
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
stakeholders.
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.
Subscribe to the Source One Podcast today for more Procurement, Strategic Sourcing, and Supply Management insights from the industry-leading team. To learn more about optimizing the relationship between Procurement and IT, check out Source One's recent whitepaper, Equipping Procurement to Tackle IT Spend: Building Successful Relationships with Stakeholders.
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