When CIOs Fire Back at Procurement (Part 1)

Last week, I began my tirade against why bad CIOs hate procurement and how these executives are hiding behind the tech spend bomb shelter better known as the vendor management office, or VMO. Yet not all CIOs agree with me. In fact, most probably don't. Consider a recent article in CIO from down under by Senior Industry Analyst and Research Director, Scott Stewart. Stewart argues in the well-researched story that "as enterprise IT is being pulled in every direction many will wisely pursue expanded sourcing strategies to help cope with the rapid rate of change ... [further] a heightened dependency follows on being able to effectively manage these relationships to deliver against key business objectives and contribute towards a stronger competitive differentiation."

Yet should CIOs assume responsibility for these expanding relationships and external spending, especially when it comes down to supplier selection and supplier performance management without procurement's broader involvement? We're not so sure. Yet data that Stewart cites from down under (Australia, 'mate), suggests that "close to half of the region's top tier organisations intend to expand their overall sourcing strategies, particularly when it comes to their infrastructure and applications ... Research validates the view that these multi-sourcing strategies will only increase the dependency that organisations have on effectively managing the supplier relationship for achieving desired business outcomes."

Stewart then goes onto explore the role and function of the VMO, which in his words is a "specialized discipline." What goes into a VMO that goes beyond the "traditional procurement practice," he asks? According to him, VMOs are about "Establishing the goals of the organisation around service, quality, cost, and satisfaction" and "selecting, managing and focusing the third party suppliers to consistently meet these goals."

If we weren't mistaken, this is what good procurement organizations do well. Moreover, I take issue with the argument he proffers that vendor management emerged from "typically large companies such as CBA, Westpac, AMP, Citi, and Cisco Systems, which were often dissatisfied with the services provided by their purchasing organisations." Rather, we might suggest, IT never fully let go of spend in these companies, inviting procurement in only, historically, when it suited their interests.

Stay tuned as we continue this exploration.

- Jason Busch

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