Contact Us

Digital Business Services

AI enabled Negotiations: Are we on board yet?

Negotiations are an integral aspect to business, in sourcing and procurement it plays a very critical role as it saves cost and gets the best deal possible. As automation and technology are drastically changing business processes, has the act of negotiation evolved along with the digitization that is sweeping the industry or does it still remain the same ?

In the world of procurement, Negotiations are purchasing processes aimed at reaching an agreement on either price or contracts. These could range from simple tasks like buying stationery to complex tasks like setting up a new facility. Hence, the Sourcing Manager has to deploy various negotiation techniques to obtain the best value for money. Negotiation is a highly valued skill for procurement professional as it delivers the most critical outcome - savings.

While traditionally conducted as face to face discussion or over a telephonic conversation, negotiation process is undergoing a change with advancements being made in technology- with a trend being observed of increased usage of email or online tools which provide key inputs enabling managers to plan their upcoming negotiations.

In this article, I would like to shed light on how the negotiation process has evolved and how the future of negotiation (or eNegotiation) may look like considering the pace at which digitization and automation are taking over Procurement.

As we are already aware of, the Procurement process is already reaching higher automation levels. Be it Reporting and Analytics, P2P, Contract Management, Sourcing, AP (accounts payable) or Logistics - most processes are now executed or monitored with just a click of a mouse. However, we are yet to see negotiation slowly being replaced with e-Negotiation tools just like eSourcing and it could be some time before that happens given the human element in negotiations cannot be completely ruled out in its entirety by cognitive technologies- however with information becoming more real-time, interconnected and platforms more collaborative and integrated with existing procurement processes - the future of negotiation to seems to be more tech-driven.

Evolution of negotiation practices:

Evolution of negotiation practices

When you closely look at the representation of the Evolution of negotiation practices, some might argue that a face to face discussion is the only practice which cannot be classified as eNegotiation as telephone, email, Virtual, AI enabled negotiations are eNegotiation practices evolved with technological advancements.

However, I would still like to classify negotiations done over telephone and email as more of a traditional and less of an e-negotiation practice. As both the channels evolved and played a significant role during the IT revolution when we were at the crossroads but still required a lot of manual intervention in the overall process as both were just modes of communication without an interface. A traditional Negotiation process is a time-consuming process where you are negotiating with multiple suppliers, individually or with the same set of suppliers, repeatedly for the same services or products. In many instances, while eNegotiation could mean a direct and time-limited competition, where suppliers join the virtual negotiation table and improve their prices in real time to win the contract with high potential to consolidate the efforts.

How the future of negotiations looks like with emergence and adaptation of Artificial Intelligence enabled technologies?
As demand for simplified, intuitive and efficient procurement processes has taken center stage. We are moving towards a world where pre-negotiated pricing and contractual terms equipped with guided buying channels will be able to direct the business user to buy from the catalogue of items of their choice at contracted price without having to repeat the exercise per each purchasing need.
As it is now possible to analyze the buying patterns of the organization with predictive and pro-active buying, it is highly likely that even eNegotiations which were conducted repeatedly as per individual needs will be replaced to a considerable extent by organizational level negotiations as marketplaces become the new norm.

With Big Data revealing business user's buying pattern, Procurement Professionals will be able to understand the user as well as supplier behaviors and plan their negotiation strategies or mediums accordingly. However, the success depends on the availability of real-time virtual inventory that continues to evolve through self -learning to anticipate and meet that demand and reinventing the customer experience.
The future Category Manager will not only be able to conduct an informed reactive negotiation with the help of AI enabled insights, but will also be able to predict the demand and proactively negotiate and keep the product or services catalogue ready to be used by the business user who has left IT footprint over the years to be taken advantage of. Additionally, the systems will have the capability to record these, understand cognitively and draw patterns from past negotiations to provide suggestive tactics or strategies.

More Power to the machines?
All the advancements in the Artificial Intelligence will most likely lead to a "have" and "have not" situation between those who possess AI and those who do not when it comes to effective negotiations.

Now let's envisage a scenario which is highly anticipated and which might become a reality in the near future. It is Negotiations being conducted by an AI chatbot. The big question is can a chatbot without common sense and emotions handle negotiation like humans?
The answer lies in the advancements in the field of NLP (Natural Language Processing) wing of AI. Natural Language processing is the next big thing in AI, and it is only a matter of time that we will be able to interact with machines on a daily basis not only for personal use (e.g. Google Home, Amazon Alexa, MS Cortana) but for business purposes as well.

Once we have the Conversational User Interfaces slowly replacing the traditional Graphic User Interface, then empowered with all the data, machine learnings and language proficiency, a negotiating chatbot will not be too far away or too hard to visualize.
The biggest challenge will be that, we, as a human tendency forget that we can do something in a new way. At the same time, we are also capable of adapting quickly to changes./p>

In other words, the technology might completely change the way Procurement negotiates in the very near future for good. It is definitely going to be a very exciting journey. Are we on board yet?