced to deliver more, with less resources.

Only time will tell.

But the procurement tech market is changing at a faster pace now than at any time I’ve seen during the 5 years I’ve been covering it.