16 April 2014 | Patricia Dreghorn
The declining cost of hosting technology applications in the cloud means this is one avenue for corporations to drive efficiency and add value. The business case for CPOs and CIOs is strong, but due to uncertainty and its nascency, it’s only recently that many companies have begun to engage with these services.
There are some benefits of this:
• Addressing shifting needs. An abundance of data is available in today’s connected world. The challenge for procurement is to turn it into insight and manage the information flows towards value generation. This is fuelling new needs in procurement technology, which is quickly moving beyond the core function of managing sourcing projects and transacting spend. The realisation of the complete source-to-pay suite of technology is becoming ever more elusive, as companies discover new areas to automate and new data to analyse.
• Decreasing costs while increasing flexibility. Reducing capital costs are a primary goal for utilising cloud service arrangements, although several other factors help businesses in the long term. The reduction in skill requirements, increased levels of adaptability for demand, business changes and platform for standardisation allow businesses to work more efficiently. Equally, the ability for technology to evolve faster makes businesses more competitive.
However, businesses must consider overcoming compliance risks. Now that these technology applications are within the reach of the often limited budgets of procurement departments, mitigating data risks must be kept in mind. Procurement professionals know their data well enough to assess the level of sensitivity; this is often driven by the industry sector and the types of categories. But is the data safe? Safety requirements can be controlled entirely and can sometimes be subject to negotiation and increases in pricing.
The majority of businesses still use cloud for non-core functions, although its use for core is growing. The key is to understand the types of data involved and any regulations attached to it. Primary topics to address are: data privacy and security; legal compliance requirements; business continuity; disruptive changes in services; adaptability to client’s changing business needs and integration.
With the new possibilities that cloud solutions represent, and the potential they provide for procurement to drive better value, the business case for CPOs and CIOs is evident. But, regardless of the speed of your move into cloud technology, the benefits and risks must first be considered.
☛ Patricia Dreghorn is global technology and strategy director at Xchanging