IT is well known for being a complex and expensive spend category, but what you may not know is that it’s also a major culprit for refusing to follow official procurement guidelines and procedures, choosing instead to make its own purchasing decisions.
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We’ve recently conducted research that looks into the procurement’s department’s relationship with other business functions and uncovered that one in three IT professionals choose to ‘go it alone’ when making IT spending decisions, with an overwhelming majority (78%) of the IT professionals surveyed referring to procurement’s formal tender processes as a hindrance, unnecessarily extending the time it takes to process orders.
According to our CPO Viewpoint research, 36% of procurement claims to own the process of buying new technology once IT has specified its requirements, however, interestingly, only 12% of IT agree that it is in fact procurement’s responsibility.
Where procurement has been involved in the process, only 19% of IT respondents admitted that the procurement team had led the way on cost saving initiatives in their department. This compared to 43% of procurement claiming that they in fact took the lead.
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The research findings certainly point to IT having an unfavourable view of procurement and being frustrated over its ‘red tape.’ However, there is also reason to believe that IT is failing to recognise the potential value that procurement delivers.
The two departments were also found to have a polarised view of spending priorities for IT, as procurement’s focus is generally on devices and hardware, while IT is more concerned with infrastructure and security.
However, one area where IT and procurement were more closely aligned is around supply chain risk. It would seem that almost half (46%) of IT identified that procurement’s most important contribution was in the areas of supplier risk and negotiation.
So what is at the heart of this gulf between IT and procurement and why should IT sit up and take notice of its organisation’s procurement policies and procedures?
Clearly, technology is a complex spend category and those authorised to purchase within IT may claim it is quicker and easier to forge ahead with their own buying needs. However, it is crucial that IT thinks twice before side-stepping procurement’s official processes as potentially they are putting billions of pounds at risk annually.
This department is also missing out on procurement’s supplier negotiation and risk management skills, which could help reduce costs, minimise risks and potential project failures. Surely, it is therefore vital that these departments look to work together more effectively.
Working with, rather than against procurement can deliver numerous benefits so how can the two departments work towards collaborating more effectively in the future?
[quote_box_center]Here’s our three top tips for facilitating this process:
- Deciding on spend priorities needs to be a shared responsibility between IT and procurement. This will help procurement gain a far better understanding of what the department needs are now and in the future.
- IT should stop dismissing procurement’s processes as unnecessary ‘red tape’ but to re-examine them instead – will the additional steps add value or necessary diligence to the project. Are there any bottlenecks in the process, and if so how can these be overcome? Find out if it’s possible to simplify formal tender processes and create ways to work together more strategically and collaboratively.
- Savings targets identified by procurement should be aligned with the IT department’s objectives for the year. Are there any opportunities to save in low priority areas, contract terms that could be negotiated that mitigates cost increases? Both teams need to to identify which opportunities can meet joint objectives and overall savings targets set by the organisation. A better understanding of how procurement’s processes work will help IT recognise the benefits of this approach.[/quote_box_center]
IT purchasing can be complex and demands a certain balance of autonomy and assistance to drive great returns and value. Establishing goals, identifying key areas of spend and utilising the skills of the procurement function presents IT and procurement with the opportunity to really drive a tangible difference to an organisation.