Tail spend stands today as one of procurement’s most stubborn problems.
It is unmanaged spend typically for low-value or infrequent purchases such as the likes of office supplies and other one-off purchases – accounting for around a fifth of a company’s overall procurement expenditure.
Tail spend can be a significant source of inefficiency for organisations and result in hidden costs, fragmented supplier relationships as well as missed saving opportunities.
Despite significant transformations, tail spend always seems to linger – not because teams aren’t trying to close the loop, but because existing solutions have never quite managed it.
Managing tail spend
Recognising this problem is Axiom Co-Founders Alistair Cane and Steve Ueckermann. During lengthy careers in procurement, they have felt this frustration first-hand and in Ueckermann’s mind, he believes the fundamental issue of tail spend is the fact it is structurally inconvenient for all involved.
“It’s really too fragmented for procurement to manage manually, too low value per transaction for finance to scrutinise it and really invisible enough that nobody actually owns it,” he explains. “So both teams know that the problem exists, but the big issue here is the efforts managed. It’s always been outweighed by the perceived return that you get from it. I think this is where AI used properly can reduce the effort involved.”
Cane agrees with Ueckermann and adds that the key element is that users often need to purchase the products and services they need quickly. As a result, when it comes to tail spend, users will take the path that presents the least resistance possible in order to get where they need to go. “Often it’s not an issue of the system failing them, it’s just not serving them correctly,” explains Cane. “Users need things fast so they can get back to their day job. Think of the toolset that’s available to most organisations and their Source-to-Pay systems, they are geared to managing big strategic purchases. You’re talking weeks when it comes to the timescale it takes to onboard a new supplier in a Source-to-Pay environment in an enterprise organisation. That’s far too long for users who need to buy something in the next day or so.”
One of the biggest challenges with managing tail spend is that sometimes the cost of overseeing it is greater than the value of the purchase itself. “When you think about how people categorise and define tail spend, people do it very differently,” explains Cane. “Most people would use a 80/20 rule, or they might use a spend threshold level. But ultimately what happens when you look at procurement organisations is they may only have 20% of their spend sitting in the tail, but they’ve actually got 80% of their resources trying to control this activity in an incredibly manual way.”
“The other area is the payment,” adds Ueckermann. “The payment layer is almost always completely disconnected from procurement. Even when the buying side is handled well, the moment the transaction hits accounts payable (AP), the data and compliance trail is broken. There’s a gap there that never gets closed and it’s where unmanaged spend lives.”
Data challenge
Buying and paying have historically been treated as separate actions and Ueckermann explains the reasoning lies within the data. “When you unify them, something fundamental changes and the guardrails on the buying side, approved suppliers, category controls, budget thresholds – these apply at the moment of payment,” he says. “You can’t circumvent procurement by going around AP because they’re in the same system. Today, they are definitely two different areas because you have a buyer going out and making a decision outside of procurement’s remit, and you’ve got the payment happening blindly through AP or Viacard with no backing data. When you get to look at the data, there’s normally not enough information there to actually understand what was bought.”
Indeed, as far as Cane is concerned, the importance of getting the data right cannot be underestimated. In his view, when that part is operating as it should be, the resulting transformation from a controller management perspective is significant. “When we look at the enterprise organisations that we’re dealing with, often we’ll ask them for a breakdown of their data,” discusses Cane. “It’s not unusual for the largest category of spend to be classified as ‘Other’, simply because they can’t understand what’s being bought by who, and they can clearly see when, but they just don’t have the level of detail to really be able to even start to think about how to control this area.
“When you make that transformation, what you can see is extraordinary – both from a management perspective and big picture thinking of how to evolve the management and proper category strategies. But at the moment, I think it’s fair to say most organisations are flying in the dark and tail spend is considered as an annoying element of spend that people would just prefer to turn their back on and look elsewhere.”
Axiom MarketPay
Traditionally, purchasing cards (P-Cards) were used to streamline, low-value transactions and help enable faster purchasing. These allowed for controlled spending, more efficiency and improved supplier relationships. However, one of the major drawbacks of P-Cards from a compliance perspective is that authorisation only happens retrospectively after the event has taken place.
This is where Axiom’s MarketPay solution comes in. MarketPay is built to handle the full tail spend flow instead of fragments of it. It operates on a disclosed procurement agency model – which means Axiom acts on the customer’s behalf instead of as an intermediary. Powered by its procurement agent, it automates the steps that typically slows everything down from validating request data to enforcing thresholds and compliance. Every payment also runs through a global payment account held in the customer’s name which allows the team to stay in control at all approval stages.
“With MarketPay, the way the platform works is that all of that compliance, the approval of suppliers and the budget sign-off, happens at the gate before the transaction or activity even happens,” explains Cane. “What that is also doing at that stage is capturing incredible levels of data, which then allow people to make really strategic decisions moving forward. The control moves from being a retrospective control to a pre-purchase control. You are putting the power of compliance in the hands of the platform, not the onus on the purchaser or the effort on the procurement person. You’re letting the platform do a lot of the heavy lifting and it’s a massive game-changer.”
