a plan for digital transformation to fuel new innovation and business value
Whereas business units from finance to manufacturing have already harnessed the power of the cloud, mobile, data analytics, and artificial intelligence (AI), one often overlooked the function is waiting to fan the flames of innovation: IT procurement.
Why start now? “The CIO will find the chief procurement officer a great partner in digital transformation, one who can deliver significant impact and turn procurement into a profit machine,” says Paul Blake, associate director for GEP.
“When belts get tightened and the global economy changes, procurement can deliver real savings.” This guide will take the CIO through the key steps to success in planning and executing a procurement modernization strategy with the chief procurement officer (CPO).
IT Procurement driving innovation?
That’s something that many IT leaders haven’t heard before. Yet, as CPOs have long known, a treasure trove of opportunity lies in IT procurement and sourcing data, if only the organization knows how to unlock it.
Blake says IT procurement is often perceived to be a cost center, not a profit center. “The CPO wants procurement
to be seen as adding value by delivering efficiency and reducing costs.”
To help achieve that goal, CIOs and IT can partner with the CPO to harness the same technologies used to transform
other parts of the enterprise. For example, turning data into action is often hampered by the way it is siloed in IT procurement payment cards records, purchase-to-pay (P2P) supply chain, employee expenses, and/or ad hoc purchasing systems.
This segregation of data often leads to users circumventing procurement policies, which can be costly to the business. Consider this scenario: Often, products are sourced and contracts negotiated, but the purchasing teams never get the memo and therefore continue using old methods instead of reaping the benefits of procurement’s work.
“It’s inertia, habit — or it’s easier to buy on Amazon,” says Blake. “Employees think it’s cheaper, but it’s not, in the long run.” The CPO has good reason to unleash the hidden value in procurement data. “Procurement has to prove it’s worth continuing, but the CFO and CEO often say they don’t see procurement’s efforts hitting the bottom line directly,” says Blake.
By teaming up with the CIO to understand that a complex data landscape is essential to gain the most value from
procurement, new technology can transcend information silos. What’s more, greater access to data can bring changes to corporate culture as C-level executives start to see the bottom-line impact of procurement’s efforts.
The CIO and CPO together can determine which applications to mine and how to simplify access and analysis for teams anxious to leverage this hidden resource.
Cultivate the new CIO-CPO partnership
business units must collaborate with IT on both on-premises and cloud solutions. It’s no different with procurement, in which a new partnership between the CIO and the CPO can drive new business value and open new opportunities for innovation.
When thinking of digital transformation, the CIO sometimes puts procurement — and the CPO — on the back burner, even though this collaboration can deliver big results. So, what does the CPO do? For most enterprises, it goes beyond sourcing, contract negotiation, and purchasing.
“The CPO doesn’t want to be a tech guru,” says Blake. “[He or she] relies on IT to implement new opportunities
and … help deliver more visibility and transparency to demonstrate that the procurement department is achieving
This can translate to the need for near-real-time dashboards that show across-the-board status, but data silos and
legacy applications can hamper the delivery of these functions.
For example, the organization may have chosen an ERP application that includes procurement functionality with little CPO involvement; yet, the CPO has a deep understanding of how integrating data from each silo can have the most impact.
Cultivating the CPO-CIO partnership also can surface new value propositions. “Upgrading existing ERP software isn’t transformative; it’s doing the same thing,” says Blake. “But if employees can shop from an online store the moment the contract is signed — that’s delivering huge value to the CPO and the organization.”
Not too long ago, CIOs were seeking a seat at the executive table as peers. Today, the CIO can help the CPO achieve the same goals by helping to create a plan that breaks down data barriers and automates repetitive low-value tasks.
In addition, considering new tools such as an integrated procurement offering can add value in new ways while
simplifying the jobs of both CIOs and CPOs.
