A Strategic Restructuring Of Procurement For A Post-COVID World
Strategic Priorities for IT Procurement Post-COVID-19
IT procurement protocols are vitally necessary for any organisation that seeks to protect budgets and achieve value. However, when the COVID-19 pandemic subjected supply chains in all sectors to levels of stress never before experienced during 2020, tensions between IT buyers and procurement teams were heightened. With restrictions in supply and the suspension of air and sea freight, Heads of IT procurement were often faced with the prospect of having to buy products that were massively over specified, simply because that was all that was available.
As we move into a period of post COVID-19 transition, the supply of many products is gradually catching up with demand -- though the pace of recovery may not reach pre-pandemic levels until well into 2021. In this atmosphere, IT procurement leaders in organisations looking to roll out innovative solutions and achieve value must work closely with supply chain partners and IT buyers.
A major lesson learned in 2020 was that relying too heavily on a small number of vendors can be catastrophic. In this light, IT procurement leaders will be looking to expand their base of reliable vendors both at the local level and with a wider geographical spread, to guard against supply chain disruptions Procurement teams will therefore require closer relationships with partners, and a deeper knowledge of their vendors. The top three priorities for our respondents’ organisations from new IT suppliers in the next 12 months are loyalty and consistent services, access to innovation and enhanced visibility and transparency.
In terms of control and visibility over IT spending, 43% of our survey respondents said their organisations provide their IT procurement team with moderate to complete control over IT spend since the impact of COVID-19.
Innovation and digital transformation will remain high-level priorities moving forward into 2021, and organisations that have transparency and analytics built into their systems will be able to harness the power of automation technology for reporting, artificial intelligence for analysis, and cloud-based record-keeping that can be accessed from anywhere. These resources will enable IT procurement leaders to pinpoint information on orders and leverage digital tools for managing spend.
Most analysts agree that remote working in some form is here to stay. 67% of our survey respondents said they are prepared to manage IT procurement for a remote workforce in 2021 -- but Heads of IT procurement may have to rethink lean, just-in-time inventory strategies to make this viable. Instead, procurement leaders should be aiming to streamline the purchasing process and put more of the decision-making power into the hands of buyers across the organisation. Technology and purchasing templates can eliminate some of the bureaucracy, and empower people in any location to run more sourcing events themselves.
Operating budgets are likely to be smaller in 2021, and staff will be leaner. Our respondents said that the top three most critical areas for them to address this year for IT procurement are hardware consultant/service provider, software consultant/service provider, and IT Asset Management. To maximise on the resources available, IT procurement leaders will need to invest in expanding the skill sets of available workers (especially in areas like data analytics and dashboard building), and make greater use of automation. Increasingly automating the procurement process can bring a number of benefits, including better control and visibility over spend and vendor performance, and reduced cycle times.
The role of Third-party vendors in the IT Procurement Process
The use of external service providers in the IT procurement process can result in cost savings, efficiencies, greater security and compliance, stronger resiliency, and higher quality services. However, looking to third parties for IT services also creates risks, which must be mitigated and / or managed.
Properly managed, third-party IT vendors and support services are a worthwhile option for IT procurement leaders looking to use data to identify new revenue streams and unlock supplier-led innovation. 72% of our survey respondents said their companies use third-party software support, but only 33% use it alongside vendor software support.
It was generally observed that the effect of third-party support on consumers was positive. Our respondents said the reason why they feel brands that use third-party support report a very high customer satisfaction with their decisions is down to the high quality of support they offer their customers.
68% of our respondents agreed that security concerns were the primary blocker when considering moving to third-party support in the past. This emphasises the need for a comprehensive vendor monitoring process. The process should encompass both critical and high-risk vendors, but can also include lower risk relationships which are of significant importance to the enterprise.
Data sources for monitoring may include questionnaires, policy and procedure documents, audit reports, surveys, and third-party data intelligence tools. The monitoring framework should define the types of issues that require escalation and the procedures to be followed in each case. In setting up the framework, it’s important to clarify who owns a vendor relationship and should be primarily responsible for monitoring the vendors, and the role of any third party subject matter experts relevant to the monitoring exercise.
