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Procurement: more than just buying tech

James Francis
By James Francis, Ghost Writer, Copywriter, Media Hack & Illustrator
Johannesburg, 02 Jun 2015
Linda Morris, Smart Technology Centre.
Linda Morris, Smart Technology Centre.

Procurement can be a headache for CIOs and others in charge of technical decisions that impact their companies. It's never been easy, especially since buying new technology is foremost a matter of capital expenditure and requires the largest business view possible.

"When looking at new procurements, it's important to ask three questions," says Linda Morris, director of Smart Technology Centre. "How will the technology be consumed? What are the benefits that will be realised? How will the new assets streamline existing architecture? Ultimately, the CIO's job is to show the value of the procurement to the rest of the organisation."

But the responsibilities and challenges don't end there. Increasingly, the business side of the company is taking a serious interest in these technology decisions, which has complicated the procurement process.

"Business has realised the potential of technology to help reach its goals," says Tony Bell, CEO of Decision Inc. "It expects this or that process to be more effective. Since there's a growing mainstream understanding of technology, these demands have become more specific and high-performance organisations are leaning on the CIO to help make it all happen. But at the same time, technology managers have to worry about how those ambitions impact the architecture, overall stack, governance issues and other matters."

Collaboration

Due to all of this, the nature and demands of procurement have changed, but so have the opportunities. Yet to buy the right gear for the right job involves a tactical approach.

Incubation as a service

Vendors are great for several reasons, not least being reliable and delivering on demanding schedules. But they often lack the agility and groundbreaking innovation found among start-ups. Yet a start-up, usually made from a small team, is not always geared towards serving the requirements of an enterprise. Numerous solution providers noticed this gap and decided to act as the bridge. Coined 'incubation as a service', such offerings are the ideal place for companies seeking procurements at the bleeding edge of technology.

It's often pointed out how the CIO's job has changed from keeping the lights on to being a proactive force in business, embedding technology's role in the mindset of the decision-makers. These new challenges require new skills, says Marcel Kramer, senior manager at Accenture. "It's important that technology leaders expand their business acumen. All too often, miscommunication leads to big problems down the line. Today, it's very easy for an executive to swipe a credit card and order an off-the-shelf solution. These are then presented to the IT people, who are expected to make it align with the existing architecture. That's not a good thing, but there's a reason why this happens. Different stakeholders understand the individual roles of their departments better. There is an onus on the IT department to reach out to the rest of the business and anticipate their needs."

Collaboration is the key word here: let each department play on its strengths, and IT meets them with technology solutions, says Morris. "IT has to be present at the discussion to ensure collaboration. There needs to be a planned journey so all stakeholders know what they're doing and that expectations are aligned. Technology should not be driven by a push factor, but around a conversation about how to innovate."

Today, it's very easy for an executive to swipe a credit card and order an off-the-shelf solution.

Marcel Kramer, senior manager, Accenture

This is why it's important for technology leaders to understand the processes demanding intervention and translating those into the infrastructure picture. Often, companies already have the means to do something, but they don't tap into their available infrastructure. Sometimes a critical improvement is as simple as a new plug-in. But, only by understanding the requirements of other departments, and collaborating with them, can such opportunities be made available.

Another point for collaboration is that it helps avoid the most common reason why new procurements fail to deliver on their promise, adds Khutso Sekgota, senior manager: Supply Chain at Deloitte.

Tony Bell, Decision Inc.
Tony Bell, Decision Inc.

"How do I make sure, when I'm designing a tech solution, that I will implement my solutions in a way that the people will come along with me? A lot of solutions look good on paper, but to realise the benefits, you have to manage the people-change involved. To get there, you need to understand the people and the work they do."

Kramer has an example that is becoming more commonplace in modern companies. "Traditionally, IT is expected to do more with less, so it's not expected to spend," he says. "But departments like marketing can contrast that: they are expected to spend. So, who does the market often approach? The guys with the mandate to spend, and they will be sold on the product based on their requirements. This shouldn't be seen as IT being sidestepped, but it's up to IT to stop this from happening. How? Not by being territorial, but by already having a relationship with marketing. That way, if a vendor approaches marketing, marketing will invite IT to join in. The benefit of IT being at the table from the start is they become a partner and don't regress to the traditional role of playing policeman."

Yet, all the roundtable participants agreed this is not happening as often as it should. Making this change is hard, which is why having the right technology partners is very important.

A pool of vendors

Expert advice

"Ask a lot of questions. Understand the issues at hand and how to overcome them. And vendors should be expected to start the engagement process." - Linda Morris, director of Smart Technology Centre

"Determine the value of the procurement for the business. What is the best, most efficient and cost-effective way to help reach business goals? Vendors should supply the data, insights and predictive capabilities to help their customers win." - Nick Bell, CEO of Decision Inc.

