The Ever-Changing State of IT Procurement
With over 25 years’ experience in IT procurement, Brian Goodall has supported many organisations in their sourcing, including Dell, IBM, BT, Xerox and Lloyds Bank.
Having long been a key voice in the procurement community, we asked Brian to share his insights and predictions for the future of IT procurement.
In the last few years technology has been developing at an ever-increasing speed, and as a consequence we’ve seen an increased focus on cyber security and risk management. How will IT procurement adapt to meet these developments?
“CIOs are certainly going to require IT managers to quickly adapt to evolving technologies and global events as they arise. Procurement leaders need to go further to anticipate and plan for risk and changes that might be necessary, as well as potential improvement opportunities.
We’ve recently seen an increased use in cloud services, online B2B and B2C trading, mobile workforces, and outsourcing. Consequently, there has been an increased number of very public hacking breaches and fraud incidents as well as an increased use of enterprise and consumer-led social media, so the risk of exposure is very high.
To address this, IT procurement leaders and category managers will need to review more often their category strategies and plans, and be prepared to analyse in greater depth the threats and opportunities posed. For example, there are now substantially more suppliers with specialist and niche services who have in-demand skills and expertise beyond that provided by more generalist security providers. It will be necessary to keep abreast of changing market and technology trends, perhaps through a closer interaction with IT architects and specialists, and market research companies such as Gartner.
Ultimately procurement departments have a major role in taking the initiative and leading, but they need to be increasingly proactive, not reactive, and deterministic to gain awareness of emerging trends. If procurement people deep dive into the technologies and services that they are buying to understand the risks, they can demonstrate to their IT leaders that awareness, which will in turn generate confidence and credibility with their stakeholders.”
Social media has caused a huge cultural shift and an increased need for accessible big data. How can IT procurement help media and consumer facing industries manage these growing needs?
“Big data is already a significant area of data mining and predictive analysis. Media agencies and those companies in consumer facing industries such as retail and financial services need to compete for access to emerging consumer trends, as well as pricing and market intelligence that’s out there in this big data. Similarly, CRM solutions are now increasingly becoming more sophisticated with social media features.
These changes are starting to happen and will relate to B2B and B2C, influencing lead generation, opportunity generation and trade opportunities. IT procurement leaders need to be prepared to engage with niche software suppliers rather than generalist software suppliers, who are highly specialised in their domain around for example social media, big data, predictive analysis, or CRM software. The number of specialist software suppliers will only increase in the future and procurement needs to be prepared for new system integration projects related to CRM, social media, mobile, supply chain changes (everyone’s buying online now), and big data.
Further to this you need to consider the implications that come with smaller, niche suppliers. When dealing with new companies that are less known you may need to be prepared to do more work initially. For example, if you were to buy products from BT or Microsoft, you would be confident that they are a well know brand with good security underpinning them. But if you want to work with a smaller company who have excellent specialist expertise, they may have only been in business for two or three years. Giving the contract to that company could give you a competitive advantage, but you would also need to do more work with the company to understand the security protocols they have in place. You wouldn’t place a contract with a supplier and say ‘that’s your responsibility’. You have to be diligent yourself to test and validate that these systems are in place before you give it the green light.”
Apart from security and risk management, what are the main challenges facing IT procurement in the immediate future?
“There’s been a lot of talk recently around market intelligence, and a big challenge is maintaining a close understanding of your business requirements, current technologies and general market awareness. There are a lot of pressures on procurement managers in terms of time, and they sometimes don’t have the resources for governing market data and market intelligence. It’s so important to find the time, and CPOs must factor in to the role of procurement managers the time and space to do this, otherwise you are to a certain extent closing your eyes to the risks and opportunities that might be out there.
To grow the insight available to them, IT procurement managers need to spread their network to other areas of the business: the supply chain, operations, finance. Understanding your business partners pressures, trends, challenges and risks will allow you to identify potential supply-side opportunities to bring value to your business stakeholders and IT client managers. Some procurement managers are already moving forward with this approach, but unfortunately many don’t have the expertise or the stakeholder engagement skills to reach out.
