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- June 11, 2018
- IT & Technology
IT and procurement have a long-standing relationship, since IT is one of the biggest categories that procurement is managing in most organizations. And, as finance becomes more strategic and the CFO’s tech portfolio grows, the IT-finance relationship has increased in importance, and the IT-procurement relationship has changed. Implementing business spend management technology is where all three functions converge.
In a customer panel at Coupa Inspire, Ronan Kerouedan spoke with three senior technology professionals that have been deeply involved with business spend management transformations about the impact that has had on the relationships between the three functions. Mark Settle, CIO at Okta, George Logothetis, HR and Finance Global Technology Lead at Aon, and Oscar Nafarrate, CIO of Grupo Herdez (pictured from left to right) candidly shared the challenges, pitfalls, and best practices they’ve discovered in engaging with procurement and finance during times of both transformation, and business as usual. We’ve excerpted their conversation here.
Ronan: What is the best kind of relationship you’ve had with procurement and finance, and the worst?
Mark: There are still organizations where procurement is a completely separate function, and IT brings over procurements that they want to pursue, and it’s given to whoever in the group has time or a little bit of background. They don’t understand the broader investment strategy that you’re trying to pursue.
Where I’ve had the most success, and what I try to do now is set up a vendor management office within IT. That individual attends staff meetings, sits in on project reviews, and develops an understanding some of the strategic initiatives that are happening within the organization.
George: I think there’s a marked difference when procurement operates as a function versus a strategic platform. For example, as Aon grew through acquisitions, we enshrined processes across different business units into our older legacy platforms. Procurement was not really working with us to create global processes or a global strategy.
As we’ve transformed in the last few years, developing a global strategy has not only led to the adoption of Coupa and saving $60 million in spend in the first 12 months, we’ve also simplified everything and enshrined the workflows into Coupa as a global process.
Oscar: We have learned that everyone has to put all their interests out on the table, to find a convergence point, because when you start, you’re looking at procurement to save money. The you realize finance is very focused on compliance and internal and external audit. For IT, we want to be able to meet certain milestones. When you don’t have everything well-aligned, there are bad relations.
Ronan: What is the right timing for involving procurement with IT decisions?
Mark: I’ve seen this movie more times than I care to remember: There’s a significant procurement for a business critical project and the group that’s driving the project is falling in love with some technology. They think they’ve done all the necessary homework; they’ve got the price sorted out, they’ve got a delivery date, and then they dump it on procurement’s lap and drama ensues.
Every time there’s a catastrophe of this nature, we all join hands and tell each other we’re going to get procurement in earlier.
But, businesses interactions are happening all the time between members of my staff and different vendors. There are not enough procurement people to be in on all of those conversations.
What I try to do now is focus on educating and inculcating discipline within the technical staff to make sure they understand the ground rules of engaging with vendors. It’s perfectly fine to talk about list pricing or discounts that would be appropriate for a business of our size. A ballpark range is probably sufficient to run a business case and obtain approval to move forward. Then you should get the professionals involved.
It’s not all procurement’s responsibility to show up early. There’s a responsibility on the part of the technical staff to follow common sense ground rules.
Ronan: Let’s flip it now and talk about how procurement and finance should be engaging with you. How does that work in your business?
Oscar: IT is involved in all software acquisitions, but we don’t take those decisions unilaterally. We have already learned that if we don’t have everyone aligned, something is going to be missed. Some business areas will just adopt solutions when they don’t have to integrate them. But once you have to integrate, even with SaaS, we need to be involved.
George: Because the business can go out and purchase their own solutions, IT is having a bit of an identity crisis, if you will. We’re not developing any more. We’re often not even developing integrations across platforms either as these are more out of the box or commoditized in some other way.
As we continue to evolve, most likely we will continue to serve as a sort of architecture and solutioning function that connects disparate solutions to solve complex problems. We’re becoming an internal consultancy.
Ronan: What type of success metrics did you define during your selection process for Coupa, and what are you measuring on an ongoing basis?
Oscar: When we started to evaluate Coupa, we defined our success metrics on purely savings. But now we’re measuring spend under control.
George: We have to talk about savings, and as we extend the system globally we’re getting to almost 100 percent spend under control.
But, how much time is the user spending in the system is a key metric for us because that’s less time and less money we have to spend on change management. Intuitiveness is important, so tracking the number of clicks, and the support tickets that have been raised has also been important for us.
Mark: George touched on an important point with regard to usage. Everybody focuses on price, and sometimes, unfortunately, people lose focus on non-financial metrics, such as terms.
