What procurement can learn from PayPal - Supply Management

What procurement can learn from PayPal

Milan Panchmatia
9 March 2015

When it comes to favourite internal functions, it’s fair to guess that compliance and procurement probably aren’t top of everyone’s list.

I won’t get into the reasons for procurement’s reputation, I’ve done it before, but I will discuss compliance.

In the not too distant past, compliance was seen as a necessary evil. A function which existed to limit others. But the array of legislation implemented following the financial crisis and accompanying fines, has made many businesses recognise the importance of the function. Companies have struggled to strike the right balance between investing in innovation and compliance and as a result may have seen their growth affected.

An industry which has had to adapt quickly is the technology sector. Successful startups are able to leverage new technology as soon as it is available. They do not have any legacy data or systems weighing them down and as a result can evolve according to the needs of the market much faster than more established businesses.

However, as the sector began creating digital behemoths such as Google, Facebook and Amazon, the need for compliance become increasingly urgent. Companies which could previously A/B test versions of their products at the touch of a button found themselves constrained. So how have they managed to maintain growth and remain compliant?

An example of a company which has managed to strike this balance is PayPal. The US company wants to become everyone’s digital wallet of choice and to do so must grow within a highly regulated industry, as well as compete with much smaller and more agile startups. This is a huge challenge, particularly as PayPal’s rivals do not have the same legacy software and programmes to stop them taking advantage of the latest technology.

Established in 2000, the company is one of the elder statesmen of the tech industry. The business has had to change its coding multiple times to keep up to speed with its rivals and has to do so while maintaining its significant stock of data. As of 2014, PayPal operates in 203 markets, has 152 million customers and allows them to manage funds in 26 currencies across the globe.

The company has delivered much of its success thanks to a focus on discipline, which many do not associate with the digital startup sector.

Chief financial officer Patrick Dupuis is adamant being compliant does not translate into being slow. The leadership team at PayPal is structured in such a way as to be able to constantly tweak the company strategy in real-time. This means cutting down on lengthy meetings and embracing agile methodology such as stand-up meetings. The latest technology is also used to encourage employees from across the globe to engage with each other.

PayPal went from a focus on three million businesses to 125 million consumers, so a huge change was needed in the company’s strategy. A change which affected both its day-to-day operations and also compliance, given the vast set of rules and regulations covering the sector. PayPal invested heavily in back-office functions, not just front-end development work to ensure both elements were dealt with the right way.

For Dupuis this has meant taking a step back and spending less time in the finance department. But he sees this as the best way for him to maintain a holistic view of the company.

The challenge for PayPal is to stay creative, while continuing to be compliant and achieve success. A challenge not very different from those facing CFOs across many leading businesses. When it comes to achieving this balance, many would do well to take a leaf out of the tech industry’s leaders – Apple, Amazon, Google, etc – they’ve been doing it right for years.

Milan Panchmatia is a director at 4C Associates

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