In the context of engaging third party vendors, budgetary concerns are again proving to be a hindrance to transformation and innovation. 56% of our respondents said that over the past 24 months their business attempted transformative or innovative projects, but stopped because of lack of funding.
Cost is clearly a key consideration when deciding whether or not to contract out certain services, but there are other factors to consider. IT procurement leaders must balance the advantages and disadvantages of each option against the overall objectives of the organisation.
Checklists and standards can be valuable starting points when considering or evaluating the use of third-party services. Clearly establishing the remit of the IT procurement organisation and implementing appropriate governance when selecting third-party services can assist in setting up the framework for contract negotiations. And the development of a broad communications strategy for the procurement team and other stakeholders creates a conducive environment for vendor monitoring and the maintenance of an up to date risk register for the procurement.
Managing Supplier Relationships in 2021
As we look to a world beyond the pandemic, increasing market volatility, uncertain political environments, and the impact of climate change are all factors that will require IT procurement leaders to up their game, in terms of supplier management. With end-to-end insights into suppliers, products, materials and data, procurement leaders can rapidly identify alternate suppliers, improve collaboration, and automate the assimilation of new supply chain partners.
The majority of our respondents said they leverage contract compliance audits to deliver historical recoveries plus future cost savings opportunities on their key suppliers. For those respondents who said their organisations leverage contract compliance audits, the majority said their audits are part or partially part of a robust, self-funding, low touch contract compliance and assurance programme.
The top three supplier relationships our respondents said they typically consider for a contract review are complex pricing, indirect spend and strategic relationships. However, only 47% of the respondents said that IT procurement is part of their contract audit strategy. These organisations may be missing out, as an IT procurement strategy that’s fully embedded in the overall contract audit framework and makes the adoption of new technologies an integral part of organisational business strategy can bring significant benefits.
Regular contract compliance audits can provide Heads of IT procurement with the opportunity to measure and assess the vendors they are working with, to improve performance and profitability. And without including IT procurement in the contract auditing mix, organisations may suffer financial and performance losses over the terms of a contract, due to erroneous invoicing and non-compliance by the other party.
Contract compliance programmes can put the checks and balances in place so that IT procurement heads receive the benefits from external suppliers that they bargain for. Contract compliance auditing can also provide visibility to a deeper level of detail than many organisations could reasonably achieve themselves on limited resources.
Conclusion
As IT procurement leaders make the switch from crisis management to recovery mode post-COVID, these executives must now focus on working closely with supply chain partners and IT buyers, to enable their organisations to roll out innovative solutions and achieve value.
In our survey of 100 Heads of IT Procurement and similar functions from firms across Europe and North America, respondents emphasised the need to manage IT procurement for a remote workforce in 2021 -- but Heads of IT procurement may have to rethink lean, just-in-time inventory strategies to make this viable. Technology and purchasing templates can eliminate some of the bureaucracy, streamline the purchasing process, and put more of the decision-making power into the hands of buyers across the organisation.
Third-party IT vendors and support services are a worthwhile option for procurement leaders looking to use data to identify new revenue streams and unlock supplier-led innovation. Loyalty and consistent services, access to innovation and enhanced visibility and transparency are the top expectations from new IT suppliers in the next 12 months. However, 56% of our respondents bemoan a lack of funding for transformative or innovative projects.
With end-to-end insights into suppliers, products, materials or customer data, IT procurement leaders can gain a better understanding of market trends, improve collaboration, and rapidly identify alternate suppliers. The majority of our respondents said they leverage contract compliance audits to deliver historical recoveries plus future cost savings opportunities on their key suppliers. However, only 47% said that IT procurement is part of their contract audit strategy, and may be missing out on significant benefits.
Contract compliance programmes can put the necessary checks and balances in place, and provide visibility to a deeper level of detail than many organisations could reasonably achieve themselves on limited resources.