Agentic AI boom
Procurement is in the midst of a new era – one defined through the likes of agentic AI and digital innovation. In recent years, agentic AI’s popularity has boomed and today most companies are leveraging agents in one way or another. The major benefit of agentic AI is that it doesn’t just respond to instructions or prompts in ways that generative AI tools like ChatGPT does, agentic AI is more like an engaged colleague – able to take on tasks such as analysing data to predict outcomes, identify goals and execute workflows. Ultimately, agentic AI is designed to free up procurement teams to focus on more strategic tasks such as managing supplier relationships while the AI handles the repetitive, mundane work.
“One of the challenges that people have with procurement systems generally if you are not in procurement is they’re not particularly intuitive,” explains Cane. “You almost have to know where to go on a procurement system to actually enact a transaction. What the agentic capability does is allow people to talk to the system in natural language and the system will then prompt them in terms of what they need to do. That’s a real game-changer in terms of the user experience.
“One of the things that we get from both procurement and the business is we just don’t want to be spending a huge amount of time on these transactions. When you can literally talk to the system and it is self-populating and making decisions on your behalf in terms of what suppliers you can go to and approve, it then becomes a tool that both practitioners and users across the business actually want to use.”
Ueckermann adds that Axiom’s solution is helping procurement teams move the needle from a reactive approach to one capable of engaging problems head-on. “This platform is continually monitoring spend patterns, flagging non-compliant behaviors, indicating consolidation opportunities, servicing and actioning insights,” he explains. “It’s not just a dashboard, it’s actively involved in the process.
“Across tail specifically, we don’t really have dedicated category management – it’s a piece that gets ignored entirely. What we’ve created is a system that backfills that gap in human intervention and makes it easy. That’s where agentic AI can fill the gap and the platform becomes the category manager of the long tail.”
Gone are the days of procurement sitting siloed and out of the way of the action. Today, the function stands as a driving force within an organisation with evolutionary technology tools in their possession to power transformation journeys. Cane reveals that “procurement has done procurement for the sake of it for too long” and what they want to do now is put the tools and platforms in front of the users who actually want to use them.
“I think procurement’s great desire has always been to get spend under management,” stresses Cane. “In the traditional world, that means under people. What we’re looking at now is terminology that talks about spend under control and the control is being delivered through the technology. With control comes better data and with better data comes better insights and opportunities. What we’re seeing is a change in procurement mindset from a police or admin centre to managing these transactions to a really valuable part of the organisation that can make strategic decisions because they can see exactly what’s happening when and why.
“The ability to talk to the technology and ask it to run and generate reports while highlighting opportunities for insights and improvement is a complete game-changer because that was what was missing in procurement previously. Prior to this, people were sitting there throwing data at analyst teams hoping that they could put some shape around the data, let alone drive insights. It’s making a massive difference.”
Procurement’s evolution
Back in 2020, Axiom was founded with a mantra of doing something different. For Ueckermann and Cane, they have both witnessed first-hand the damage inaccurate data can do to the function and made it their mission to solve that procurement pain.
“It was always down to, ‘Oh, this is what I think, this is my gut feel, or what is the consensus amongst a number of procurement people.’ That’s just how decisions were made but I think we can move that on now to agnostic decision-making where you’re making objective decisions because the machine is being totally objective about that. When you’re talking about strategic procurement,you need the experience, the gut feel and the consensus but with tail spend it sits very comfortably with AI and the whole agentic piece.”
Cane adds that upon starting Axiom, the organisation had a mission to deliver insight and outcomes. He explains that their frustration from a collective 50 years of experience in procurement was that procurement professionals have been looking in the wrong place. “At the start of a transaction anywhere in the tail, if the technology is enabling you to capture the right data and make decisions on that data, then from day one you’ve got clean data into the platform,” explains Cane. “From there, every single transaction and activity that goes through the platform is recorded, it can be analysed and assessed, and it can be part of the data set that then the agents can go to work on to understand what’s happening.
“There is going to be a fundamental shift between people leaving that old world of worrying about terrible data sitting in the ERP systems. With the technology now we are capturing clean data, and we’re using that technology to really understand what that data is telling us. We’re going beyond that to actually understand what decisions can then be made using that data and scenario planning. Then it is about putting that information in front of the buyer to make the right decision which is the fundamental shift. To my mind, procurement then stops being this procurement for procurement sake entity that sits in a hole somewhere in a business and starts to become a real value add to the buyers across the organisation.”
Future
Looking forward, few could argue procurement is in its most exciting period ever with an array of digital solutions at its fingertips to make life easier for leaders and their teams. It is clear the advantage lies within leveraging digital solutions to manage tail spend or risk inefficiencies and hidden costs creeping into the bottom line. Ueckermann believes that the next frontier of spend management is not far away from being realised. “I think the future is a world where spend is spend, not tail spend and strategic spend, it is all spend,” he explains. “And you can get there with proper data, fix the data in your tail, and do it properly with a platform like Axiom. Then the problem will go away.
“We’re not there yet, but as soon as the data improves and the models are trained, we will see that shift happen at a huge pace. There is a world where Axiom won’t even have a UI, it will just be a box that does things automatically. And that’s really where we think it will ultimately get to.”
“Spend is spend and it goes from spend that is either managed or unmanaged to all spend being under control,” adds Cane. “And that makes all the difference.”
