Why CIOs Secretly Hate Procurement And Other VMO Tales (Part 1)

Many lesser-performing CIOs really do hate procurement for good reason. On some levels, you can't blame 'em.

I should provide some context here. Almost 20 years ago now, I got my start in the professional world as a summer temporary worker for Liberty Mutual's IT division in Portsmouth, New Hampshire (in between my sophomore and junior year at college). At the time, I observed that all of my colleagues really had no idea what purchasing did, other than push back -- or rubber stamp -- on manual requisitions.

Even when it came down to inventorying deployed and available IT assets in a given division (my project that summer) to better understand whether to "buy" from inventory or purchase from a vendor, procurement was completely out of the loop. In other words, IT was on its own, aside from buying copier paper (which we used a lot of in those days).

After I graduated from college and graduate school a few years later, I entered the consulting world, focusing initially on IT strategy and architecture work (before procurement would take over my life). This is a topic that even the most unsophisticated IT organizations at the time considered a core competence of their own, even when it came down to specifying desktop software and the most basic servers. As a monthly columnist for Internet Week at the time, I observed this first hand in interviewing executives.

Never would procurement (or so they thought!) influence or touch the buying of something that could "mess with the enterprise." Hardware, software and expert IT services were not only a sacred cow -- they were the feed, the water, the waste and the bovine itself. If you got near any of it, manure included, you'd have an army of geeks wanting to take you out with the vengeance and secrecy of a SEAL team.

Yet something clearly happened in the next decade (we're talking 1999-2009 here). Procurement, with the tacit approval of stakeholders, including IT, gradually increased its influence in the organization, especially in the area of indirect spend (and to a lesser degree, direct materials, where applicable, and services). Under the office of the CIO, many of these projects were limited to areas of little core strategic value. Want to swap out Dell laptops for Lenovo? Have at it. Touch my blade servers specs? I'll cut your finger off and feed it to my telecom sourcing guy (wait a second, you didn't know he was still in IT ... oops, I didn't say that).

I had a somewhat unique vantage point on this era. Here I was, a geek at heart who started developing in Basic and Logo in second grade, at the same rate as our teacher at the time (yet in full disclosure gave up all development after just a few weeks of high school Pascal). I had worked in the dungeon of an IT organization for a summer, but eventually climbed out into the world of IT strategy and architecture (really not knowing what I was doing, mind you) after college. And then I made the transition, in less than two years, to procurement and sourcing, not from an IT perspective, but from a purchasing and finance one.

At the same time, a number of transitions were happening in the market. Indeed, I think a number of things came together at one time to make procurement more relevant to IT. Just to name a selection:

  • IT became overwhelmed with initiative after initiative (e.g., Y2K), culminating in a continuous compliance focus (e.g., SOX), and was willing to cede the "non-strategic" buying activities to others
  • ERP implementations and eventually upgrades bogged down big time and IT (and CIOs) had to dig themselves out of holes that, more often than not, kept on getting deeper and deeper the more they took out the shovels
  • Spend shifted. The daily management of the big systems integrations/consultants and later the business process outsourcers (BPOs) was a job that could occupy three CIOs in a single company (let alone one). As services firms captured more and more of the overall technology spend pie, IT executives had to shift their focus to the active management of these providers
  • Procurement had a few success stories, usually elsewhere in the business. Maybe office supplies or car hire (rental). Or perhaps it was even in the metals, resins or electronics area (for manufacturers). This gave CIOs enough reason, especially with the influence of CFOs, to consider the services that centralized procurement, acting as a shared sourcing service in many cases, could provide to IT

Yet not all was honky dory at the IT ranch. Just as a decade earlier, as Bush senior was voted out of office after his first term, so too would procurement be voted out of strategic IT -- i.e., the bulk of the spend in most cases (actually, marginalized is probably a better description). It would take many more years for this to change.

To be continued...

- Jason Busch

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