CPO View: Why Fostering Collaboration Between IT and Procurement is Critical

At a time when businesses face continued uncertainty with spend controls and ongoing supply chain risk, there’s an increased need for organizational alignment. As a CPO and procurement leader across a number of organizations and industries, I’ve witnessed these disconnects firsthand time and again. These gaps in executive collaboration are often most noticeable between IT and procurement.

A clear example can be seen in the recent ProcureCon CPO-CIO Report. Respondents say that 55% of the time the CIO/IT takes the lead on technology procurement and 41% say the CIO and CPO are equal partners. This shows that collaboration is moving in the right direction but more can be done between leaders to engage and more fully serve the needs of their organizations.

“Fostering closer collaboration and establishing dual leadership in technology projects are key strategies for enhancing procurement’s role in IT strategy.”

— The 2024 ProcureCon CPO-CIO Report (Source)

Procurement can drive added value in any organization by actively engaging with IT leadership. Aligning the IT department’s tech knowledge with the negotiation expertise of procurement can help enhance the quality of product and service acquisitions while also reducing spend. To be most successful, a collaborative strategy requires procurement and IT to understand each other’s key objectives. Where IT may be looking at a product or service from a security or ease of implementation perspective, procurement is looking at streamlining processes, negotiating purchasing, and ensuring company spend is following the correct path. Both roles want an end-to-end approach with transparency and visibility across the organization. Investing energy into a strategic effort by procurement to reach out to IT leadership in order to build a partnership will drive value for years to come.

Lack of procurement and IT collaboration erodes margins and increases risk

IT and procurement often work in silos, each with its own strategic objectives. While IT and the CIO are technology experts, procurement’s expertise is negotiating — driving a competitive and transparent, fact-based and analytics-based process without any (perceived) constraints. When it comes to technology purchases, the CIO can identify the right products and requirements; but procurement knows how to ask the right questions around service levels, coverage, risk, compliance, strategic sourcing best practices, and control visibility.

In an optimal situation, IT provides procurement with its set of requirements and their two- to five-year strategic objectives, and then procurement brings value to the business by finding the optimal solution to meet those needs in a competitive landscape.

In an optimal situation, IT provides procurement with its set of requirements and their two- to five-year strategic objectives, and then procurement brings value to the business by finding the optimal solution to meet those needs in a competitive landscape.

I often hear stories about solutions being deployed where the CIO only wanted software from one specific legacy vendor. Many times I’ve heard the CIO call out the “single throat to choke” concept. While that makes sense in theory, there are many layers to determining what solutions work best for specific business needs — and it’s sometimes necessary to explore beyond legacy vendors to properly solve for current and future business needs.

In one memorable case, such shortsightedness resulted in the deployment of a platform that was neither mobile-friendly nor cloud-based. End-users were disappointed because the solution didn’t meet business needs. And because end-user needs and habits weren’t considered, adoption was slow, change management was difficult, and ultimately, less spend came under management.

This was a typical case where failure to ask the business units what challenges they’re experiencing and what problems they’re trying to solve resulted in a multi-million dollar spend that yielded limited to no benefit to the organization. Procurement can and should be a partner to the business in technology purchases, to make sure that business objectives and total cost of ownership are evaluated with any new deal. Buying behavior isn’t what it was three or four years ago — organizations simply can no longer afford to purchase software that is redundant compared to existing tools or not designed to survive attrition. At the end of the day IT (as is procurement) are support functions that help enable the execution of strategic objectives for the entire enterprise.

Procurement and IT collaboration on AI policy and usage is essential

When procurement doesn’t engage the CIO, it leads to a suboptimal outcome that sells the organization short. Many companies that have implemented new technologies, like AI-enhanced solutions, are not fully satisfied with the results. Those shortcomings only reinforce the tendency to cling to legacy systems, limiting the organization’s ability to realize improved margins and increased profitability while continuing to strategically implement solutions that help companies see positive margin impact and increased profitability. As David Berry, CIO of Galaxy Universal, and the CIO during my tenure at lululemon recently told me, “First rule of being a CIO: never fall in love with software as you become a dinosaur.” (For more CIO-related insights from David Berry, check out this blog post.)

