Procurement and IT: Digital Partners or Indifferent Siblings?

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In the emerging digital economy, it should be apparent that two forces are having a massive impact on nearly every industry: digitization and externalization. These forces feed each other and the broader trend of servitization, where everything is becoming an information-based or information-augmented service. So, if all of the assets around us are getting digitized, outsourced and consumed as a service, then corporations better have their act together to orchestrate these new value chains. And who are the internal protagonists who should be leading the charge to digitize and tap third-party service providers in this everything-as-a-service (XaaS) world? You guessed it: IT and procurement.

Both IT and procurement are individually getting massively impacted by the new digital economy and are struggling to stay ahead of the changes, stay ahead of their stakeholders and stay in the game to be internal business partners of choice. To do so, they need to disrupt their own legacy operating models and embrace these trends themselves to “lead by example.”

And the funny thing is, procurement and IT lead almost identical lives. Both are functions that strive to add higher value, reduce complexity, extricate themselves from low-value work, embrace innovation, protect the firm from risk, ensure compliance and be relevant to stakeholders to make them successful. It’s massive transformation for these two, and they need each other more than ever and shouldn’t be stepping on each others’ toes. Anecdotally, they often struggle to influence each other and be aligned in a positive manner, and this alignment challenge will only get worse over time.  And just throwing them into a global business services (GBS) group won’t fundamentally solve the problem — but that’s a discussion for another day!

Digitization and outsourcing are increasingly becoming intertwined in the value chains, and IT and procurement will need to similarly become intertwined. Unfortunately, this doesn't always seem to be the case. In fact, when we asked procurement practitioners what topics they would like to see shape the agenda for our upcoming Global Procurement Technology Summit (GPTS) on March 14–16, procurement-IT alignment came in at the top spot, as shown below. But how bad is it really and what can be done to improve the situation? Since procurement organizations thrive on data, ISM and Spend Matters wanted to provide some good data on this to our members.

Unfortunately, although there is good knowledge of IT procurement (i.e., managing “ITC” spend of information and communications technology ) at many consulting and advisory firms, there really wasn’t any good formal research on IT-procurement alignment, especially related to the impact of IT on procurement. This was the same situation we encountered with the topic of procurement-finance alignment that we researched with ISM. (Results are available on Spend Matters PRO or on the ISM website for ISM corporate members.) So, we decided to run another research study on this issue, and we have some great provisional data already!

In this series of posts, I will share the research approach that we used and some of the early data snippets. For practitioners who want to get access to a presentation readout of the study results, you will need to participate in the study. Alternatively, you can simply attend the GPTS and not only receive enhanced results but also see the insights in action at a few of the sessions we have planned with CPOs (and an ex-CIO) on the topic. Stay tuned!

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