In the Functional ExtAInction Battle white paper, the authors repeat the ridiculous claim that we may see AGI within the next decade (despite their acknowledgement that it will need a gargantuan data processing infrastructure which will require an unachievable energy requirement that is the equivalent of 34 new nuclear power stations by 2030 and 34 more by 2035, which still overlooks the requirement for an exponential increase in training data, which does not and will not exist — as we don’t even have enough data today for effective LLMs, which already stole every piece of data on the internet to get to the point where it fails almost 50% of the time on tasks it was specifically trained for, like ChatGPT which generates responses with incorrect information 52% of the time! [And now that the internet is filled with as much AI slop as actual human created content, performance is just getting worse.])

The reality is that we won’t. Every 10 years we see a resurgence in AI hype and every 20 years it is a big one. This is the biggest AI craze since the early 80s, when Japan almost bet its entire IT economy on 5GL which was supposed to allow a computer to solve a problem presented to it from constraints alone. i.e. A first attempt at … AGI! It didn’t happen them, it’s not going to happen now. Until we crack intelligence and ingenuity, and how to effectively model it, all the processing power (and flawed data) in the world is not going to do that for us. Moreover, we will continue to outsmart the most advanced AIs in the world using toddler level thinking and hiding in boxes and bushes, like these marines did.

However, the C-Suite’s desire to believe in this is forcing digitization efforts, if not AI, and the teams that survive this current nightmare will be those that not only digitize under the guise of AI (since every vendor claims it, whether they really have it or not and since most C-Suites have no clue what AI is or isn’t), but in fact embrace next generation automation on steroids (like Adaptive RPA that learns from every exception, decision, and override to continue to decrease the need for human intervention over time). (The teams that fail to embrace modern tech will be sidelined and the teams that don’t resist the experimental AI being pushed on them by the overpriced consultancies brought in by the C-Suite will continue to contribute to the 95% failure statistic and possibly end their function entirely.)

Moreover, the teams that embrace appropriate digitization, like form fit ARPA, will evolve into the evolutionary niche that the business needs, and that only Human Powered Procurement can do. While the authors got the premise wrong (it’s not AI that you need to worry about, it is the AI Marketing), and are overzealous about the emergence of AGI, they get the future right. (Which is the past, by the way, but more on this later!)

According to the white paper authors, the future is spend that needs human interaction (because it can change the game or presents existential risk to the business). This is what should be Procurement’s primary purpose. Procurement’s never had enough time to manage all spend, and like the authors note, it shouldn’t be managing tactical spend. It should be automating it. If the spend is low volume, low risk, easily replaceable, etc., Procurement should define the best-practice strategies and processes and let modern tech (which doesn’t require AI*, by the way) entirely automate it. This goes for routine and non-routine spend where in the case of non-routine spend, the provider has best practice templates culled from its experience and community intelligence. However, routine strategic spend will not be turned over to AI. It will be highly automated, but human experts will still vet the suppliers and verify the decisions before a contract is signed or a PO is sent out, but a lot less time will be spent on strategic spend that is routine and usually doesn’t change much from year to year.

The world, and the technological underpinnings, will continue to evolve as they have for the last four decades. The pace will pick up a bit, but not much. Humans are naturally lazy and change resistant, which means that significant change typically requires a generation (or two). It’s never a “whole new world”, just a slightly different one. The only time humanity has ever undergone and grudgingly accepted such significant change is as the result of a significant natural or man-made disaster that has devastated entire cities and populations, and forced adaptation to survive. But rarely has the survival brought something better in the lifetime of those forced to undergo it! (Plus, the world has been a commercial hub since before history was recorded. We’ve always traded to survive, thrive, and satisfy our desires. It’s just that we’ve replaced food and trinkets with digital bits that represent food and trinkets with a digital equivalent of their perceived monetary value. So whether you call the function in the business that manages that aspect of the outside world Procurement or the Commercial Hub [of the business] is irrelevant.)

