Is Procurement Muscling In On Your Turf?

By Robert McGarvey

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Just who is that guy wearing the green eyeshade who’s crashed your recent IT technology acquisition meetings? You had better figure out who that dude is because he just may hold the purse strings.

“Procurement has been involved in IT spending for a long time, but lately it has assumed a new, bigger role,” said Scott Feuless, a senior consultant in Houston with the IT consulting firm Compass.

“We see procurement playing more and more of a part,” agrees Greg Baker, CFO at Bloomfield Hills, MI IT integrator Logicalis.

It wasn’t always so. Procurement, the formalized purchasing discipline that usually reports to the CFO, once played a confined role in IT purchasing. It used to be, relates David Robbins, head of U.S. operations for Procserve, which provides electronic marketplaces, after a vendor struck a deal with IT procurement would pop into the room, insist on a further discount of one or two percent.

In that era—up until a year or two ago—procurement was not trying to improve purchasing, it simply wanted a better deal where “better” meant cheaper, period. Towards that end procurement used standard playbook moves—vendor consolidation, for instance, where one vendor wins all of a company’s laptop business. That species of procurement is easy to understand, even to control, but nowadays procurement is becoming much more ambitious.

Right now, for example, a big procurement mission in many companies is to put a sharp halt to so-called “maverick spending,” which are purchases that fall outside the formal purchasing procedures. IT traditionally has argued that the need for speed coupled with the complexity of the purchasing decisions—“You couldn’t possibly understand why this data center solution is so much better”—won it exemption and, therefore, maverick spending has been the IT norm in many organizations.

That’s changing because money talks especially loudly in a stumbling economy. And procurement says it can generate huge savings. Case in point: Shawn Fronzaglia, Catagory Manager, IT and Telecommunications at spend-management firm Ariba, said that when he looks at a company’s spending on wireless communications, usually he can produce savings of 14% to 20%. Fronzaglia does not say every IT spending category produces similarly sized savings but he is optimistic that spend management procedures will produce savings pretty much wherever it looks at an IT budget.

That quickly turns into big buckets of dollars saved and, said Fronzaglia, it happens with no diminution of quality, reliability, or anything that matters to users. Just picture your CFO hearing that about spending in your company—and how quickly he might want to join this parade.

Procurement disciplines save money, no doubt about it, but will the IT output suffer? A chief complaint, said Feuless, is that often procurement’s involvement triggers “procurement paralysis. A lot of IT groups suffer from it,” meaning that necessary purchases just get delayed and delayed more—as procurement studies and studies more—and in a fast moving IT context delay can quickly become another word for failure.

But Feuless is just as quick to point out that procurement can indeed play a useful role “when there is competitive bidding,” Feuless cites as a for instance. Anytime the purchase involves a commoditized product, from laptops to monitors to VOIP phones, and where a disciplined competitive bidding procedure will help assure that the organization’s needs are in fact met and that bids involve apples to apples comparisons, by all means bring in procurement, suggests Feuless.

Even when commodities are involved, however, IT needs to speak up about its concerns, stresses Dave Schoettmer, president of consulting firm Navigator Management Partners. For example: what is the cost of switching from Microsoft Word to the Google word processing application? How many hours will be involved in helping each employee make the switch? Real apple-to-apple comparisons factor in all the costs and, said Schoettmer. It’s up to IT to make very sure that procurement hears the whole story.

The bottomline is nobody expects a reduced role for procurement in IT. Not in the prevailing economic environment. And that raises a key question: how can IT learn to work better and smarter with the eyeshade wearers? Is win-win possible?

Greg Baker said it is—if IT “puts itself at the same table with procurement on a regular basis.” The standard IT complaint about procurement is that they are calculator-carrying penny-pinchers who are clueless about technology but the procurement gripe about IT is that it is populated with cowboy spenders who cannot align IT purchases with larger corporate objectives.

To some extent both sides are right but that, said Baker, is “because there is a failure to communicate. They come at the same problem from different perspectives. IT will up the odds of getting what it wants  when it develops mutual trust and respect with procurement and that happens when there are regular meetings, particularly informal get-togethers. Help procurement understand what you are trying to achieve and why this matters and they will get on your side.”