CPO View: Why Fostering Collaboration Between IT and Procurement is Critical
At a time when businesses face growing uncertainty with spend controls and supply chain risk on the rise, 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 first-hand time and again. These gaps in executive collaboration are often most noticeable between IT and procurement. Functioning in a silo and not seeking to engage IT suggests that procurement leaders are not serving the needs of their organizations as fully as they might.
It doesn’t have to be this way. Procurement can drive added value in any organization by actively engaging with the CIO. Aligning the IT department's tech knowledge and 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 an end-to-end approach with transparency and visibility across the entire procurement process, and a strategic effort by procurement to reach out to IT leadership in order to build a partnership that will drive value for years to come.
Download the new eBook: The CIO’s Guide to Business Spend Management and share the value of BSM with your IT leadership today
The Disconnect Between IT and Procurement
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, and control visibility. In an optimal situation, IT provides procurement with its set of requirements and their 2- to 5- year strategic objectives, and then procurement brings value to the business by finding the optimal solution to meet those needs in a competitive landscape.
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 are not fully satisfied with the results. Those shortcomings only reinforce the tendency to cling to legacy systems, limiting the organization's ability to grow, excel and identify competitive advantages. As David Berry, CIO of ARGO Merchants Group, 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.”
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 short-sightedness resulted in the deployment of a platform that was not mobile-friendly nor cloud-based. End-users were disappointed because the solution didn't meet business needs; and, because they were not involved in decision-making, the adoption and change management was difficult.
This was a typical case where failure to ask the business what challenges they are experiencing and what problems they are 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. 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.
Engaging the CIO
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. According to a survey by Deloitte, nearly 70 percent of Chief Procurement Officers are improving and automating procurement processes, and 59 percent are extending these digital tools to internal and external stakeholders.
Because IT is typically the biggest spender in the 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.
Six Ways Procurement Can Better Engage with the CIO
- 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.
- Demonstrate the value proposition that Procurement drives a higher quality outcome by running a transparent and multi-step purchase process. Demonstrate procurement is a trained negotiating team that considers TCO, maintenance, consulting services, contract duration, strategic alignment, quality, and payment terms as award criteria.
- Offer to give advice, something most CIOs are already seeking. According to the State of the CIO report by IDG, CIOs mainly rely on strategic vendors (52%) and their peers (42%) when evaluating tools and solutions during the tech purchase process. CIOs should also turn to procurement and partner in making these important business decisions.
- 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 percent of CIOs say their responsibilities are expanding into new areas like cybersecurity, data privacy/compliance, and customer experience, according to the IDG report.
- 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 and/or negotiation.
- Offer assurance that the “D” (decision) does not sit with procurement. Ensure there is a checkpoint before going to RFxP that aligns with the business and IT, and there is cross-functional sign-off before awarding the contract.
Deliver an End-to-End Process for IT and Procurement Success
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 her/his respective 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 support a new levels of resilience, agility, business value and growth.