IT: Procurement’s Unknown Ally?

Following on from the first post on the relationship between Procurement and other departments, "Why Procurement, Sales and Marketing Need to Align Their Views of the World,Marcus Willbourn, Chief Operations Officer at Wax Digital, the leading UK-based eProcurement solution provider, discusses how IT could benefit from a mutual relationship with Procurement.

Global spend on technology across vertical industries will total $2.69 trillion this year, according to IT analyst firm Gartner. Consider Wax Digital’s CPO Viewpoint research which revealed that it’s commonplace for the IT department to bypass corporate procurement processes. This raises the issue of potentially poor IT buying decisions of a significant scale.

Our survey of 200 professionals in procurement and their peers in finance, IT and sales and marketing, found that approximately one in five IT professionals say that they don’t work closely with procurement when sourcing suppliers. Divide Gartner’s global IT spend figure by the amount of professionals who are guilty of this, and it could be that close to $500 billion of IT spend flouts corporate sourcing and procurement rules.

But this may not be surprising. For many other business functions, the less specialist nature of their purchases, and therefore the related sourcing and procurement processes, can be simpler in comparison to IT. In these instances it’s easier for procurement to apply best practice correctly to different sourcing and spending requirements and appreciate what the department or category requires. But IT is more complex and so it can be easier for procurement simply to leave it in the hands of the ‘experts.’ Equally, IT may be prone to mandating its own requirements, whether approved by procurement or not, and take control of its purchasing decisions.

From working closely with our clients in a range of sectors, we’ve found collaboration between IT and procurement is possible and also a better way forward. The face of procurement is evolving. The structure of some procurement departments used to largely consist of administrative buyers that mostly responded to the needs of the organisation. But now we’re seeing procurement-savvy professionals even sitting within specialist departments like IT who ensure good buying processes are followed. Similarly, leaders of specialist departments are increasingly working with procurement to guide them on resources required and provide technical knowledge. This new way of doing procurement gives both departments a better understanding of each other’s needs and collaboration then comes much more naturally.

As procurement widens its specialist functions, it’s possible that it will win greater influence within individual departments. It may not always take the lead role, but procurement can add value by working closer with departments like IT and applying rigour to the corporate buying process. The CPO Viewpoint research shows that in one in three cases IT will place orders and spend budgets without procurement’s intervention. It’s worrying if IT is acquiring expensive equipment and assets but not working in accordance with procurement best practice to ensure value for money and the right supplier profile.

We’ve seen some examples of procurement and IT collaborating very well, which all organisations can learn from. One of our clients saw the value in having a specialist IT procurement system, due to previously being bound by long support and maintenance contracts with vendors that gave unfavourable terms. It saw the benefit of letting procurement step into IT to apply extensive contract knowledge and ensure that the organisation was entering into terms that it would ultimately benefit from.

Procurement’s support in IT contract management is applicable now more than ever. We’re seeing a gradual shift of IT spend going from CAPEX to OPEX, driven by the rising uptake of services such as cloud computing. The IT department is therefore dealing with a different landscape as they increasingly manage service and support, and assess services required. Again, procurement can step in and ensure that the supply chain for IT services has received adequate scrutiny.

Unfortunately, it’s commonplace for innovative IT projects to fail. The National Patient Record System is an example, which despite billions of pounds of investment, was abandoned. This is where procurement should apply its expertise in risk assessment to avoid project failure in IT. Through effective collaboration and an exchange of skills in situations like this, procurement and IT can support one another.

There’s no doubt that investment in IT will continue apace as it is so critical to efficiency, productivity and innovation. So the need to ensure the right resources, suppliers and prices is high. Our research found that a clear majority (78%) of IT professionals view procurement as a hindrance, suggesting why they’re prone to going against corporate buying processes. Procurement building its relationship with IT could be just what IT needs to help establish improved project outcomes. Equally procurement has been criticised in the past of not ‘selling itself’ sufficiently internally to other departments, so this increased collaboration should boost the chances of procurement stepping in when it needs to.

It’s perfectly feasible for IT and procurement to collaborate successfully based on the real life examples I’ve seen. Now is the time for procurement to prove its value to departments such as IT and instil a different way of thinking by working together to achieve better outcomes.

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