In my last post, I shared some provisional results from a research study that ISM and Spend Matters is currently conducting. (Practitioners can still participate until March 4.) I explained the overall approach, which included not just quantitative metrics related to levels of automation and also levels of investment and resources but also inter-function influence and perceptions of value.
This use of internal satisfaction surveys by one function serving another function (in a high-value, non-servile sort of way, of course) is done by many large organizations, especially ones with global business services (GBS) entities. For example, some procurement organizations use a form of standard customer satisfaction metrics such as Net Promoter Score. In this case, though, rather than measuring a function like IT’s perception of procurement’s value, we asked procurement how it rated IT’s value delivery to it (although we did measure procurement influence on IT). And we asked it for 12 distinct value streams.
So, what did we find out? Well, the results are still provisional, but the top-two areas where procurement practitioners said “agree” or “strongly agree” to the following positive statements are shown below. Unfortunately, a minority of procurement groups cited even the highest two scoring areas.
No. 1: My IT department delivers on time and within budget for work it agrees to (49% agree or strongly agree)
For most IT organizations, this is usually one of their top metrics. IT is very project-centric and likes predictability in scope and (low) risk so that it can execute on time and within budget. Of course, the operative phrase in the above statement is “work it agrees to.” IT is very busy just trying to keep infrastructure and data safe and somewhat up to date. More progressive IT organizations separate such lower value (albeit critical) infrastructure work, which is often outsourced, from higher value and high-impact services in application development and various customer facing digital innovations to create firm value. Sounds a lot like procurement, right?
But, getting your procurement project on the list and on IT’s radar in the face of executive level mandates, firefighting, strategic projects and projects that generate hard revenues (or cost savings) will take precedence.
As one procurement manager noted in the study, “Executive management initially supports procurement in budget planning but when the fiscal year starts, other IT priorities to meet client demands supersede [procurement priorities].”
So, procurement often has to fend for itself, while also not “going rogue” — something procurement’s stakeholders deal with when procurement is too busy to help them! This gets into broader issues around resources, decision rights and so on, which we address in the study. It’s also something we’ll discuss at our upcoming Global Procurement Tech Summit in Baltimore March 14–16, with a specific session dedicated to this overall topic. It’ll feature David Hearn, who ran indirect procurement at Juniper Networks, and also Kendra Von Esh, who was the senior vice president and CIO at Veolia North America. Veolia is a massive global environmental solutions firm with more than 300,000 employees that you may have never even heard of.
Anyway, we’ll be talking guerilla tactics for gaining IT alignment, but also not slowing down the procurement transformation. As another study respondent said, “Whatever systems are working are because of procurement. We helped to bring in new systems by getting them approved for funding by management, major team designing and installing, teaching and troubleshooting. We try and do what is right on behalf of the company despite the roadblocks.”
No. 2: “My IT department is a flexible partner [that tries] to accommodate procurement’s dynamic needs” (44% agree or strongly agree)
What’s interesting is that for almost half of the respondents, they in essence empathize with IT and feel that IT is trying its best to satisfy procurement’s requirements. When I started doing procurement technology analysis and advisory work back in 1999 at AMR Research (now part of Gartner), I found the IT folks generally wanted to help out and make goods decisions about technology and the business. They aren’t soulless robots trying to ram a single instance ERP application down procurement’s throat. Yes, such an objective can be a key one for the CIO in order to reduce complexity, maintenance costs, integration headaches and prevent getting stuck on a current version. And such an objective can trickle down to the rest of IT.
Luckily though, being an enlightened Spend Matters reader, you know that choosing an ERP vendor in procurement (or anywhere) does not necessarily deliver the principles upon which ERP was based — an integrated application suite. (You can read my rant on this here.) This is why we wrote a whole series on “procurement information architecture” so that you have flexibility (e.g., standardize data, establish data governance, have strong MDM at the center of robust analytics, adopt open APIs, use emerging cloud “platforms”, and so on) to establish application co-existence strategies that support flexibility and changing business priorities.
This then leads us to the bottom two areas where IT falls down in supporting procurement.
No. 12: “My IT department doesn't let its own interests get in the way of maximizing procurement/business outcomes” (only 23% agree or strongly agree)
Obviously each function has its own set of goals, but as functions become more service-oriented to help enable internal partners to meet their goals, such stakeholder centricity should lead the servicing function to align its metrics and service levels to its internal customers. If procurement is about delivering “savings as a service” (to steal some Coupa terminology), then IT should be directly helping procurement get supporting technology to support that objective, and secondarily ensure that IT goals are also being met (e.g., infrastructure, ERP, analytics, security, cloud, mobile, digital business, etc.).
No. 11: “My IT department engages/effectively benchmarks externally to bring best practices and optimize technology acquisition” (only 24% agree or strongly agree)
Many readers might have already surmised that although the context of this article is procurement measuring the effectiveness of IT support they receive to get the technology needed by/for procurement, the issues could be 180 degrees flipped and it’d be just as relevant. Ask yourselves whether procurement suffers in its ability to deliver such services to other functions — including IT. This is especially true in relation to the No. 11 issue.
From procurement’s standpoint, procurement doesn’t tend to see IT bringing new techniques and tools from an “outside in” standpoint. Procurement often feels that IT is framing the problem in the wrong way, paraphrased as, “We bought ERP, so we need to commit to it even though it doesn’t completely meet your needs,” or, “You get to only pick one solution provider,” or, “You need to use our data warehouse for your analytics needs.” Procurement often feels that IT may be well-intentioned but doesn’t understand the “business of procurement,” so it shouldn’t be advocating approaches or solutions that don’t meet procurement’s need.
But IT says the same thing of procurement! To paraphrase, “Procurement folks are generalists and can’t help us source technology because they don’t even understand it.” This is why IT folks will use IT industry analysts and other third parties for market intelligence and engagement strategies that procurement may not be bringing it. This is why firms embed procurement staff into IT (and vice versa) and hire staff from IT into Procurement (and vice versa). These practices are included in the 12 best practices that we measured in the study — and it’s what we’ll discuss in the next blog post.