For some years now, IT has been one of the largest spend categories for organisations of all kinds
This article looks at the key issues for procurement people and functions and some of the latest developments in the market and issues that procurement need to consider in the category
By Matt Donovan, Lead consultant, at ExceleratedS2P
For decades technology has been the critical enabler for business – big and small. Whether it be efficiency improvements, better engagement with customers or enhanced connectivity and collaboration. Over the years it has become such an ingrained and entrenched part of the organisation that it has become one of the largest spend categories. But is the procurement function adapting at the rate of the technology?
There’s an observation doing the rounds at the moment which provides an intriguing insight to the modern economy….”The world’s largest taxi firm, Uber, owns no cars. The world’s most valuable retailer, Alibaba, carries no stock. The world’s largest accommodation provider, Airbnb, owns no property”…and so on. But this isn’t just about the latest new fad on the ‘sharing economy’, but a fundamental shift that’s been gathering momentum for some time. A broader move to lean and purposeful business operations. The IT function is critical, but some key questions can be asked by procurement: is the technology expenditure focused enough on allowing business to focus on what they do best? Does the investment in such technology represent the best value that can be achieved?
Cloud technologies looks to free up long term capital investment and therefore for IT procurement, priorities are changing, from data centres and on-site software licences to cloud based data storage and software-as-a-service. The procurement function needs to keep evolving and face up to the challenges of disruptive technologies.
But while the technology offerings might be relatively new, the ‘old fashioned’ key principles such a business strategy alignment, economics and risk are still firmly at the heart of the procurement decision making.
Economics – cloud technologies have the potential to reduce costs – the killer USP. But do the costs stack up in the long term? What if the demand or user bases grows, does the cloud offering still provide good value? What KPIs can be put in place to assess and monitory the buying decision?
Strategy – does the offering support the business strategy? Does it allow the business to focus on the core product/service offering and foster innovation? Does the technology align across business functions?
Risk – Perhaps the biggest threat to the take-up of cloud technology are security concerns and increased risk to the enterprise. Is data secure? Is reduced control of upgrades and software changes acceptable? However, there are also risk reduction opportunities which need to be balanced such as reduced downtime and even greater security. Procurement will need to help assess, quantify and balance the risks.