"Avoid a big impression situation. You may have a three-year strategy, but ensure you can show results at very small intervals. Implement in short stints and the business can see the results. Utilise those results to justify improvements." - Khutso Sekgota, senior manager: Supply Chain at Deloitte

"Take a step back. Start with a sourcing strategy, as you might not need the procurement. Once you know what you need where, think in terms of partnerships. Work together with partners to make the outcome bigger than on your own." - Marcel Kramer, senior manager at Accenture

Technology partners can play a key role in the procurement process. Although vendors and systems integrators are often considered to have an agenda, that of selling solutions, the difference between a good and bad technology partner is how much they can facilitate outside that focus.

"There's so much happening today that a company should really weigh up if it's worth going it alone, and as a rule, it isn't," says Morris. "This is why they should build on their tech partners."

Bell agrees, adding that while budget is often a pressure point in discussions with vendors, that isn't the whole picture. In fact, companies with more mature technology regimes tend to put budget as secondary to their long-term prospects: "Companies want vendors to increase the business' capacity to win through the right tools."

Two demands always stand out in the procurement process: companies want to create a level of agility to help implement future ideas more easily and at lower costs, while also avoiding vendor lock-in. Modern licensing and service models have eased some of that pressure, but the silver bullet is to cultivate a pool of different vendors.

Companies don't like changing their vendors, as a good vendor means reliability through familiarity with the business processes and effective turnaround times. It has altered the vendor landscape, seeing fewer players emerge that combine their offerings to deliver on more promises. This, though, can breed complacency with customers and should be played in the other direction. Says Sekgota: "If you spot an opportunity to bring a new vendor on board, consider it. This not only makes lock-in less likely, but that agility can let a company tap into certain innovations when the time is right. And because modern ecosystems are increasingly collaborative between different vendors, it shouldn't be a cost burden on the client company."

A lot of solutions look good on paper, but to realise the benefits, you have to manage the people-change involved.

Khutso Sekgota, senior manager, Deloitte

Relationships with vendors and service providers are also useful to help bridge gaps within a company. Says Morris: "We see it all the time. A business is sizable, but it doesn't have a CIO position in place. Instead, you deal with the CEO, CFO, GM and multiple directors. So the view of its technology is fractured and communicating technology to the end-users becomes complicated. The IT people are pre-programmed towards how the business runs, but they don't know how to humanise technology. So third parties like vendors can fill that space, bridging the gap between tech teams, business owners and users."

Skills transfer

The human factor in procurement strategies is often overlooked. When new technology services are brought on board, there is already a critical distinction at play: will the tech be placed in-house or outsourced? This question should be one of the earliest in the process and to determine that means understanding the company's needs today and into the future. Calculating the human capital of the procurement is often a good way to measure this demand.

Marcel Kramer, Accenture.
Marcel Kramer, Accenture.

"Taking stock of the skills you'll need to develop will give a good guideline of how you want to license a technology," says Sekgota. "If applications enable something unique for your business, you want that to be internal, while something that isn't really market differentiated can be rented in as a service to give you more flexibility. Often, the difference will be reflected by the unique skills in an organisation. Bringing a system in-house is a deliberate strategy to retain skills. If a company adopts a new in-house solution, but lacks the skills, it should engage the vendor to help develop the solution on-site using company resources and transfer skills to the staff."

This is even more important when looking forward. Companies that only address current skill demands can find themselves backed into a future corner. Mobility is a good example, adds Kramer. Many companies that in the past have outsourced mobility solutions are now paying a mint to hire the talent for their internal mobile strategies.

There's so much happening today that a company should really weigh up if it's worth going it alone, and as a rule, it isn't.

Linda Morris, director, Smart Technology Centre

"See if there are any overlapping qualities between existing architecture and a proposed solution," he says. "You may find that some employees can be trained towards the new solution because of their familiarity with existing systems."

Alas, companies tend to take the easy way out, says Bell: "Not many companies embrace upskilling. They prefer to outsource for immediate results. But the internal person knows the business better, so upskilling is a smart long-term strategy."

A modular approach

All of the above makes for some great advice, but it doesn't paint a simple picture to follow. How can technology leaders avoid collapsing under the weight of it all? Do it like a squirrel: one nut at a time.

"Return of investment will always be a topic between the IT executive and the rest of the C-suite," says Sekgota. "A modular approach is the best strategy; it allows you to test ideas and show results quickly. Those can then feed into current and future procurement motivations."

Delivering in a modular fashion also aids relationships by managing expectations and delivering on promises. That includes making sure users are enabled and mature enough to take advantage of the new systems.

Khutso Sekgota, Deloitte.
Khutso Sekgota, Deloitte.

"Don't take on a big solution for a critical component of the business," says Sekgota. "Instead, use a non-critical section so that failure is not a problem and test it there. Once the teething problems have been addressed, scale it up. This can help everyone comprehend the challenges involved."

Bell suggests to also look for proof of concept: "Nothing works better than using the customer's data to demonstrate a solution. Another option is to show what their systems are capable of. All of that makes it easier for the CIO to take things further."

Ultimately, procurement should be built as a proactive process, not one that only staggers in when technology and business can no longer serve each other. Companies that consistently analyse their assets and goals create a procurement culture that is agile and all-encompassing.

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