So don’t fear a rapid change, it’s not going to happen. But prepare for a steady change, and you can keep up while your peers fall behind.

^* When the doctor wrote his AI In Procurement (Sourcing, Supplier Management, etc.) Today, Tomorrow, and the Day After in the late 2010s (before all the Gen-AI bullcr@p), what he didn’t tell you was that everything he included in “the day after”, which is the majority of everything the Agentic AI providers are promising now, was already possible. It just required a lot more code, sweat, and tears on yesteryear’s stacks with a lot more templates and customized training data sets than most providers, or companies, had at their disposal at the time.

One thing the Functional ExtAInction Battle white paper gets almost entirely right is that Procurement faces an existential risk from the chain of events that AI will trigger because, to be entirely right, Procurement, like every other back-office function, faces an existential risk from the chain of events that the Bullcr@p AI Marketing from the A.S.S.H.O.L.E. has already triggered.

The C-Suites in most larger North-American centric organizations are populated by psychopaths whose only goal is to amass as much wealth and power as they can, in the hopes of joining the elite and hobnobbing with the Techbros they all admire so much! Moreover, in their minds, the best way to do this is to get rid of those pesky paycheck and benefit demanding employees who can’t even work straight through their 8 to 12 hour shifts! No one is more inclined to believe the lies from the Big Gen-AI/LLM vendors than these C-Suites, as no one wants to believe them more. Thanks to the biggest con man not in politics since PT Barnum, they want nothing more than to eliminate as many positions as they can, as fast as they can. Which means if you are not performing significantly more productively than average, you’re next to go!

While AI has not advanced to the point that was promised, and will not over the next few years, technology will. People will return to the tech that works, use the data and computing power available to massively scale this tech up, and continue to digitize more and more as time goes on. This means that while AI will not end Procurement or any other back-office function, it will cause them all to evolve, for better or worse (and may even cause some functions to be absorbed into others).

This will also force, as the authors point out, a shift in the provider landscape. Many of the systems and vendors we know today will disappear, but not because of AI, or lack of AI, but because of lack of differentiation and lack of value. There are over 700 vendors in our space (see the Mega Map) that consists of less than 10 core modules of functionality based on current Source-to-Pay definitions and best practices. Moreover, the vast majority of vendors have not delivered on their automation and ROI promises, and the vast majority of new upstarts without even a fraction of the capabilities of the mature vendors won’t deliver either.

A large number of vendors will continue to pop up promising revolutionary Agentic AI powered workforces complete with a slew of AI Employees for your every needs despite only being able to solve a small set of tasks under near-optimal conditions and needing constant intervention either from the buying team or the provider’s development and support teams to keep them going. (And this is why AI Employees Aren’t Real … because they don’t work without real employees backing them up 24/7/365.) In their wake, we will see new vendors who scale back the claims and the efforts, and instead string together a series of point-based AI solutions in a modern take on classical, gated, RPA solutions (i.e. ARPA) that implement next generation versions of processes today’s leading Procurement organizations are ready for and capable of adopting. Only the Procurement teams that adopt these solutions will survive.

The reality is that, despite what the authors claim, the automation of routine is not, and will not, be a done deal because it is the routine that is the leading cause of inefficiency in the back-office, and once the AI reality sets in, and more and more C-Suites start to realize that the claims are all lies (damn lies, and AI), the end-goal will revert to automating that routine. Right now, routine is what takes up over 80% of the average back office worker’s time. Get rid of that, and you have an 80% workforce reduction with no impact to organizational productivity or performance. They C-Suite will soon realize that even though their dreams of an employee free operation are just that, they can still eliminate 80% of their workforce with proper digitization and will aim to do just that. Moreover, they’ll eventually call it a win because it’s still an 80% reduction in human workforce in the back office.

