It's no secret that today's Procurement leaders speak the language of every department within their organizations. Many companies, however, still observe a culture clash between their Procurement and IT units. Misconceptions about Procurement's goals and expertise often result in poor stakeholder engagement. Without IT's investment, Procurement teams face considerable challenges in managing the department's spend.
Source One's procurement consultants have considered IT strategic sourcing a specialty for over two decades. They've continually succeeded in bridging the gap between the departments and fostering a sense of unity.
Recently, IT procurement specialist Torey Guingrich sat down with the Source One Podcast to discuss best practices for bringing the departments together. The key, she suggests, is to emphasize more than cost savings and present Procurement as a decision support team.
Here's a full transcript of the conversation:
Source One: Hello, and welcome to the Source One podcast. Consider us your on-the-go source for the latest insights in the procurement, supply management, and strategic sourcing industries.
Today we’re joined by Source One Senior Consultant, Torey Guingrich, to discuss a prevailing challenge for Procurement groups: having an impact in IT. For many organizations, IT spend is off-limits to Procurement. In today’s conversation, we’ll uncover some of the reasons behind Procurement’s limited reach in IT and discuss methods for bringing the two business units together to support overarching enterprise-wide goals.
So, let’s get started with introductions. Torey, do you want to give a little bit of background to your experience in Procurement and your role at Source One?
Torey Guingrich: Sure. I’m Torey Guingrich and as you mentioned I’m a Senior Consultant at Source One Management Services.
Coming out of school, I started as a practitioner in corporate Procurement at a manufacturing company. I began with MRO-based products and services and eventually began supporting raw materials category management. That really was my first exposure to more technically-focused stakeholders. It's where I started to get out of the habit of speaking Procurement's language and started speaking the language of our
From there, I went to work in Procurement for a large health insurance company. This was during the ACA's roll-out, so there was a lot of focus on indirect costs and a lot of changes to business processes. In that role, I worked closely with IT and business stakeholders to source solutions that helped support those process changes. I also worked on developing GPO-level agreements. These were mainly within IT services, software licensing, and telecom services.
In my time at Source One, I've worked on a number of telecom-related initiatives and helped to support a range of IT product and service sourcing initiatives. My role at Source One is to lead those engagements with our clients, manage the projects and stakeholder relationships, and ensure that the overarching strategy and approach enables our clients and aligns with their goals and objectives.
S1: Great, thanks for that introduction, Torey. So, set the stage for us.What are companies typically looking for when they reach out to Source One and your IT sourcing team for help with their IT spend? What are some of the typical challenges they face?
TG: Many clients are trying to understand their spend and what’s driving the numbers behind their budgets. Many times, this comes in the form of a holistic review of spend from the CFO or CEO. In that case, we’d look at anything categorized within IT or anything hitting the CIO’s budget. When IT teams reach out to us, they are usually looking to implement a new software platform or replace an existing system. They come to Source One for a strong sourcing process and our market intelligence. Also, IT services are a large area of growth, trying to get managed services consolidated or develop strategies for managing supplier relationships. Typically, clients reach out to us when looking to drive visibility into spend and services and reign in any associated costs.
S1: What makes the IT category such a difficult one for Procurement organizations to approach?
TG: There is a long history in many organizations of IT acting independently or being silo-ed from the rest of the organization, including Procurement. Because much of the IT spend is made up of technologies and infrastructure that support the operations of an organization, it may be viewed as ”too critical” for Procurement to get involved. It might also appear “hands off” from traditional cost savings and negotiation strategies because it is essential to enabling the business.
Certainly, Procurement departments that are just starting out or looking to build their credibility may be looking for “lower hanging fruit” as opposed to what is typically considered more technical or strategic spend within the IT area. Even your more established Procurement organizations can feel that they add little-to-no value to IT.
As procurement departments look to increase their maturity level and add more value to the organization, they are oftentimes looking to move from reactive, short-term strategies to longer-term, more strategic sourcing and supplier management strategies.
IT has also evolved throughout the years in its own ways. They, too, have begun moving away from transactional or piecemeal hardware, software, and service purchases. They now display a more holistic, long-term vision for the technologies and solutions they and the organization as a whole employ, while also considering the business process impacts of these technologies. IT is playing a very critical, hand- on role in managing that growing list of tools and solutions that are necessary for supporting the business processes within different departments and across the organization, while still supporting more traditional IT processes and underlying infrastructure and acting as a support organization for the business.
