profit from procurement

Why Is IT Procurement So Neglected?

17/12/2015

Of all procurement categories, IT is arguably the most important.

Few other categories, if any, can create such a huge competitive advantage for a company if conducted professionally, while at the same time, carry such considerable risk and cost to it if conducted poorly.

So why do so many companies neglect it or afford it second class status?

All too often, the ‘default’ for IT procurement lies solely with IT professionals within the IT department. At first glance, this may seem logical, but this is to confuse IT procurement as a technical activity rather than the highly commercial activity it actually is.

That is not to say that highly trained IT professionals could not also be highly trained commercial purchasers too, but how often is this the reality? More usually (and understandably), IT professionals see the purchasing element of IT as a necessary, but distracting part of their key role; namely, to ensure the smooth technical operation of their business. How many of them have been trained in strategic sourcing, let alone negotiating, supplier management, contract review and management etc? This is not fair on the IT Department and it is a missed opportunity on the part of the Company.

IT suppliers just love this situation!

You can be absolutely sure that when they come to sell to you, they will spearhead their approach with a highly commercial sales person who is likely to be far more skilled in the knowledge of selling than the deep understanding of IT.

They are not concerned about the inner workings of a WAN or a LAN, but rather, they are intent on achieving their huge commissions by asking simple questions such as: What is your budget for this purchase? Who else are you asking to quote for this business? Who is the incumbent supplier and how much are they charging?……and so on.

Sadly for the buying company, the suppliers are usually given this information on a plate by unsuspecting IT professionals. In addition, since supplier management is not usually part of an IT armoury, if the supplier does not get the information it wants from one person, they are simply allowed to move freely from one part of the IT department to the other until they can fill in all the pieces of the jigsaw they need to secure the business.

It is important to recognise that this is not an exercise in criticising IT professionals. It is actually fighting their corner! Why should IT professionals be expected to know how to purchase professionally any more than purchasing, marketing or sales professionals be expected to know how to support a company’s enterprise software? Yet so many companies leave their IT community to purchase in splendid isolation at the mercy of huge multinational suppliers. They need support!

CEO’s (and their business colleagues) need to see beyond the ‘IT’ in IT procurement and recognise it, like any other category, as a highly commercial activity, not a technical one.

However, unlike many other categories, it can also be highly complex and needs to include the involvement of IT professionals too.

In other words, to conduct the strategic procurement of IT effectively, it needs to be commercially led with cross-functional involvement and support.

An IT procurement professional needs to have a good understanding of the IT market and a broad understanding of IT itself, but does not need to be technical.

It is their role to bring the commercial know-how to the activity and lead the commercial process opposite the supplier, but this is not sufficient in itself to purchase IT effectively.

Just as the IT professional requires commercial support, so the procurement professional needs technical support.

The combination of both, commercial and technical skill-sets, is incredibly powerful and when aligned to business strategy, can release major benefits to the company while simultaneously reducing the risk and cost to it.

Back to news