This means that Procurement is caught between a rock and a hard place. They can stand still, and die, or evolve, and shrink. At least for the “age of disruption”. However, once the C-Suite leaders realize that they didn’t gain anything with the workforce reduction, when the “age of evolution” begins, the smarter C-Suites will bring back more humans who are capable of focussing on strategic functions, growth, and market innovation. Procurement that adapts and leads the business through the “age of disruption” will see its human workforce almost double (compared to the new baseline) in the “age of evolution”, while Procurement that fails to do may be swallowed by Supply Chain, Operations, or Finance.

So what does all this mean? It means that …

(Sorry, but you have to come back tomorrow for Part 4.)

Namely, it’s a battle of propaganda versus reality, lies versus truth, against not only the other departments but the vendors selling solutions built on the lies and the consultancies coming in and spreading new lies on a daily basis!

The reality is that even though AI is NOT advancing at lightning speed, the claims around it are and that’s more dangerous than the tech. People are getting lured in to tech that’s not market ready, and that’s why so many projects are failing.

Even worse is the 5% that aren’t failing. Even though most of these are far from a resounding success, when the AI works good enough on the mostly tactical tasks it is installed for, the organizations start to trust it (even when they shouldn’t) and get overconfident on the ability of AI. These companies then approve a slew of AI projects and prematurely get rid of people they shouldn’t, hindering everyone’s ability to do a proper job. This can lead to Procurement extinction when it leads to organizational extinction with not enough people left to deal with the first crisis that materializes that the AI can’t handle.

Procurement has to find a way to win the battle of propaganda and stave off “AI” that is unproven or that is in select use cases the organization is not yet ready for due to a lack of data, systems integration, or knowledge to properly use the real AI that works. Otherwise, it won’t survive, and there’s a chance the business won’t either with one economic crisis after another; supply chains constantly breaking as a result of trade wars, sanctions, and border closings as a result of wars and geopolitical uprisings; demand constantly shifting as unemployment and costs rise; etc.

In other words, as the authors wrote in the Functional ExtAInction Battle white paper we started discussing yesterday, we are in an Age of Disruption, but it’s not the tech (which rarely works), but the marketing and lies around the tech (that all of the psychopathic CEOs want to believe so they can fire all their human workers and replace them with 24/7/365 robots that don’t have any rights and don’t need to eat or sleep). The sad thing is that we’d have a better chance of surviving an age of real AI than this, especially when lying is now sanctioned in the USA and instead of being investigated by the FTC you are given a free pass, and should a state court convict you, you can just buy a pardon! Given that most people didn’t understand technology before the Age of (Fake) AI, how can you expect to understand AI and what is real and what is not?

Moreover, an Age of Evolution has to follow because the C-Suite believes,
right or wrong, that every aspect of their organization has to digitally evolve or they will die. This means if that Procurement doesn’t evolve digitally, it will be replaced by a function, or a team, that does. Fortunately for Procurement, every vendor, and their office dog, now claims to be AI-backed, -driven, -enhanced, -first, -powered, etc. even if they don’t have any AI at all! This means that Procurement can select a solution that works for them, which uses configurable, adaptable, RPA; embeds best practice; encodes decision optimization and predictable, dependable trend analysis in its analytics; etc. and automates 80% of their work error free. They can evolve, look like they are meeting the impossible AI mandate, and get better results than the rest of the business.

Finally, a new world is coming because, once we have the AI crash, vendors with real solutions built on real, traditional, AI models that can now be effective with the data available and processing power at our disposal will emerge. Instead of searching for the magic model that will supernaturally become emergent and achieve intelligence and work on every problem, the next generation of vendors will take the time and make the effort to integrate dozens (if not hundreds) of traditional, appropriately trained, models that reliably solve point-based problems with high, and often near-perfect, accuracy; encode guardrails for the rare situations in which the models might fail; and build workflows that are easy to follow, execute, and even manipulate and that solve the tactical data collection, manipulation, analysis, and export problems that take up the majority of a Procurement professional’s time and deliver no value in return for their completion. Procurement teams that wait to identify and adopt this technology will be the ones that rule the new world, while the other teams (departments, and maybe even businesses) won’t exist any more.

