Once heralded as a strategic differentiator, AI in procurement is rapidly becoming table stakes. It is undoubtedly an imperative for organizations to remain operationally efficient and companies that fail to integrate AI into their procurement strategies will not just fall behind, they will be uncompetitive. The challenge is to thoughtfully and pragmatically implement solutions and tools that will deliver results quickly and cost-effectively.

We believe that the opportunity is massive and, despite all the hype about the promise of AI, the value proposition is undeniable. AI is reinventing the procurement process by freeing up time and amplifying the capabilities of skilled professionals. This fundamental change in procurement processes has led to the emergence of a raft of new companies that offer distinctive point solutions or orchestrate the flow in novel and more effective ways. This is a good time to be a founder or investor in the global procurement market.

In this report, we look at how companies are currently securing the last mile, examine how outdated infrastructure, non-human identities and non-standard apps are leaving cracks for attackers to exploit, and consider the start-ups that are emerging to solve these problems.

While the magnitude of annual global procurement spending is much debated and we have not seen any reasonable consensus estimate, it is generally agreed that the process is both inefficient and ineffective. Research shows that 80% of requests-for-proposal (RFPs) are still handled manually, and more than half of all procurement and supplier management processes have yet to be digitized. This leads to errors, rework, lost savings, and as much as 20% of procurement teams’ time being wasted. With the right tools, experts at Deloitte, Gartner and McKinsey estimate that procurement teams can deliver savings of 2%-3% on most commodities, 5%-10% on other direct costs, and as much as 10%-15% on indirect purchases that typically represent 20%-40% of a company’s total spend. This is a huge opportunity.

The best procurement organizations understand that success in today’s complex and fast-moving environment requires mastery of data-driven decision-making and sensible automation of procurement processes and workflows. McKinsey benchmarking showed that companies with top-quartile procurement maturity have EBITDA margins at least 5 percentage points higher than their less mature peers, which translates into material differences in bottom line performance and total market capitalization.

Chief Procurement Officers (CPOs) recognize this and 72% of those surveyed by Deloitte in its 2023 CPO survey said that driving a digital transformation in procurement was a priority. Gartner’s 2024 CPO Survey identified investing in AI and genAI as a top three priority for 2025 and McKinsey research highlighted that procurement professionals had the most positive outlook on this technology. They estimated the potential impact from cost savings and efficiency gains at about $80 billion.

To pursue this significant opportunity, get the visibility and data required to make informed decisions, and to build AI tools into procurement workflows, CPOs are investing in software solutions to support their teams. It is estimated that the ~$8.2 billion procurement software market will grow at a rate of 9.5% per annum to reach ~$17 billion by 2032. The winners will naturally grow at many times this rate.

GenAI effectively enhances many procurement workflows and 73% of procurement leaders surveyed in early 2024 claimed that they would adopt the technology by the end of the year. A quick look at Gartner’s “hype cycle” for procurement and sourcing solutions, shown below, highlights that predictive analytics and genAI are at the very peak of inflated expectations.

Overhyped it might be, but implementing AI in procurement remains an imperative that can’t be ignored. There is simply too much value at stake and very few other AI use cases will offer such compelling and quick returns. Quite simply, AI has the potential to redefine procurement processes.

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