Financial Services Procurement in a Digital World - 56608

PUBLIC
Hugh Anderson, John Thompson, SAP
March, 2018
Financial Services Procurement
in a Digital World

2PUBLIC© 2018 SAP SE or an SAP affiliate company. All rights reserved. ǀ
Value Realization with SAP Ariba Solutions – Customer Proof Points
Technology in a Digital World
Our Digital Business Framework for SAP Ariba Solutions
Case Study – The Intersection of SAP Ariba Solutions and Claims Spend
Wrap Up, Q&A
Agenda

Value Realization with SAP Ariba
Solutions – Customer Proof Points

Financial services customer portfolio
Financial services customers – $46 billion
invoice spend on the network
Buying channels – 61% invoice to PO and 39%
invoice to contract
218 FSI customers globally using SAP Ariba
solutions for sourcing and procurement
40,000 FSI suppliers on the Ariba Network
transacting 8.3 billion invoices and 5.3
billion POs annually
Spend concentration with 95% of spend in
the top 10 categories with 1.8% of suppliers
accounting for 80% of spend

Key findings and trends from SAP Ariba insights 2017–2018
01
Value trumps sourcing savings.
02
Projects are getting bigger and more
complex.
03
Digital procurement enables operational
excellence.
04
Automating compliance eliminates
uncertainty.
05
Agility will help propel procurement’s
performance.
06
Insights (not data) drive superior
performance.

1.
Value trumps
sourcing
savings.
Sourcing savings (as % of spend sourced)
9,7%
7,8%
9,2%
2015 - 2016 2016 - 2017 2017 - 2018
Maverick spend
3,0%
4,9%5,0%
2015 - 2016 2016 - 2017 2017 - 2018
Number of suppliers per $B in spend
Data not
tracked
Top quartile in 2015–2016 Top quartile in 2016–2017 Top quartile in 2017–2018
Savings have tapered off slightly.
As a result, if saving is your sole
objective, you’ll be missing out on the
broader value drivers.
1.668
1.875
2015 - 2016 2016 - 2017 2017 - 2018

2.
Projects are
getting bigger
and more
complex.
Average spend sourced per event ($M)
$4,7
$5,8
2016 - 2017 2017 - 2018
Sourcing cycle time (days) – requirements
definition to contract signature
30
37
2016 - 2017 2017 - 2018
Top quartile in 2016–2017 Top quartile in 2017–2018

3.
Digital
procurement is
an enabler for
operational
excellence.
% of POs disseminated electronically
71,0%
100,0%
Average Top Performer
% of invoices received electronically
40,0%
67,0%
POs per FTE
8.306
10.721
Invoices per FTE
18.468
25.000

4.
Automating
compliance
eliminates
uncertainty.
% of SAP Ariba PO lines created from
contract or catalog
65,7%
92,4%
% of SAP Ariba invoices associated with
contract or catalog
57,6%
88,0%
Guided buying drives users toward the right
contract and catalogs for compliance.

5.
Agility will help
propel
procurement’s
performance.
PO cycle time for transactions through SAP Ariba solutions (days)
1,25
0,17
Invoice cycle time for transactions through SAP Ariba solutions (days)
The ability to perform a process quicker… …with fewer resources is a trait of an
agile organization.
8,40
3,34
Procurement FTEs per $B in spend
39,40
21,30
Accounts Payable FTEs per $B in spend
10,50
5,10

The pace of change has never been
faster than it is today and it will
never be this slow again.

40%Of today's companies on the S&P 500
will no longer exist in 10 years
Source: John M. Olin School of Business at Washington University.

Hyper-
connectivity

Super computers and
in-memory technology

Advanced analytics

Watt Steam Engine
1775
True innovation occurs when the
adoption of technology is met with a
change in the business process.

Time to reimagine
the business of
procurement

Our Digital Business Framework and SAP
Ariba Innovation Road Map

Our digital business framework

© 2016 SAP SE or an SAP affiliate company. All rights reserved.
SAP Ariba solutions in the
context of the digital economy
Customer
Experience
Workforce
Engagement
Spend
Management
IoT
and Supply Chain
SAP for Financial Services – digital business framework
Spend management within the context of the digital economy
BuyerSupplier
Integration to SAP and non-SAP solutions, secure, open platform
Spendcategories
Direct
Indirect and MRO
Contingent labor
Travel
Fulfill SettleMarket
Buyer management
Procure SettleSource
Supplier management
SAP Ariba business network

Trends and innovations for world class procurement
Digital
business
TodayTomorrow
Business value of
procurement
Tasks are
operative,
tactical, and
strategic
Key KPI:
savings
Business value –
“value creation
officer”
Supplier
innovations
Supplier risk and
performance
Paper-based
POs plus
goods receipt
and invoices
Scanning
Lights-out shared
services with end-to-
end automation
Spot Buy integration
in catalogs
Networks and
marketplaces
B2C
B2B
Connected
commerce