Moreover, the Procurement professionals of tomorrow will be almost entirely focussed on strategic capabilities, as the need for tactical efforts will be rare and limited to not yet seen exceptions (as each resolution will train the platform which will then be able to handle similar exceptions reliably from that point on). This means that today’s Professionals need to start preparing for that eventually. They don’t need to rush, but they do need to start and make steady progress.

When we say the urgency is not as great as the authors make it out to be, we mean it. the doctor has been covering this space for 20 years. For 20 years he has been reading “future of” white papers that proclaimed the space was going to be totally different in 10 years. This means that the space should have been totally transformed by modern tech 10 years ago. Guess what? It wasn’t! Nor was it the next year. or the year after that. Or the year after that. For 10 years the predictions of radical transformation have failed to come true. While the pace of digitization will increase, the trend will continue to hold. After all, the point of Procurement has not changed since the first manual was published 138 years ago. The world may have changed, but the world’s second or fourth oldest profession has not! (Now, if the “sales” profession really was the oldest, that makes the “buying” profession the second oldest. However, before that we had [religious] leaders and stargazers, which are still professions today. So that would make “sales” the third oldest and “buying” the fourth oldest, despite the claims.)

We agree you have to start today, but you will only win the race if, like the tortoise, you go slow and steady and master each step while the others try to take shortcuts with tech they don’t understand, become overconfident in the great sounding (but incorrect) outputs that are returned, get lazy and lethargic as a result, and nap on the job — allowing you to pass them by.

Like objects in the rear view mirror, AGI appears closer than it is. (And that’s a good thing, because if AI actually emerges, we are not likely to continue on this planet.)

Like we said before, the paper is worth reading, it gets the stages right, it gets the mild urgency right, it just gets AI wrong (at least where it is today and will be tomorrow, and the day after that, and the day after that for quite a while … at least until entirely new models and breakthroughs are made that may actually model intelligence and not just random computation).

Plus, the history lessons (including those which really don’t have anything to do with Procurement, but it’s a nice lesson anyway) are a good read for those that didn’t study history in school (or even remember what happened last decade).

About a month ago, Jonathan O’Brien of Positive Purchasing and Guy Strafford of OneSupplyPlanet released a white paper on this very topic where they claimed:

AI means Procurement is going to be left jostling with the rest of the business to control the commercial space. It is a race. Start now or lose.

I have to say I don’t agree. In fact, we’re still in the start now AND lose timeframe, as evidenced by the recent MIT study demonstrating that 95% of AI projects have failed and the plain and simple fact that the majority of consultancies, providers, and new-age services-as-software providers claiming to provide AI Employees (which is all bullcr@p by the way, see our previous posts as AI Employees Aren’t Real) are applying the wrong AI to the problems they believe AI can solve. (And that’s another issue, real AI can do quite a bit, but not what the greatest con-man since PT Barnum not in politics keeps telling us it can do.)

However, they’re close. You need to start learning what AI is and isn’t now, looking out for the past and next (NOT current) generation of providers who were applying real AI properly and who will emerge to apply next-gen implementations of real (non-LLM) AI properly to Procurement problems (with real education and real procurement experience to back it up, and that’s not a Youtube crash course in how to engineer a prompt for a bullcr@p LLM, by the way). That way, you can select the right solution for the right problem at the right time.

You are going to have to jostle with the rest of the business, especially Supply Chain who believes they are the most critical function (when they are only one side of the critical coin with Procurement being the other half), IT who believes they have the best technical knowledge and should make the decision (and don’t really understand what the tech has to do for the rest of the business, just what is easy for them to maintain and fun for them to play with), Finance who wants to ensure they have better visibility and control over every dollar, Sales and Marketing who want to pretend the age of the Mad Men never ended, and so on.