IT groups are often under-resourced to support required configuration, implementation, integration, management, maintenance, and overarching security needs – so considerations for cost, supplier management, and overall category management (Procurement’s bread and butter) get pushed to the wayside. But, ultimately, if IT and Procurement can overcome the real or perceived hurdles to working together, their individual department goals can actually align.
S1: You mentioned that, in some cases, Procurement teams are looking to mature as business units –growing their strategic reach, but how is Procurement typically viewed by IT groups?
TG: In many organizations, IT’s view of procurement is similar to other department’s view of Procurement. They view them as a reactive and tactical function within the organization which is willing to sacrifice service and quality for cost savings. Of course, Procurement groups have a lot of work to do as they evolve. They've got to communicate their real value to an organization.
As we discussed, IT departments are burdened with ensuring technologies and solutions across the organization are working correctly. They've also got to manage the underlying infrastructure and network performance. IT is focused on ensuring that user needs are met and that systems are available and performing. Procurement - viewed by many as cutting costs at all costs- can appear to have highly conflicting goals. This is why it’s so important for Procurement to communicate their value, especially to the IT group. They need to present themselves as “budget optimizers” as opposed to “budget slashers” to change their perception. They need to remind IT that they are no longer a tactical cost-reduction team, but have evolved into a focused, strategic sourcing-driven decision support unit.
S1: For those IT departments who are hesitant to work with Procurement, what is the value Procurement can deliver?
TG: Procurement can help IT to better use the dollars they have allocated and get more value out of the projects and initiatives that they take on. Procurement brings a sourcing process that allows IT to define project goals and requirements upfront, prioritize those requirements, and evaluate cost and solution models that align with their goals and objectives. IT tends to be very comfortable with their preferred suppliers because they are focused on service delivery – the old adage of better the devil you know than the devil you don’t – so this may lead to missed opportunities if better strategic sourcing and supplier management plans aren’t employed. Additionally, Procurement brings a wealth of negotiation experience to the table and can help IT and its suppliers to look at spend and opportunities more holistically, as well as push for defined and transparent service levels and account/relationship management expectations. Procurement also brings value by working with IT to define category management plans, supplier relationship management programs, cost monitoring/auditing schedules, and contract management initiatives. With these in place so that the IT group can stay focused on service delivery and allow Procurement to support the areas that they don’t have enough bandwidth to manage.
S1: So, then, what can companies do to better align their Procurement and IT groups?
TG: Certainly, Procurement as a whole needs to be positioned across the organization as a partner and a support group for making strategic decisions. What I have seen work well is for IT to have a defined point of contact (or group depending on the size of the organization) within Procurement that acts as a liaison for supporting IT needs from a sourcing and procurement perspective.
Once a support structure is defined, it is critical for Procurement to take the time to learn about the different categories within IT, research the suppliers in the market, and develop an understanding of the IT services, systems, and infrastructure in place within the organization – not necessarily from a highly-technical standpoint, but from an overarching priority, dependency, and general knowledge standpoint to speak IT’s language and understand their goals and requirements more clearly. This can be as simple as asking questions and carrying over lessons learned or insights, or as involved as scheduling ongoing discussions or initiatives.
S1: What can Procurement groups do to build better relationships with their IT counterparts?
TG: Procurement should position themselves as a partner for IT and a group invested in understanding the concerns and priorities of the IT group to better serve them as stakeholders – a good place to start is to work with the IT team to understand their technology roadmap and start anticipating where Procurement can support the group's 1, 3, and 5-year plans. By understanding IT’s long-term vision, their goals, and how the group is measured from a performance standpoint, Procurement can focus their conversation on meeting service delivery metrics and driving innovation, as opposed to simple cost reduction.
All of this is to say that when working with IT, Procurement should look to embed themselves as a strategic partner and decision support group that helps to ease IT’s burden and provides for better, more informed decisions to help the IT group reach their goals. Additionally, Procurement can act as an advocate for the IT group to ensure that as Procurement is brought in to help other parts of the organization, they are watching out for potential IT impacts. They can also bring in IT as a decision support function look at integration points, systems requirements, implementation support, and other considerations. This allows Procurement and IT to build a mutually beneficial relationship and establishes a foundation for IT to bring in Procurement for projects they are supporting across the organization.
Ultimately, the goal of this collaboration is a relationship in that allows Procurement to focus on sourcing considerations (including supplier and contract management) while IT focuses on its organization's service level and technological needs.
S1: Absolutely, well said. Torey, thank you so much for your time today and for lending us your insight.
TG: Thank you.
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