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Procurement & IT: Vying for Control of Tech Spend

Procurement and IT share a lot of similarities. Both functions possess a very specific skill set designed to improve business performance and get the most out their company's investments.

Procurement and IT have also faced similar criticisms over the years, namely that (at their worst) they operate under their own mandate and often put the function's goals ahead of the success of the business. Despite the similarities, procurement and IT departments don't always see eye to eye.

Some of the shared challenges (and their solutions) include:

1) Differing processes – IT often criticizes procurement process as being too slow to meet the demands of the fast moving tech sector. Extended sourcing projects can mean that by the time a purchase has created a request for proposal (RFP), put out a request for quotes (RFQ), collected three competitive bids, obtained buy-in from all stakeholders and a vendor has been selected, the technology required may well have been superseded by a superior product.

According to IT managers, one of the critical elements in IT sourcing is speed. The lesson here for procurement professionals is to try and break into the IT decision-making process as early as possible. By gaining early access and providing structured supporting data, procurement can easily explain the benefits of utilizing a more structured sourcing approach. Open communications with the IT department can also alleviate fears about the speed and responsiveness of the procurement department. If speed is required, then procurement can act quickly, ensuring that only the most vital commercial elements are covered off.

2) Differing mandates – Perhaps the greatest challenge for collaboration between the two functions is that the core priorities of each are intrinsically different. Whether they like to admit it or not, procurement activities are still motivated largely by cost savings. IT professionals are driven and incentivized on uptime. These two priorities are often at loggerheads with one another.

To put it simply, the key performance indicator (KPI) of the procurement manager is likely to be reported cost savings, whereas an IT manager's KPIs are likely to be based around uptime. So what may look like a good solution to the procurement manager (one that prioritizes price over system stability) may not look so appealing to the IT manager. In order to achieve success here, it is critical that both procurement and IT take their thinking away from the traditional mandates that have governed our functions and determine what is the best course of action from a business point of view. There will likely need to be some comprise. Perhaps the procurement team will need to forgo some savings in order to access a system that will ensure business continuity or perhaps the IT department will need to come to the conclusion that the most expensive and reliable solution is not always sustainable from a cost point of view.

3) What we know – The knowledge bases of procurement and IT staff are vastly different; and they should be. IT professionals have an intricate understanding of the available technology, how it works and how it might fit within their business. Procurement staff bring the commercial rigor and negotiation skills to ensure these IT agreements are contractually sound.

The challenge that presents itself is that IT contracts are inherently complex and require not only an in-depth technical knowledge, but also vast contractual knowledge. IT agreements will often require multiple contract phases for items like training, implementation, licensing, change management, and project management. this requires a detailed technical knowledge of these solutions that most procurement professionals do not possess.

Similarly, IT staff are unlikely to possess the negotiation skills and contract knowledge to identify areas of potential negotiation and cost saving opportunities if they were to go the contract alone. Procurement is vital for ensuring the contract agreed is commercially sound and for delivering the post engagement supplier relationship management effort. Only by working collaboratively to understanding one another can procurement and IT get on the same page to deliver a solution that is technically, contractually and commercially sound.

As with so many commercial relationships, the key to a successful partnership between the IT and procurement departments relies on open, early, and frequent communication. If the two functions are able to converse freely and understand each other motivations, strengths, and weaknesses, while keeping the business's best interests at the forefront of their efforts, then we can be certain that our companies will continue to get the most of out of their investments in technology.

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