Why CPOs Can’t Make Do With a Single Business Application

This is the second part of our series “What CPOs Can Learn From Facebook’s CIO.” You can check out Part 1 here.

In this edition of this series, we’re going to drill into how procurement can counter the CIO assertion that procurement can make do with a single business application, and also that the application is a single-instance ERP suite. As Facebook CIO Timothy Campos was quoted in a recent Wall Street Journal article, “You can’t go buy the off-the-shelf solution that everyone else has and expect we’re going to have a better outcome. We found that tweaking off-the-shelf software would force us to adapt our process to the tools. We want to do the opposite: make our process better, more efficient, faster. Our tools are very purpose-built.”

This, however, doesn’t mean that Facebook is running uncoordinated best-of-breed application development (and acquisition). It’s likely not building its G/L application from scratch. But, it is picking the right approach and tools for the job/purpose.

And here in lies the lesson that the acquisition of any “solution” (apps, content, knowledge, labor, etc.) starts with a “market basket” that is scoped properly and is sourced based on best practices. The biggest thing the CPO can do is to actually follow a “market-informed sourcing” process that doesn’t fall victim to a “winner-take-all” approach to the sourcing of technology.

Even forgetting the internal stakeholder requirements driven by external customers (and regulators), consider the complexity of:

  • Category-specific requirements not met with vanilla technology (e.g., telecom, complex MRO, marketing, travel, events, energy, and… IT!)
  • External content, intelligence and knowledge that are also needed and getting embedded increasingly real-time into the process. The age of “empty apps” is over
  • Multi-tier processes to coordinate in the value chain not supported well for systems historically built on a single-tier model. This isn’t just in the manufacturing supply chain, but also consider the emergence of tools such as freelancer management systems that can work alongside vendor management systems to manage a hybrid multi-tier services network.
  • Requirements for the sensor-driven telemetry of an “Internet of Things” world

OK, you get the idea. A CPO needs to harness supply market innovation (which is becoming increasingly digital) for internal stakeholders, for procurement itself and for IT. And this, by definition, goes beyond technology applications since procurement “solutions,” broadly defined, in an industrialized XaaS (everything as a service) world are increasingly getting mashed up. For example, a managed service provider or BPO solution is a hybrid combination of labor, technology, knowledge, etc., brought together to deliver better business outcomes.

If a CPO doesn’t lead these more sophisticated conversations about developing business capabilities and solutions, and then working intelligently back to the supply markets that can provide them, then those decisions will be made for you – and likely not very well.

One of the ways to develop this deeper capability to allow a more “mix-and-match” solution assembly is to define your “platform” and architecture to do so: technical architectural standards, data standards, process standards, KPI standards, role standards, skills/knowledge standards and the ability to bring all these together in an effective operating model.

Please forgive me for diving into some of these gory details, but I’m not going to dumb this stuff down. There’s hard work and serious “engineering” you need to do to give yourself the ability to tap supply market innovation to power your procurement “services” that, in turn, helps stakeholders safely and cost effectively tap supply market innovation for strategic advantage (or at least parity!). Ignoring this work and relegating it to, say, a big vanilla BPO vendor and an equally big vanilla ERP application (or even an older technology based best-of-breed suite) is not a recipe for “agility” and building mix-and-match capabilities that allow procurement to help dynamically re-jigger value chains to meet the dynamic needs of the business.

OK, let’s move on. In Part 3 of this series, we’ll dive into more specifics around Facebook’s internal development activities and their relevance to procurement.

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