I spoke with our vendor management office leader a few months ago about what metrics we were going enshrine as part of this implementation. His take was that we’re growing so fast that there are not going to be tangible savings that we can point to. Expenses are only going to grow. So, usage is incredibly important.
Ronan: There’s a lot of buzz around artificial intelligence and big data. In the context of procurement and finance, who’s driving this within your business?
George:A lot of what we’ve done the last few years is getting back to basics and being able to leverage the capabilities of a technology like Coupa to get spend under control and governance approval workflows in place, knowing that we have this treasure trove of data available to us so that we can eventually utilize. Frankly, we’re not where we want to be but we’re now at the precipice.
We’re creating an ecosystem in AI where we’re willfully spending small amounts on different AI technologies and seeing what sticks. We put out data sources from Coupa and Workday and created “innovation teams” within the company to see what they could do with them and what insights they can derive. Once we’re done with the global deployment, we are going to have more of a laser focus on that, but right now it’s more of a startup culture.
Ronan: How do you strike a balance between compliance and maintaining flexibility in your business?
Mark: A lot of the conventional reviews that we would normally have are easily subverted in the SaaS world we live in today. Everybody needs to understand there’s going to be a security review, and a legal review. There’s a fixed amount of time and paperwork that’s going to be required. That’s just a given. When people think that they can do it all on their own and drop it on IT at the eleventh hour, that’s when governance starts to break down.
George: When I think about IT governance, I think about how technology can lead transformation and how governance can follow suit. This has really challenged us because we came from a hosted environment where a lot of our platforms could not be changed outside the yearly upgrade, so everyone had to get on that train
Cloud solutions have challenged us to truly be a more agile shop while still being SOX compliant, and have the kind of controls you always have to attest to. We have, number one, put in place global service owners from all our functional areas, and on our side we’ve identified their solution counterparts.
We facilitate the governance mechanisms. If you need a set of configuration changes, as long as it ties back to the strategy that you as the global process owner are pushing forward, we now do that on monthly cycles. We’re able to get a lot more value out of the process because we no longer have the tax of being tied to the expensive cycles of maintaining hosted solutions.
Oscar: We still do this ourselves, but we are gradually pushing it to the business. We are in the process of figuring out where we need to be involved, and where the business can be more autonomous.
Ronan: What’s keeping you up at night? What’s worrying you when you’re running so many cloud solutions?
Mark: One is duplication of functionality. What’s really difficult in the SaaS world is the business has lots of small bolt-on tools that don’t add up to a lot of money, and you have to spend political capital to try to get them off of those and to use the main platform, whether it’s Salesforce or Marketo or NextLead or SAP. You really have to think about whether you want to use your political capital that way.
Also, you want to indemnify yourself against fluctuations in usage to really make sure the way that you’re consuming the product is reflected in the contract that you have. I’m willing to pay more for a super user or frequent user, but I don’t want to pay the same for somebody who logs on once a quarter.
The third is integrations. There can be kind of a long tail to some of these SaaS tools. It sounds like it’s cheap until it shows up and then it’s got to play nicely with these other tools and it turns out that it doesn’t.
George: With these frequent upgrade cycles and the hunger internally to turn things on, we have to remember that a lot of these users are not going into our platform more than probably three to five times a year. So, as much as you don’t want to have change governance around cloud platforms because they should be straightforward, that’s not always the case, so how do you run a change management process to keep users abreast of what’s available to them?
I think the second thing is, as you’re deploying these, there’s an impression that some of the IT workload can be optimized, or put elsewhere, which may or may not be the case. What we have to continue to recognize as we continue to bring more automation is that we’re also moving around little pockets of work around.
So, you have to look at, when this thing is live, what has it done to IT? How has it transformed us? And, as we free up capacity, do we want to apply it towards artificial intelligence? Do we want to apply it towards less technical work and more business intelligence work, for example? You have to pause and have a reflection period to see where you stand.
Ronan Keroudan is Vice President, Global Value Solutions Consulting for Coupa, Mark Settle, is CIO at Okta and author of “Truth from the Trenches: A Practical Guide to the Art of IT Management. George Logothetis is HR and Finance Global Technology Lead at Aon. Prior to that, he was a senior manager at Accenture. Oscar Nafarrate is Director de Procesos y TI at Grupo Herdez. Prior to that, he was Director de Practica at Sintec.
Want to hear more from Mark Settle, CIO at Okta on this topic? Join him on Wed, June 20 at 11:30AM PT / 2:30PM ET for "Managing IT Business Spend: Thinking Strategically While Executing Tactically," a live webinar in partnership with CIO.com and Coupa.