Fully integrated source to settle – business strong
 Commodity
classification
 Enrichment
services
 Market
intelligence
 Analysis
 D&B insight
 Dashboard –
360-degree
visibility
Supply chain
collaboration
Spend
visibility
Sourcing
Working
capital
and payment
Invoicing
Procurement
and catalog
Contracts
 Category
management
 Process
compliance
 eRFX and
auctions
 Knowledge,
repository
 SAP Ariba
Discovery
 Reporting and
analysis
 Process
compliance
 Pricing and
terms
 Repository
 Authoring
 Operational
contract
 Expiring
contracts
 Guided buying
 Requisitions
 Managed
catalogs
 Spot Buy
 3 bids and buy
 Contract
compliance
 Workflows and
approvals
 PO flip
 Smart invoicing
 Invoice
automation
 Invoice against
contract
 PO and non-PO
invoices
 Active
compliance
 Dynamic
discounts
 Payment terms
mgmt., extend
DPO
 Supply chain
financing
 E-payment
 Remittance
advice
 Outsource bank
account data
mgmt.
Supplier info and
performance
 Portal, self-
registration, and
onboarding
 Diversity, green,
certs
 Risk
management
 Surveys and
performance
 Quantitative and
qualitative
scorecard
 Forecast commit
 PO, schedule
collaboration
 PO changes
 Advanced
shipping notice
and quality
 Inventory
collaboration
 Consignment
 Service entry
sheets
Catalog and supplier enablement servicesSourcing help desk
Ariba Network – collaborative trading partner business community
One integrated source to pay
4%–15%
in average unit price reduction
$20 million
in contract leakage per $1
billion of spend
40%–60%
in operating cost
reduction
$1–$2 million
in savings per
$1 billion of target

The Ariba Network

Cognitive intelligent procurement
Machine learning
Artificial intelligence
Blockchain
Internet of Things
1
2
3
4
5
Cognitive procurement

Case Study – The Intersection of SAP
Ariba Solutions and Claims Spend

Insurers do not always have visibility to important loss and expense data (such as total spend or # of suppliers by category)
3rd-party categories in claims
3rd-Party Categories in Claims
FNOL
Investigate
& evaluate
Ongoing
claim mgmt.
Reserve
mgmt.
Fraud
mgmt.
Lit.
mgmt.
Payment
&
recovery
Closure &
feedback
Claims
settlement
lifecycle
Internal
process
Internal
process
Call-center
Agent or broker
Independent
adjuster
Rentals
Repair shop
Construction
services
Towing
Attorney
Subrogation
Expert
services
Private
investigators
Medical
services
Third-party
administrator
Salvage
Accounting
Jury
consultants
41%
14%
12%
11%
22%
Independent Adjusters
Expert Svcs (Engineering)
Accounting
Expert Svcs (Building
Consultant)
Client Example
U.S. Property and Casualty Claims Spend
Distribution of claims spend on 3rd-party categories

Requisition to pay moves from a manual process that exposes leakage and risk to an automated, informed, and eventually predictive model
Technology-driven claims procurement: what’s different?
Futurestate
SourcingSelection Engagement Payment
PerformanceRequisition Engagement Payment
SourcingSelection Payment
Limited visibility into supplier
performance management
across lines of business; lack
of central dashboard
Ad hoc selection, lacking
consistent selection criteria
and resulting in quality, cost,
and risk concerns
Limited supplier engagement
controls and approvals
(unstructured agreement)
Invoices not being matched
against engagement details
or contracted rates prior to
payment
Performance management
standards defined and
tracked on an ongoing basis
Assignment of suppliers
based on selection criteria
(such as past performance,
price, or preferred status)
Template-based
engagement: rules and
service expectations defined
and documented prior to
service delivery
Standards defined to match
invoices against engagement
details and contracted rates
prior to payment
Adjusters
First notice of loss
(FNOL) and adjusters
Suppliers
Currentstate
Guided buying with SAP
Ariba solutions
Sourcing, contract compliance, and
invoice matching Spend analytics

Developing preferred third-party provider networks can result in a 1%–3% improvement in loss ratios for most insurers.
However, many firms experience a 50% loss in benefit without ensuring compliance to parameters of these networks.
Technology-driven claims procurement: value at stake
1. Claims and procurement have partnered
to improve loss ratios by 1%-3% (~$100
million in savings) through application of
price and demand management value
levers across third-party spend.
2. However, lack of compliance of third-
party requisitions made through the
payment process can help reduce the loss
ratio benefits by 50% (a.k.a. leakage) and
put insurers at risk.
3. Accenture and SAP are partnering to help
insurance companies mitigate leakage
and reduce risk by establishing
procurement-management procedures
within a seamless and integrated process.
Source: Based upon Accenture benchmarks

Thank you.
Contact information:
Hugh Anderson
Senior Principal, Insurance
Financial Services, SAP
hugh.anderson@sap.com
860-480-8074
Contact information:
John Thompson
Director, Value Realization
Financial Services, SAP Ariba (SAP)
john.thompson01@sap.com
678-699-7040

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