The Cloud and the IT revolution – good news for procurement. Or is it? (Part 1)

If you follow the IT world for any reason, you'll be aware of the "cloud revolution" as the more excitable might call it. We'll pass on the fact that many providers have been operating on this basis for 10 years or so - it's all got hyped up in the last year or two, to the point where software company valuations seem to be based on how convincingly they can talk about the Cloud rather than any more tangible factors.

But there are fundamental changes going on here. Being able to access IT services without going through that whole traditional installation (behind the firewall) and integration process means organisations can access capability more quickly, try things without long-term commitment, use new and innovative suppliers without huge risk.

Then there is the user aspect – most cloud-based applications are being presented as easy to use and not requiring lots of detailed user training. Certainly this has been a major selling point for a firm like Coupa, who have succeeded in devolved clients like Subway, who wanted a purchase to pay system that could be rolled out to thousands of locations without a huge training programme for the users.

For obvious reasons, this is not being seen as good news by many CIOs and IT functions. The lower cost, easier implementation of cloud based solutions means that budget holders and users can go off and “do stuff” without relying on the mighty IT Department to agree the licence deal, build the interfaces, install the software, run the 3 -week training course, manage the annual maintenance fee, etc etc. Users are installing IT behind the back of central IT functions, to the chagrin of the managers in those now-vulnerable teams.

But it's all about power being devolved, and users having faster and more flexible access to the solutions they need. That must be good news for us in procurement, mustn’t it? Well… perhaps.

Procurement people through the ages have struggled with IT functions. (I know I did in my time as a CPO...) Trying to persuade recalcitrant CIOs that procurement really could add value to the negotiations with IBM or Oracle; suggesting that we don’t need THE most expensive hardware every time; or even more challenging, pointing out that competitive processes are usually a good idea….

So seeing the mighty IT Department reduced to impotence might make many of us celebrate. And within our own area, it is liberating to have the ability to run cloud based sourcing processes, or take advantage of other useful software, without having to plead for permission from IT.

But we need to be aware of the dangers. Because, just as this power-shift may affect IT negatively, it's not all good news for procurement by any means. In part 2 we'll explain why.

Voices (3)

  1. Plan Bee:

    oh purleeeeasse

    I dont know of any large organisation that is putting anything close to critical applications outside their firewll. Too many talk of ‘internal cloud’, or ‘private cloud’ Well I was using that in the late 80’s and its called a network with served applications.

    There are huge savings to be made, but until organisations are brave enough to put key applications outside the firewall, it a server estate they dont own or run, AND close down a datacentre because of it, then the claimed cost savings will not materialise.

    It may well be that putting spend analytics and the like in the cloud is a cheaper way of doing things, but while its just these applications, the Cloud is not going to fundamentally change the IT cost strucutre of large coporates.

    What it might do though, is give smaller companies (or those devoled like Subway) access to the kind of systems that in the past were only affordable by large organisations

  2. Lance Mercereau:

    Hi Peter,
    Buzz or not, the cloud has distinct advantages over traditional solutions such as zero IT footprint, rapid deployment, low cost, etc.
    Regarding IT’s role, organizations that truly understand the value of business analytics to improve decision-makers are developing BI strategies that are centred around information, not infrastructure. CIOs are putting “information” back into IT. Cloud computing enables IT to facilitate this shift cost effectively and more efficiently than ever before.
    I think it’s worth pointing out that procurement leaders who themselves are embracing cloud-based services such as hosted spend analytics are now best positioned to advise their colleagues (including IT) on what their organizations should consider when evaluating cloud-based services. Cloud computing need not be divisive subject – just the opposite because for the first time colleagues are able to collaborate around better information from a single platform. We see procurement and IT working closer together because of the many opportunities cloud computing delivers organizations.
    Kind regards,
    Lance

    Lance Mercereau
    Head of Global Marketing
    Rosslyn Analytics

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