Frequently asked questions about procurement and procurement software

Procurement is the function that ensures a company receives the goods and services it needs at the right price, quality, time and risk. It covers strategic tasks (selecting suppliers, negotiating, contracting) and operational tasks (ordering, delivery, invoice and payment). Our Procurement 101 explains the basics.

In practice the terms are often used interchangeably. Strictly speaking, purchasing means the operational act of ordering and paying, while procurement is broader and also includes strategy, supplier selection, negotiation and contract management.

Direct procurement buys everything that becomes part of the product (raw materials, components, packaging); indirect procurement buys everything the company needs to operate (IT, marketing, services, travel, maintenance). Direct procurement is usually more business-critical, because missing parts stop production.

A modern buyer needs negotiation skills, an understanding of cost structures and markets, analytical skills with data, and increasingly knowledge of sustainability regulation and digital tools including AI. Just as important are communication skills, because procurement works with almost every other department and with external suppliers.

The most common KPIs are savings, spend under management, maverick spend, purchase price variance, supplier on-time delivery, cycle time from request to order and the touchless invoice rate. Our Procurement 101 explains each of them.

The Kraljic matrix sorts purchased categories by their profit impact and supply risk into four groups: non-critical, leverage, bottleneck and strategic items. Each group calls for a different strategy, from simple automation for non-critical items to close partnerships for strategic items.

Source-to-pay, also written Source2Pay or S2P, is the complete procurement process from spend analysis and supplier selection to ordering, invoice processing and payment. It combines source-to-contract (strategic procurement) and procure-to-pay (operational procurement). See our process overview.

Source-to-contract covers the strategic steps up to the signed contract (spend analysis, category strategy, supplier management, sourcing, contracting); procure-to-pay covers the operational steps from the purchase request to payment. Strategic procurement aims to buy "better", operational procurement to buy "faster".

Intake-to-procure describes the front end of procurement: one simple entry point where employees describe what they need, after which the request is automatically routed through approvals, legal, IT security and purchasing. Zip, ORO Labs, Omnea and Levelpath are well-known providers of this new software category.

Tail spend is the large number of small, irregular purchases that make up a small share of spend but a large share of transactions. It is best managed with catalogues and marketplaces, purchasing cards, simple intake tools and, increasingly, autonomous sourcing or negotiation bots.

There are several reasons why direct procurement is special and not every software masters these requirements:

1. Complex supplier management capabilities
2. Embedded risk management
3. CSR and sustainability requirements
4. Cost tracking and benchmarking incl. analyses of indexes
5. Capabilities to manage future cost reduction results

An auction is the only way to carry out a real negotiation with clear goals and rules electronically. It works best when the specification is clear, several qualified suppliers compete and the winner is certain to receive the contract.

Millions of auctions are constantly taking place on the internet – each advertisement is the result of an electronic auction.

The providers with the most complete source-to-pay portfolio are SAP Ariba, Coupa, Ivalua, Jaggaer, Zycus and GEP. Coupa, GEP and Zycus each announced a Leader position in Gartner's Magic Quadrant for Source-to-Pay Suites published in January 2026.

There is no single best tool; mid-sized companies should look for software that is easy to implement, easy to use without training and needs little IT support. In the DACH region, vendors such as Onventis, tacto, Mercanis or Hivebuy focus on this segment. Our article on the different needs of companies explains what matters by company size.

Large enterprises with dedicated "processes & tools" teams often combine best-of-breed tools, while mid-sized companies usually prefer one suite to keep the IT effort low. Intake and orchestration platforms have recently made combinations easier. Read more under all-in-one vs. best-of-breed.

Simple tools for the mid-market can go live within weeks; a full source-to-pay suite in a large company often takes 6 to 18 months. Projects should be split into steps of no more than six months, starting with a minimal viable product, because long projects lose user acceptance.

The most common reason is low user adoption, not missing functionality. Unclear goals, over-customising, long project durations and a lack of internal ownership are typical causes. Our article on user adoption lists eleven success factors.

Notable AI-native startups include Lio, Didero, Pivot, ORO Labs, Omnea, Procure AI and, in Germany, Mercanis, tacto, Zalion and akirolabs. Our market landscape assigns them to the individual process steps.

