The IT Procurement Debate Rages On: How do you bridge the gap between IT and Strategic Sourcing?
We’ve posted before about this very topic on several occasions, originally going back to July 2012. It’s a topic that always gets lots of discussion, because there doesn’t seem to be a right or wrong answer. WHO SHOULD OWN – IT Purchasing? Procurement and IT are both on the cutting edge as vitally important business functions – both with a big seat at the board room table. But, there’s overlap (or where should the overlap be) because things seem to get sticky in terms of who has ownership over what.
IT departments maintain that only they have the technical know-how to conduct their own purchases of complex systems – hardware, software, IT consulting services, licensing, telecom, network & engineering services and so on and so on….you get it, anything (absolutely anything to do with IT). Man, these are all really, really big ticket items in companies so IT has also got to understand why Strategic Sourcing would surely want to take a hand in managing the potential for huge dollars saved on the bottom line in these very important categories.
IT of course wants to take ownership over the entire buying process of the piece of technology they’re investing in, from vendor selection, contract negotiation, procurement to implementation, renewals, Service Level Agreements and support.
On the other hand, Procurement/Strategic Sourcing feels they know they really have the specialised knowledge in achieving best practices, finding best of breed vendors and negotiating the best overall package for IT to achieve maximum cost-savings without sacrificing quality and integrity. Procurement and IT often wrangle about how the process gets done and whether documenting the purchasing process is completed the right way. As Ron Joy, a former Senior SCM executive, mentioned in a LinkedIn comment, Procurement Professionals worry that IT departments who sometimes use trial and freeware versions of software are opening up their organizations to possible infringement issues. That’s a point well made.
Our previous post mentioned that there was even one organization we connected with where all IT Procurement activities (hardware procurement, networking, telecom, software, IT consulting, licensing, etc.) were owned by IT and bypassed sourcing completely. The very essence of what Strategic Sourcing is trying to achieve for companies as a whole is stymied if large departments like IT are permitted to carry on this way in isolation of the collective whole. It’s a complex, multifaceted situation, and it’s only getting more complex as procurement becomes much more strategic and technical.
Clearly, the two sides can’t be at loggerheads forever. Or can they? It is clearly something that top, top management is going to have to weigh in on in a much more formal way. Because collaboration is key at the end of the day – it’s healthy for growth. And for those companies that can do it, they will have the strategic edge and will be ultimately more competitive.
Last week, Spend Matters had an article “Understanding the Friction Between IT and Procurement,” discussing this very issue. The article’s author, Jon Winsett, a Spend Management Consultant, proposes a way of bridging the ‘Gap:’ He has seen organizations place a sourcing executive directly into their IT departments (we have also seen some of our Sourcing clients deploy a Category Manager for IT work in IT rather than Procurement but report into Procurement). According to him, the executive can learn about the intricacies of IT Vendor and Contract Management, while teaching the IT department about sourcing best practices. But does this solve the problem?
The article got lots of discussion going on LinkedIn’s IT Procurement Group.
Scott Braden, an SVP with Net(NET), a U.S. IT Optimization company, says: “The assertion that tension exists seems to imply difference in needs or goals between departments. In some organizations, there are truly misaligned objectives; for example, IT may be tasked with a transformative project that requires purchasing new solutions, while procurement might be tasked with keeping spend rates under a certain target…communication, understanding, knowledge, and collaboration are the means to understand the drivers and intent of each constituency.”
Derek McCarthy of Accenture argued that this debate is only an issue for organizations with embryonic Strategic Sourcing operations. He says: “In organizations where the Procurement service to its internal clients is mature, there is a far greater partnership approach between Procurement and IT…for many organizations, the days of territorial battles between procurement and business functions (not just IT) are over.”
So what do you think? Is the rift between Procurement/Strategic Sourcing really coming to an end with IT? If not, has it become worse? How can organizations stickhandle this better? Is there a role for high level Contract Staffing to facilitate the process…Let us know in the comments!
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Over and Out for now