5 tips to make your IT purchasing performance sustainable

The rapid emergence of new technologies, the price opacity of major market players, the experts shortage in I.T procurement are all elements justifying an urging need to bring performance and professionalism to I.T Purchasing.

Here are 5 tips to make your I.T purchasing last:

  #1 PROVIDE THE COMPANY WITH A PURCHASING POLICY SHARED AND VALIDATED BY ALL STAKEHOLDERS

In big companies, with multiple geographic locations, I.T purchasing is often managed directly by countries or business lines, without any real coordination. Each country, in connection with its own development, has been able to set up an IT Department that implicitly manages its expenses and many of them are therefore out of the Purchasing Department radar screens and are not covered by any coordinated policy.


In collaboration with the IT Department, I.T purchasing must therefore (1) define the policy to adopt on each segment in relation to the structure of each supplier market, - centralization (global or regional), coordination, 100% local, (2) stall a RACI matrix on each phase of the purchasing process (budget forecasting, purchasing, supply, expenditure control, SRM), (3) make this policy work through transversal animation of the different entities of the company (country and / or business lines).

  #2 EQUIP THE PURCHASING DEPARTMENT WITH SPECIFIC SKILLS IN I.T PURCHASING

The term "I.T spending" hides actually a real jungle: nothing in common between hardware, cloud, software or service expenses. It is in this jungle again that we meet unavoidable big names (Google, Oracle, Microsoft, and Salesforce, etc). It is also in this jungle that we face unscrupulous salespeople who leverage their expertise and the apparent complexity / uniqueness of their solutions to sell more and more.

It is therefore vital to put, in front of them, buyers who are experts in their field. This way, they can develop a peer-to-peer exchange by best piercing the sellers’ interests, sales cycles and emerging alternative evolutions. The I.T expert purchasing profile is a rare resource, with long training. It is illusory to rely on internal mobility to quickly acquire such skill. Only looking for external profiles in mature I.T purchasing organizations can meet the need.

  #3 MOVE FROM AN ALLOCATION MODE TO A USAGE MODE

The current period is more to budget restraint on indirect spending, of which I.T is mostly part, while the complexity of technologies is constantly changing. Salvation resides more in an adaptation of the offering to the real company needs than in the negotiation of a particular material or support. The principle is to switch from a purchasing model in silos (equipment, service...) to a full cost model based on usage (I.T as a service), thus limiting the expenditure to the necessary and especially putting it under condition of activity.

This approach makes it possible, on the one hand, to directly connect the cost of I.T to the actual use and, on the other hand, to make the cost distribution between the different internal customers, objective. This distribution is most often in the classical model carried out by means of more or less arbitrary keys.

  #4 STRENGTHEN THE CONTROL OF I.T EXPENDITURES

In a context of constant increase in I.T spending (+ 4% per year on average, + 4.5% forecast for 2018) - especially due to digitalization -, many of these expenses are not managed by the purchasing department and being directly in the hands of internal customers (IT Department for an important part, but also trades which can have specific needs), the follow-up, that it is budgetary, contractual or functional is a real headache. In particular, having a consolidated overview of I.T costs is often a challenge.

Two points are particularly lacking: the budget monitoring itself - the vision of the adequacy between actual incurred expenses and the budget provided - and the control of billing before payment. The first point is to put in place a consistent and accurate expenditure classification so that allocations are clear, easy to achieve and aligned across entities. The second point may require the implementation of dedicated tools, which will never completely replace human control, as providers often show ingenuity (not always voluntary) in billing. In addition, the establishment of a contract library and a SAM (Software Asset Management) are two examples of control tools particularly relevant for I.T expenses.

  #5 DEVELOP AGILITY TO CAPTURE INNOVATION AMONG "ICONOCLAST" ACTORS

The I.T ecosystem is made of a multitude of actors of a heterogeneous nature. Many purchasing procedures, processes, rules especially in risk management, evaluation criteria, are not adapted to this diversity.

For example, supplier qualification rules are often incompatible with working with start-ups: ability to present 3 years of balance sheets, potential level of dependency quickly important as the targeted company's activity is fledgling, lack of certification... Capturing innovation is then seen as a risky exercise that mature organizations may not be ready to take.


Agility goes through the definition of specific processes in order to be able to collaborate in a different way with companies with "exotic" configurations, even if it reinforces certain aspects to secure collaboration (co-development model, exclusivity, incubation, intellectual property...). Often, the effectiveness of this type of measure is increased tenfold by the establishment of a dedicated organization within the purchasing department, with specific skills, not only on new technologies, but also in the legal or financial field to better support these fragile start-ups.


9 Tips for Procurement to Impact Revenue Generation

Over the past 20 years, the Sourcing function has evolved from Cost Reduction To Total Cost Management To Risk Management gaining more and more strategic impact. However, Sourcing initiatives are still contained to bottom line impact. In this article, we will share real cases coming from various industry sectors (automotive, pharmaceutical, aerospace…), where Sourcing Organizations have generated Revenue Impact through specific initiatives or organization design.

Purchasing to generate strategic market impact
Procurement to create a competitive advantage

This paper describes our 9 tips for Procurement to Generate Revenue Impact. They are broken into 3 categories...

1

Product

How Procurement can generate revenue by influencing the new products that your company will launch

2

Business Growth

By influencing processes that can exist today in your company how procurement can generate revenue

3

Future

Procurement can make profit by influencing, and participating in the dynamic nature of how the business world is likely to change, but how?

Procurement product business growth future

Click/Tap on each tip to read more

Tip #1: Design to Value

Tip #2: Engineered Procurement Organization for Speed to Market

Tip #3: Innovation Ecosystem

Tip #4: Lean Bidding through Parametrical Costing

Tip #5: Success in Growth Markets

Tip #6: M&A

Tip #7 to 9: Procurement 4.0

Conclusion: What does it mean for the future of Procurement?

We see Procurement evolving toward an increased synchronization with the overall business and a closer collaboration with the Sales organization. Traditional Category Management is expected to evolve toward a more value stream organized function allowing for breakthrough solutions to be quickly implemented Procurement will be more of a Business Partner contributing to the business model evolution by identifying and matching the internal and external opportunities. This will also impact the required skills of Sourcing professional: soft skills will take more importance than traditional functional skills.

Future of Procurement