AI is used to classify spend, extract data from invoices and contracts, find and assess suppliers, draft category strategies and RFQs, compare quotes, negotiate tail spend and predict risks. Since 2025, AI agents have started to carry out complete tasks on their own.

Agentic AI means AI agents that carry out a complete procurement task on their own, for example processing a purchase request, sending RFQs, comparing quotes or chasing an order confirmation, within rules defined by the buyer. The buyer approves the result instead of doing each step. Startups such as Lio, Didero and Pivot and most large suites now offer such agents.

AI will take over many repetitive tasks such as data collection, quote comparison and simple negotiations, but it will not replace buyers. Supplier relationships, complex negotiations, risk decisions and internal stakeholder management remain human work – and buyers who use AI well will handle far more volume and value.

A negotiation bot is software that negotiates prices and terms with suppliers automatically, usually by chat or email and within limits set by the buyer. It is mainly used for tail spend, where manual negotiation is not worth the effort. Known providers include Pactum and nnamu (part of Beroe). Read our article on savings with a negotiation bot.

1. AI agents that process purchase requests and orders end to end.
2. Intake and orchestration: one simple front door for all requests, routed automatically to the right process and system.
3. Usability: consumer-like interfaces and ordering via Teams, Slack or chat, so that employees need no training.
4. Higher automation through machine learning: for example the automatic recognition of the right spend category or the automatic risk check in contract management.
5. Mandatory e-invoicing, which is turning invoice processing into a fully structured, automated process.

Since 1 January 2025, all German companies must be able to receive structured e-invoices; companies with more than €800,000 turnover must issue them from 2027, all companies from 2028. Procurement and accounts payable need systems that process XRechnung and ZUGFeRD automatically. Read more under Accounts Payable.

CBAM, the EU's Carbon Border Adjustment Mechanism, makes importers pay for the CO₂ embedded in steel, aluminium, cement, fertilisers, hydrogen and electricity from outside the EU. Its definitive phase started on 1 January 2026; importers below 50 tonnes per year are exempt. Procurement has to obtain verified emission data from suppliers and include CO₂ costs in supplier comparisons.

The German LkSG still requires large companies to manage human rights and environmental risks in their supply chains, but the government decided in 2025 to abolish the reporting obligation and reduce fines. The EU Corporate Sustainability Due Diligence Directive (CSDDD) has been postponed and is to apply from July 2029. Please check the current legislative status before making decisions.

1. Volatility – tariffs, geopolitical conflicts and fluctuating commodity and energy prices make planning harder and require faster category strategies.
2. Managing supplier performance and supply risk – since material costs are only part of total costs, supplier performance and risk reduction are central levers for cost reduction and cost avoidance.
3. Regulation and sustainability data – CBAM, e-invoicing and supply chain due diligence require data from suppliers that many companies do not yet collect systematically.
4. Missing or incomplete technology – few companies use procurement tools in all areas, and where they do, usage is often low, which weakens the ROI.
5. Turning AI into results – most CPOs are testing AI, but few have scaled it into everyday processes.
6. Difficulty engaging stakeholders – internal departments and IT often have other priorities; clear project goals and good project marketing are proven remedies.

1. Managing and mitigating supplier risk – category and supplier management remain top priorities in times of tariffs and supply disruptions.
2. Scaling AI – moving from pilots to AI agents that handle requests, sourcing events and supplier communication in daily operations.
3. Identifying cost savings – analysing cost components with cost breakdowns and should-costing to counter price increases.
4. Compliance with new regulation – e-invoicing, CBAM and supply chain due diligence.
5. ESG initiatives – enriching supplier data with external risk and sustainability data (e.g. from EcoVadis or Sphera) to draw conclusions quickly and act.

Investment activity is high: between autumn 2024 and mid-2026, procurement startups raised several hundred million dollars, with large rounds for ORO Labs ($100M), Zip ($190M), Levelpath ($55M) and Omnea ($50M). At the same time, established vendors are buying AI specialists. Our page for investors summarises the deals.

Recent acquisitions include Scoutbee and Cirtuo by Coupa (2025), nnamu by Beroe (2025), e2open by WiseTech Global (2025), Sligo AI by SpendHQ (2026) and Vendr by Vertice (2026). The full list is on our page for investors.