Most organisations aim to get every department to follow procurement processes at all times, but our recent CPO Viewpoint survey showed that it is common practice for some business functions to stray.
And the survey, questioning 200 professionals on how they saw procurement’s relationship with other departments, identified the IT team as a key culprit. Our research uncovered that one in three IT professionals prefer to ‘go it alone’ when making IT spending decisions, completely bypassing the organisation’s established procurement processes. As a result maverick spend is likely to be a key issue, with the consequent impact on IT budgets, supplier risk and proliferation.
So why the cavalier approach? Well 78 per cent of IT respondents told us that they see procurement’s formal tendering processes as an obstacle to timely and efficient spending, which could suggest why they are so keen to avoid them where possible.
Disagreement over who leads IT spending could be another issue that adds to friction between the two business functions. Some 36 per cent of procurement teams believe they own the process of buying new technology once IT has specified its requirements, but only 12 per cent of IT professionals agree. IT and procurement were also found to have contrasting spending priorities for technology. IT departments prioritise infrastructure and security, while procurement places more importance on front-end technology such as devices and hardware. Is IT right to think that procurement doesn’t understand its needs?
IT is of course one of the most complex indirect spend categories, often with its own category specialists within the IT team. But making itself exempt from formal tender processes and keeping a distance from the rest of the procurement team is a recipe for failure.
While it might be a challenge, procurement can ensure efficiency by collaborating with IT in the following ways:
• Review procurement processes. IT’s common perception of procurement as a hindrance could suggest current procurement processes need re-examining. Determine whether there are any bottlenecks in procurement systems and consider how to mitigate them. Can you simplify formal tender processes?
• Communicate savings targets. Inform IT on how formal tender processes aim to reduce costs, as well as what the specific targets are. You could win IT’s support once they understand the tangible difference that procurement makes.
• Mutually decide on spend priorities. Make it a shared process to determine key resources for the year ahead. You will get more of an insight into what IT requires to function properly and in the long-term you will know how to better meet their needs.
Given the value of IT spend as a percentage of overall spend in most organisations, it is critical purchasing decisions comply with the wider business procurement policies to address risk, maintain value and ensure best practice is shared. Opening a two-way dialogue will help make purchasing decisions a joint process, making collaboration between the two functions more natural.
☛ Daniel Ball is director at Wax Digital