There also needs to be more attention paid to a deeper analysis of market and product strategies. Category managers take responsibility for their category, but sometimes this category is defined too broadly and could be more focused. For example, if you were to have an IT category of ‘networks’, how do you define networks? Is it Hardware? Software? Voice and Data? You need to fully detail and define exactly what that category strategy is: what’s in it and what’s out of it. You can then focus on your demand and requirements in those particular category segments, and their markets and opportunities and strategies. This deeper understanding of category strategies is important, but as technologies and market trends are changing, you must also more frequently adapt and update those category strategies. My recommendation would be to do this at least quarterly, which will also save time when undertaking annual reviews.
In my experience, I’ve found that not all IT procurement managers understand how to undertake effective risk analysis and truly understand how to work with suppliers, business and IT leaders to develop thorough mitigation and contingency plans. This must be done at the start of every planned new or upgraded service; when you’re looking at poor vendor performance you need to understand why it is happening.
I’ve worked a lot in manufacturing procurement, which is closely tied to the quality assurance department. There are many quality assurance processes and tools that can be deployed to cut out the number of errors in manufacturing a product or delivering a service, and this knowledge can be transferred effectively into vendor delivery management processes.
Arguably the most important challenge for a procurement manager is maintaining focus on cost reduction and cost savings. An example of this for 2017 would be developing plans to mitigate adverse currency impact. We’ve seen recently with Brexit how the pound has become weaker against the euro and dollar, and it’s important to understand how that impacts you: where are you buying from globally and paying in what currency? Look at political and geophysical dimensions around the world. You may have a data centre in Tunisia for French-speaking customers; what’s happening in Tunisia right now? It is essential to understand the potential impact if you are to put mitigation plans in place.”
As the state of global events and technology evolve over the next few years, will this change the required skill set of a good IT procurement person, and how will this affect hiring talent in the future?
“Sometimes IT leaders are not present at interviews when they are hiring for IT procurement roles, and the procurement person conducting the interview is often looking at it from a commercial focus, without any technical focus or operational IT understanding. This is increasingly becoming an issue as IT procurement managers need to have more in-depth knowledge about their markets and technology and IT services being supported. Ideally they will demonstrate not only an understanding of price and negotiation in a commercial sense, but the additional dimension of stakeholder engagement. It’s a wide spectrum of skills that an IT procurement person needs, beyond negotiating price or a supply contract. If you have those skills and knowledge you will better placed to land your desired role. You’ll also receive better performance appraisals as you’ll have a deep knowledge and credibility with your IT stakeholders.
This increased depth of knowledge and skills should be a win-win, but often people find they don’t have the time to develop that extra level of understanding. If you do invest the time and effort it will reward you, and you will get a lot of job satisfaction out of it. I’ve found many new opportunities either in cost reduction, service improvement or stakeholder engagement, simply because I had read a Gartner paper or gone to a conference or spoken to a supplier. But don’t just talk to your suppliers, talk to their competitors as well, because that brings you leverage that you can use in a negotiation. That’s a really important point in terms of the attributes of a good procurement person.
CPOs could also consider supplementing their team with knowledgeable and experienced interim procurement managers, to bring in best practise or market intelligence, to lift the level of skill and expertise in their department. It’s not good enough to perform simply at a commercial level anymore, so bringing in an interim specialist procurement manager could be an effective strategy.
There are a lot of IT procurement leaders operating in global companies, and it’s a huge bonus if your team has that knowledge and awareness of working globally. It is normal now to have data centres that follow the sun: operating for eight hours in Asia, then eight hours in Europe, then America. Selecting suppliers who are global is key and it’s going to be increasingly important as export opportunities presented from a lower pound will see companies buying from emerging markets in South America and the Far East. It will be essential for IT procurement to get closer to these global opportunities. Equally experience of leading multi-national teams across numerous geographies is invaluable.
A strong IT procurement person will be skilled in risk management, market intelligence, relationship building with suppliers and their competitors, engagement with IT architects and business leaders, and will have an awareness of global opportunities. Combined this will give you the advantage of an all-round knowledge of what your business is doing and the key trends that may hit you, or even give you new opportunities.
IT leaders have got multiple business issues, technologies and business players they need to work with, and complex operational elements to manage. Increasingly they will need closer support from their IT procurement team. A good team will be able to influence IT leaders and bring that added value of working as part of an extended team, not just as ‘the procurement department’. We need to be bigger than that.”
Brian Goodall is Managing Consultant at White Rose Business Services, and Associate Consultant with Sourcing Solved.
Article originally published in Procurement Leaders.