Has much changed in Financial Services procurement over last 10 years? Notes from ProcureCon ..

One way of looking at the ProcureCon Financial Services conference last week (see here for initial views) was for me to compare how procurement in the sector looks now compared to 12 years ago when I left it after 3 years as CPO for NatWest, one of the largest UK banks at the time.

Note this is based on just one day at the event last week, but I found it very interesting - so here’s my list of what appears to have changed in the sector from a procurement perspective, and what hasn’t changed so much. I’d love to get some comments from readers in that sector of course to validate or otherwise my views!

What’s changed?

  • The regulatory pressure, including firms being placed in commercially difficult situations by regulators’ actions (see below).
  • A generally more professional approach with procurement appearing to have more “control” over spend, involvement in demand management initiatives etc.
  • Much more penetration - perhaps not surprisingly – of technology, eSourcing, P2P etc.
  • What seemed to be a consensus view of the procurement role as a “trusted adviser”, although backed up in many cases by some governance “teeth” -  from procurement’s perspective, a positive of the tougher regulatory environment. However, this is expressed through  a range of organisational models (see below).

 What’s not changed

  • Technology is still – in fact perhaps even more so – THE single most important spend category for the financial services sector.
  • Many investment banks still “don’t really care about costs” as a couple of delegates said to me. So no change there compared to 1997-2000...
  • Still quite a wide range of organisational models for procurement, from pretty centralized to procurement people sitting in the business with not even a dotted reporting line to the CPO (if indeed a CPO exists at all).
  • Suppler relationship management is still an aspiration, without much evidence of real success and measurable benefits.
  •  If the delegate list was representative, still a heavily male and white procurement community – not particularly diverse.

The regulatory situation was interesting. An example was quoted where the regulator suddenly decided that calls from mobile phones had to be recorded. There were only a couple of suppliers in the market who could provide the right equipment, so they were handed an immediate oligopoly, with buyers time-bound to sign contracts. Not a good situation to be in for a procurement person!

“The regulators get obsessed about details of our contracts with some of our relatively minor outsourced service suppliers. Meanwhile they totally missed the problems behind RBS, Lloyds and so on” was one comment over coffee from another delegate.

Certainly the regulatory burden has made procurement more risk aware, which maybe isn‘t a bad thing, but has also made life more costly and bureaucratic in terms of managing suppliers and contracts, which isn’t so good.

Anyway, we’ll have more output from the event to follow.

Voices (2)

  1. Jon Hughes:

    Apologies, all you financial types. The comment I put on was meant for the public sector.
    Agree with Peter’s comments on risk etc. Best of luck in developing a balanced strategy of value minus cost and risk.

  2. Jon Hughes:

    The really big issue I think is that if we look at the different types of major procurement and commercial activity, from both a structural operating model or a competence perspective, across public sector procurement then very little of it is actually fit for purpose. Until it is addressed from a genuine policy perspective that highlights the core inadequecies and then puts in place a properly resourced plan to tackle them, not much will change. What is the scorecard on PFI, major capital acquisition, infrastructure, transport, health service or even the relatively tactical consolidation area of ERG? There is little accountability but a lot of complacency. Maude and Hodge need to raise their game considerably and start focusing on the big issues, big opportunities and big competence requirements. Little chance of that at the moment. Time to start lobbying the politicians again.

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