Find the right Technology for the job
The very notion of “siloed solutions” often creates the breakdown in procurement processes. The question at the
heart of procurement software selection may come down to: Should we select “best in class?” or “single source?” The
answer: Bringing all the elements of procurement under a common software umbrella can eliminate duplication of
effort and streamline processes.
An organization may review “feature counts” for procurement software functions, adopting a more-is-better strategy,
Blake says. However, arming procurement with a blend of “best-in-class” applications for each function — RFP
creation, sourcing, contract management, supplier management, and purchasing, each acquired by a different team— can be inefficient, Blake notes.
“The speed of procurement is controlled by the slowest step in the process,” he says. “No matter how sophisticated your sourcing tool is, if the glue between that and the contract software is nonexistent, then you are figuratively copying down data from the winning bid on paper and bringing it to the attorney’s office, telling them ‘Here, this is what we want the contract based on.’”
Blake sees automation as the driving force in winning deployments today. “It’s no longer a feature arms race and
ticking off all the boxes,” he says. “What the organization needs to understand is this: Can people use it easily?
Does it help them achieve what they want to do? Do they enjoy using it so they can issue an RFP faster or raise a purchase order for an item they want in under three clicks instead of under three weeks?”
Often, this silo breakup requires a new organizational approach to the software selection process. “Departments
are divided into different groups because they work with different software,” says Blake. “Consider dividing teams by
subject matter or commodity, having a single department with sourcing, contract, and supplier management along
with strategic buyers and finance for each area.”
Streamlining and consolidating don’t have to be inelegant. GEP’s Blake suggests some key considerations other than feature count. “Focus on usability, and don’t worry about all the bells and whistles. Support for arcane auction features are nice, but you don’t want them cluttering users’ minds or desktops.”
“Make sure end users are part of the evaluation team, since their buy-in is what drives adoption, and look at procurement as the cross-functional process it is, engaging purchasing and legal teams for their perspective as well,” he adds. “Giving users a common toolset can bust silos, and quickly.”
Engage users (of Every generation) for increased productivity
The consumerization of IT has led procurement users from boomer to GenZ to expect simple, intuitive, touch-friendly, device-agnostic software for business as well as consumer applications. CIOs and CPOs together can
capitalize on this trend in several ways.
What makes procurement software “better”? Simplicity, says GEP’s Blake. “Users don’t want to enter the same data
over and over. One difference between good and great software is that, if you don’t need it, it’s not on your screen,”
Simplifying a tool’s visible functions to only what users need can reap huge rewards in other ways. “You could spend a month on the perfect RFP, a perfect bid analysis to get the perfect result… or spend those four weeks sourcing four
different categories instead,” Blake says.
“You might only get 10% savings instead of 12%, but you’ve saved that 10% in four categories and can now move on and do it again. It’s the efficiency and speed that matter, and how the end users take advantage of that.”
Users ask for an Amazon-like experience for new applications as shorthand for something familiar and easy to use. This orientation can color the way IT and/or procurement evaluates potential solutions.
“One CPO asked how he could trust that a software solution worked as advertised since it looked ‘too easy to use,’” he says. Blake advises CIOs and CPOs alike to stop and re-think any prejudice that easy-to-use, attractive, gamified software isn’t serious or robust.
Providing a simple, clean user experience (UX) can make a big impact on compliance and adoption. “If the end user
finds that the easiest way to buy something is to use the system compliant with the strategy, then you can’t fail,”
“If the person approving purchase orders needs to open hundreds of email attachments, digitally sign them, attach a PDF and send it off, [he or she] may put it off till later. But if approvals are pushed to [his or her] phone and a fingerprint is all that’s needed for approval, it becomes instantaneous and painless.”
By simplifying the users’ data-entry burden, hiding seldom used features until necessary and delivering a Google- or
Amazon-like experience with screen elements familiar to every user, the CIO, and CPO can deliver robust, gamified
applications that are as compliant as they are easy to use, adds Blake. Contact Musato Technologies to learn more about our innovative and ingenious IT solutions and services to empower your business. Content provided by CIO