Moreover, while many of the activities carried out by Procurement functions will be automated, these are just the data entry, transformation, and output functions that we were promised would be automated 40 years ago when computers started entering the average business. We’re not going to see the automation of the strategic functions, the relationship management, or the consensus building that is critical to success. While the authors may claim that many Procurement activities will soon be managed directly by the business, that will be a step back as we’ve seen, and Hackett has catalogued, the significant difference in performance in businesses that have standalone best-in-class Procurement departments and those that don’t have any Procurement departments. The reality is that, in the economic and technological climate that is coming, businesses without Procurement likely don’t have the same chance of survival as businesses with Procurement.

According to the authors, all that will remain are the commercial hub activities that require human expertise and intervention: change management, innovation, and sophisticated market engagement. While these will definitely remain, the reality is that you can’t turn supplier discovery, qualification, onboarding, relationships, performance management, development, and innovation over to a machine. You can’t build organizational consensus through emotionless algorithms. Not all award decisions can come down to the results of lowest cost computations after automated negotiations based on bid rank or classic game theory (or even modern game theory as many of the game theory “experts” get this wrong regularly, as the author has poked holes in claimed “optimal” solutions presented on LinkedIn and vendor websites more than once, because there’s always an assumption as to what optimal is, and it’s usually one sided or wrong). Technology will reduce the time requirements for a lot of these processes as it will fully automate the data collection, transformation, analysis, and recommendations for you, as a human expert, to one-click accept or deny, but a human will still be needed. All that will disappear is the 80% to 90% of the work that is tactical data processing. While this will displace people, as all technological evolutions do, we need to remember that each evolution has ultimately resulted in the creation of new jobs as old ones get automated. Not only will people be needed to maintain the automations and hardware supporting them, but new strategic and creative jobs, some of which we can’t yet predict, will emerge as a result.

Moreover, the authors believe that since such capabilities are found across the business, the other functions … will want to move into this commercial space and that unless Procurement develops the skill sets to a higher standard than the other functions, it will be outpaced.

While they are not wrong, and while this will make life difficult for Procurement if other functions get ahead of them in terms of value delivery to the business, Procurement is more than just change management, innovation, and market engagement. However, without this core, Procurement’s differentiation will be limited and its overall influence over the business not what it should be.

Moreover, while there will be a battle to evolve and survive post AI, we’re not there yet because what we have now is not AI, it’s the latest instantiation of Silicon Snake Oil with grandiose, false, claims and no real value. We’re still a few years away from widespread application of real, useful, AI, and more than a few years away from post-AI. In other words, the likelihood of Procurement being phased out as-is by 2035, as the author’s claim, is not too likely at this point. However, depending on how fast we get to, and through, the Fake AI crash and on to real AI, Procurement could be in deep trouble in the early 2040s. Which is why you have to start learning about real AI today, where you can apply it safely and effectively, and how you can implement it bit by bit for stable, guaranteed, success. Learning — not rushing in to an incomplete, half baked, solution guaranteed to make you the next casualty among the 95% error rate — is key.

So for those of you who asked, that’s my initial response as to whether or not there is a Functional ExtAInction Battle in Procurement. There’s the same battle there’s always been, but without real AI, and without the rest of the business having the deep Procurement knowledge necessary for real Procurement success (which goes well beyond what can be automated today), there’s no chance of ExtAInction in any Procurement department which is a leader in its operation.

However, even though the conclusion is wrong, the majority of the observations and analysis in the paper is right. In fact, it’s one of the best the doctor has read yet in terms of analysis and insight. So in our next post(s) we are going to discuss that. Despite a few mistaken conclusions, which can be forgiven because it’s really hard to understand the reality when it takes a very advanced understanding of mathematics to understand the tech, which is necessary to understand the reality, it does a great job of figuring out how Procurement needs to be seen and why. So download the white paper and read it today for the insights within (without having to worry about an extinction that won’t happen … at least not yet).