Coupa: Digital Transformation in Procurement and IT
In its third consecutive year of benchmarking the relationship between IT and procurement leadership, ProcureCon IT continues to document how technology is catalysing an increase in shared goals and a need for greater communication between the CIO and CPO. While procurement and IT haven’t adopted shared KPIs due to the differences in their core missions, a necessity to select the right solutions and enable digital transformations, as well as the possibilities that features including AI adoption and wider use of automation means that they must be closely aligned.
The key findings of the report included:
- The responsibility for IT procurement still lies within a joint process for the majority of respondents. That stated, the impact of new technologies on both departments continues to grow.
- Digital transformations are continuing. Respondents indicate similar levels of advancement on digital transformations as in 2018, suggesting that digital transformation can be seen as a “new normal” rather than a single process to be definitively completed.
- CIOs and CPOs are working together more closely in comparison to last year, with patterns of communication settling around patterns of sourcing responsibility.
Since the previous year, the number of respondents who report that their technology sourcing is a joint effort between procurement and IT remains almost unchanged. This suggests that within the majority of cases, responsibility for sourcing is now shared, while another quarter of respondents actually have final authority to approve technology spending within their procurement groups.
Despite many respondents not sharing final authority to authorise spend between IT and procurement, the majority believe that the responsibility for executing on technology sourcing projects should be shared. With this in mind, the proportion of those who now believe that solely procurement should own responsibility for technology sourcing has risen by 4% year over year. This may be a response to hiring trends that have seen many procurement organisations brings new talent with technology expertise into their ranks, allowing them to more confidently handle conversations with internal businesses, IT and solutions providers in turn.
Elsewhere in the report, Coupa asked respondents the current level of coordination between the CPO and CIO. With half of respondents reporting that the leaders of their IT and procurement organisations will work together in response to the demands of their technology strategies as they are executed. Another near quarter of respondents will collaborate closely on an ongoing basis, deepening the ability to understand the needs of each department as well as how their strengths can be best utilised to serve the company on a larger scale.
Over the past few years, IT and procurement have become more reliant on the other as well as more collaborative. Embedded procurement teams may work on a regular basis with their technology peers and then report to a CIO or CPO, while executives meet at preset intervals to update each other on strategy and define goals for the future.
Will Public Procurement Budgets Increase in 2021?
Procurement is more than just a private enterprise. COVID-19 reminded us that sourcing materials is an essential part of the government’s role. Throughout 2022, tiny departments sourced massive amounts of personal protective equipment (PPE), medical supplies, and emergency vaccines and testing kits. Even non-procurement professionals were pulled into the fray, as frantic timelines demanded nothing less.
According to Celeste Frye, co-founder and CEO of Public Works Partners, the crisis brought procurement to the attention of skilled employees who had never considered it. As non-procurement personnel stepped up to help their coworkers, many found that they’d stumbled upon a critical and rewarding job. “Existing public employees have seen the essential nature of the work”, Frye said. “[They’ve] gained some critical skills and possibly [grown] interested in pursuing procurement as a longer-term career”.
Small, Local Suppliers Take Charge
Frye, whose firm helps organisations engage stakeholders and develop long-term procurement strategies, thinks it well worth the effort to open one’s mind to new opportunities. Cooperative contracts, for instance, can help public departments and municipalities save money, time, and effort. By joining together with other towns or cities in the region, public procurement teams aggregate their purchasing power and can drive better deals.
These cooperative contracts have the added benefit of advancing equity. Smaller suppliers that struggle to compete with established firms for government contracts can act as subcontractors, helping big suppliers fulfil bits of the project. Once they get their foot in the door, small, local, and disadvantaged suppliers can then leverage that government relationship to take on additional projects.
Especially as governments start to pay attention to procurement resilience, public procurement departments must expand their requests for proposals (RFPs) to take into account innovative solutions and diverse suppliers. According to Frye, Public Works Partners—a certified female-owned firm—has benefitted from local and state requirements that specify diversity.
Post-Pandemic Funding Swells Procurement Budgets
And the pandemic won’t be the end of it. City governments need to build sustainable energy infrastructure such as solar panels, charging stations, and recycling plants, ensure that masks and medicines are never in short supply, and source new technologies to keep up with cloud and cybersecurity concerns.
Public procurement budgets will likely increase to match demand. As Peter Ware, Partner and Head of Government at Browne Jacobson, explained, “in a non-pandemic world, the [U.K.] government spends on average around £290 billion on outsourced services, goods, and works...anywhere between 10% and 14% of Gross Domestic Product (GDP). Post-pandemic, city procurement will only increase as national governments provide local divisions with emergency funding.
And in truth, government employees might jump at the opportunity. Frye noted that public procurement could give immediate feedback on new programmes: “[Procurement] is where new laws and policies ‘hit the road’ and are implemented”, she said. “Professionals in these fields get the satisfaction of creating real change and seeing quantifiable outcomes of their work”.