Procurement departments are being challenged, but as with technology teams, all too often, this vital arm of the business is misunderstood, lacks the right level of skills and sponsorship, and is therefore unable to fully deliver on its remit. In the recent past there has been friction between technology and procurement teams, but if organisations are to truly transform, then is a new partnership about to arise?
In a whitepaper written by Kristin Ruehle, MD for Operations, Procurement Business Process Services at Accenture, she reveals: “stakeholders find the procurement process too cumbersome, slow, and rigid. In their minds, Procurement is an obstacle to be avoided rather than a useful tool.” CIOs and CTOs in some sectors agree with Ruehle’s findings, but others, and modern procurement leaders indicate the landscape is changing.
“We often find that CEOs don’t know the pain of working with procurement,” says Fin Goulding and Haydn Shaughnessy, authors of Transformation Sprint. Goulding is former international CIO of insurance providers Aviva and Sabre. “Procurement is not used to working with small firms,” they add, echoing a common refrain from CIOs and CTOs who need to bring in specialist technologies and skills, often best found in medium-sized and scale-up businesses. Christian Martin, Director of Procurement at The London School of Economics and Political Science (LSE) counters Goulding’s view, though: “Working with SMEs is not a challenge unique to IT,” adding that the capacity of the SME can increase project risk.
“The challenge with compliance is that it is the enemy of pace,” adds Mike Potter, Digital Transformation Director at Thames Water, a major utility firm in the UK. Potter’s point highlights the friction that exists between technology leaders charged with delivering major change, and the compliance remit endowed onto procurement teams.
“I have some sympathy with CIOs and CTOs, many have had bad experiences of procurement,” says Alan Knott, a procurement leader and associate with Tessiant, a consultancy that includes retail CIO Anna Barsby on its leadership team. “Therefore, the onus is on procurement to show they add value,” he says. Knott’s colleague Alex Ball says CIOs are often frustrated by an experience that is not real procurement, but buyers with a procurement job title. The difference he says is subtle but important; a real procurement leader is a negotiator that will go into battle on the CIO’s behalf.
All corners of the business world are in agreement that the pace of change that organisations require in the 2020s means that existing procurement practices are just not up to speed. “It has become clear that we are completely dependent on IT to operate at pace, which was demonstrated by the rapid demand for virtual environments and VPNs during the pandemic,” says Kevin Brown, senior VP for the Secure Power Division at Schneider Electric. As a technology service provider, Brown is seeing Schneider Electric’s customers in the major internet organisations challenge procurement practices, expecting global reach, but also responsive local services.
Procurement leader Knott says the modernisation debate has been on-going for 20 years but agrees that the pace of today’s business is very different. “Organisations ask, ‘how do we get six to nine months of procurement process down to 120 days?’ Everybody wants to run at pace, no matter the business function or vertical market. But there is a need for a balance between pace and governance. That means there has to be a degree of rigour.”
The pandemic has demonstrated that need for ‘rigour’; in the UK, Conservative Party health secretary Matt Hancock has been found guilty of using the pandemic to avoid procurement protocols and award major contracts to friends and party donors.
Shared challenge
Despite the friction that occurs between technology and procurement, both business units work under similar sets of challenges, with neither being given enough scope to influence senior decision making. “Procurement are often involved too late into the process, and then their involvement can begin to take a project backwards,” Knott says of how procurement teams have to check compliance or tie up some loose ends. At times, the CIO is to blame too; experienced CIOs and CTOs have suppliers in mind that they trust, and from experience, they’re confident the supplier can once again take on the challenge. This is often the case when a CIO is fairly new in a role. “If we can have a conversation earlier, then we can reach an approach that both procurement and the CIO agree on,” Knott says.
Potter at Thames Water says the two can work together and be highly effective. “We have focused on designing for agility and building compliance into this, so the aim is to build assurance into the process, which means it does not become a backstop. That has been an exercise in co-design.” Laura Dawson, CIO with the LSE agrees: “At LSE it is very much a partnership, and I think a mutual understanding of each of us as professionals. Some of that comes from setting joint ‘missions’ and creating a common goal.” LSE procurement leader Martin adds: “We are very much on the same team. Dawson has given us space to offer negotiation training, and there is a high degree of pragmatism.”
Like technology-led business transformation, Knott says often changes to procurement practices can feel like change being done to the business, rather than with business - again, an accusation often levelled at CIOs.
Procurement can often be the department with the lowest staff turnover, which, in turn, leads to a skills problem. James Findlay, founding partner at Stance Global and a former government CIO, says there is a vital need to “build up the procurement capabilities” of organisations. He agrees with Goulding that most procurement organisations are “not SME friendly”.
“There are two types: those that negotiate and those that administer. You often have a Head of Procurement, when what you really have is a buyer, and they run a business process. There is a process, but what a CIO wants to see is the negotiating ability,” says Ball of Tessiant of the skills gap Findlay identifies and the business risk this creates.
An excessive focus on processes has led to procurement teams losing their role as a key business function - just at the time that technology is being recognised as key. “I have worked in areas of government where procurement has been an exercise in managing process and legal risk. At Thames Water we are subject to a lot of the same regulatory environment as the government, but here there is an incredible commercial leadership,” Transformation Director Potter says of the power of a partnership.
“In my experience of working in procurement, there are some departments that are very compliance-focused, and therefore, I can see that’s a problem,” procurement leader Martin at LSE says. His CIO colleague Dawson adds that transformational procurement leaders, like their technology peers, “know a methodology really well, and therefore know what elements of that methodology can be dispensed with in order to get things done.”
“I have seen plenty of cases where Procurement spots that the buyer doesn’t know what they are buying,” Ball says. “If the procurement process is done properly, then it is a multi-faceted process with clear needs and touchpoints that demonstrate value for money.” Knott adds: “If Procurement is a business function, then it is part innovative and creative with a desire to do the right thing, and to meet the expectations of stakeholders. I worry that the process is seen as the procurement in itself. All the process does is to provide the structure and framework for decision making.
“Procurement and sales functions are two sides of the same coin; at its core is the ability to negotiate a deal,” Knott says. Ball adds: “It feels like what has happened to programme management, it became formulaic and you tick the boxes, and that means it has commoditised down in value.”
Buying into a new future
No department demonstrates the possibility of moving from service provider to partner more clearly than technology, and this is the journey that procurement must get a ticket for. “There are a lot of conversations about the levels of collaboration on offer...organisations that are looking for answers to the challenges of digital transformation want to see into the ecosystem of the businesses they work with,” Brown at Schneider Electric says of how the purchasing discussions are changing. Knott at Tessiant agrees: “There is no lack of willingness to do the right thing and to remove the essence of commodity.
“The point is that procurement has to be seen to be adding value, then people will want to use you and your services, and Procurement will be seen as necessary to success.”