Although IT and procurement look at AI tools through different lenses, there are two things they share: a commitment to supporting business objectives, and an understanding of the need to weigh those objectives against the total cost of ownership for solutions the company already has. Specifically:

• IT wants solutions that are integrated into the source-to-pay platform, are easy to implement, provide the right data to the right user at the right time, and deliver continuous updates to AI algorithms which allow companies to apply AI effectively with the resources IT already has.
• Procurement wants solutions that maximize buying power with the best supplier terms and community sourcing, along with capabilities to manage spend categories strategically for cost control, eliminate manual processes, and improve forecasts.

A collaborative IT and procurement environment enables implementation of AI solutions for the organization to provide the features and outcomes that both procurement and IT are looking for and ensure data protection and compliance to mitigate risks.

Procurement and IT collaboration starts with active engagement

Procurement can help to prevent problems like these, but we should not wait for IT to open the door for us. We must take the initiative to demonstrate how we can help drive better business outcomes.

In many cases, procurement is already extending into and engaging with the organization with services and tools to support business spend. The ProcureCon CPO-CIO Report found that 66% of the survey group have a procurement team that is included in the strategic planning process, working alongside IT to develop the strategic IT roadmap. This trend is significant where procurement teams are becoming integral partners with IT and shows the shift toward a collaborative approach in harnessing technology and addressing challenges.

Because IT is typically the biggest spender in any company, fostering a strategic and collaborative relationship with that department can deliver significant value. By bringing our expertise to the table, procurement can help the organization secure products and solutions that meet users’ needs precisely, align interests across the organization, lower the total cost of ownership (TCO), and reduce risk.

7 ways procurement can strengthen collaboration with IT

1. Explain that procurement is not here to mandate but to support, collaborate, and drive better business outcomes. True collaboration results in superior solutions with increased value for the business.
2. Demonstrate procurement is a trained negotiating team that considers TCO, maintenance, consulting services, contract duration, strategic alignment, quality, and payment terms as award criteria. I like the analogy that IT buying software is like a mechanic buying a car, what ultimately matters, and how we drive adoption, is the end-user experience.
3. Offer to give advice, something most CIOs are already seeking. According to the ProcureCon CPO-CIO Report, 50% of CPOs and CIOs share leadership in driving digital transformation. This shows the opportunity to foster closer alignment with IT through supporting objectives like identifying redundant software that can be consolidated, sharing best practices, co-creating strategies for optimizing technology investments, sharing insights on industry trends, and identifying and managing risk.
4. Strive to truly understand the CIO’s world and what drives the IT department. Identify the three to five most important considerations for the executive. For example, it’s important to know that 95% of CIOs say their responsibilities are expanding into new areas like cybersecurity, data privacy/compliance, and customer experience, according to IDG’s most recent State of the CIO report.
5. Learn to speak the “IT language” so you can resonate with executives. Schedule regular meetings with your IT team to understand and appreciate how they talk about their challenges and goals outside of any particular project or negotiation.
6. Offer assurance that the “D” (decision) does not sit with procurement. Ensure there is a checkpoint before going to RFP that aligns with the business and IT, and there is cross-functional sign-off before the contract is awarded.
7. Work with vendors that have a history of ethically developing AI through prudent governance and security measures.

Successful procurement and IT collaboration is an end-to-end process

Procurement can deliver significant value to the organization by engaging with the CIO in a collaborative procurement process. Collaboration leads to alignment, which results in higher quality products and services that meet users’ needs exactly, often at a reduced total cost of ownership and risk profile.

Many organizations still rely on legacy technology and point solutions for managing business spend, which lacks robust analytics and a holistic view of the relationship. This lack of information and visibility limits their ability to fully understand and analyze the benefits and TCO of products and services. In my prior roles as CPO at global companies, I made it a priority to focus on establishing a strategic partnership with the CIO and their teams by demonstrating the desire to fully appreciate and understand their objectives and challenges. This created a relationship of trust and when seeking support for a solution that provides this full visibility and control of business spend, it was this partnership that helped accelerate their support and approval cycles. By making procurement a trusted partner of IT, the organization can achieve new levels of resilience, agility, business value and growth.