What do CIOs see as the best procurement model for IT?

CIOs and industry experts debate whether a centralised function or a specialist IT function is the best fit for procuring IT

"Ultimately we decide what technology [we want], and their job is to get the best commercial deal possible," says Shop Direct Group CIO Andy Wolfe.

It sounds simple; Wolfe is referring to a process whereby the IT team specifies the technical aspects of a solution and a centralised procurement team then ensures that the company gets the best deal possible.

It's hard to find much wrong with this model, but many organisations are struggling to ensure that procurement is managed both swiftly and securely, and that the right solution is being purchased.

Much of this is because procurement teams are often not set up in a way that accommodates working with new, agile suppliers.

The coolest ideas

"The days of working with IBM, Tata and Accenture are pretty much over. If you want the best staff, the coolest ideas, then you're going to have to work with all sorts of vendors and a lot of IT and procurement teams aren't set up to do that," says Andrew Horne, managing director at practice insight and technology firm CEB.

The worst case scenario is that it takes months to evaluate a particular vendor that is then dropped because it's decided that they're not big enough, or because there is no track record of working with them, or because they can't give you the guarantees that larger vendors may be able to give you, says Horne.

Earlier in the year, Phil Pavitt, the former CIO of HMRC, and now global CIO of Specsavers, said that the biggest enemy of SMEs trying to break into government IT is the procurement teams that work in Whitehall departments.

"Forget the hype, the last thing they want are SMEs in procurement in a department because of the headache, the contract management, the overheads - they are just not geared up to do it, and most SMEs are giving up working with government," he said.

While the government may be slow to react, private-sector organisations are interested in how they can be more flexible in assessing vendors.

One CIO that CEB spoke to looked at how venture capitalists assess vendors to invest in, and his IT team began to use some of the same criteria when procuring IT solutions.

He would ask: is this a vendor we should do business with, how much cash are they burning through, who is investing in them and what sort of talent do they have?

"These are indicators which are completely different to what a traditional IT team would look at but it gives them a sense of whether the vendor is going to stay around," says Horne.

Much of the problem can lie with a conflict - or breakdown in communication - between a centralised procurement team and IT.

CEB spoke to a food company in the US that did a survey asking IT people what slows down the procurement process. It also asked procurement people what IT people do that scares them into slowing things down.

"They tried to spot areas where procurement were doing something that was creating a lot of delays in an unimportant area or when IT was doing something that really worried the procurement or legal team, and they tried to make improvements on both sides," Horne explains.

"Essentially, IT said it would stop doing risky procurement practice and procurement said it would find a way of streamlining everything - and both improved and [the process] sped up," he adds.

According to Alex Kleiner, general manager of Coupa EMEA, from an organisation's perspective, a centralised procurement function is preferred to having a specialist IT procurement team.

"This centralisation will give the organisation greater transparency and control over the company's purchases, allowing for better centralised reporting and providing a solid foundation for the organisation to scale."

But as Mark O'Shea, CTO of Blur Group, states, a centralised model can infer rigidity of process and a pace of implementation that is slower than the pace of the business functions.

It is for this reason that Computing has found many IT teams that are trying to claw back some responsibility over procurement.

Take Reckitt Benckiser, for example. The consumer goods firm takes a different approach depending on the type of vendor and solution it is dealing with.

"For enterprise licence deals or big deals with software [companies] or systems integrators then I think the centralised procurement model is good and proper," says the firm's CIO, Darrell Stein.

"When you're talking about niche technologies where you're testing and learning and determining whether these technologies actually work, and you're using companies with only a handful of people working for it, you don't want a centralised procurement deal, you just want to get it going quickly," he suggests.

Only when the firm is ready to scale a specific solution across its user base should the centralised procurement team be called, says Stein.

"You have to make sure those things are fused together at the point where you need to scale, and that's where you understand that it's clearly a different conversation if you're rolling it out for five licences or 50,000 licences," he adds.

Stein agrees with Shop Direct's Wolfe in this respect.

"We work very closely with central procurement, they look after the commercial side and we look after the technical side. They look after the price, the legalities and we'll say ‘this is what we want the contract to do, it's got to cover these things'," he says.

Slow down you're going too fast!

Organisations are always looking to speed things up - with CEB finding that CEOs are asking CIOs to help move things along faster. Part of this is speeding up the procurement process, and in the majority of cases this is an area that CIOs will focus their attention on. But for chemicals and sustainable technologies firm Johnson Matthey, it's been quite the opposite.

The firm is consolidating 150 smaller businesses into a more centralised whole, and CIO Patrick Seeber has the unenviable task of actually slowing down procurement to reduce risk.

"As we are so federated, we are very fast at doing procurement as we have 150 local teams who are going off and buying things... so evaluating vendors through the RFP [request for proposal] process tended to work pretty quickly, probably at a higher risk, so we were signing up to things that we were unaware of and procuring stuff outside of the IT function and picking up the pieces afterwards," Seeber tells Computing.

As O'Shea of Blur Group states, a more distributed model may provide the agility and speed to deliver quickly, but can lead to lack of visibility of spend across the organisation and in some cases can mean creating heterogeneous solutions not in line with, or not generating the best value for, the business.

To combat this problem, Johnson Matthey's IT team has ensured that it is involved in the decision-making process at an early stage of procurement, and aims to bring more rigour in the way the process is done.

"We are identifying the risks, we think we are making better decisions - the proof will be in the pudding as we go through, but we are seeing benefits of better deals being made and certainly less risk," says Seeber.

Seeber is taking an interesting approach going forwards: he's building a specialist IT procurement function.

"We've had quite a bit of debate as to whether we build that IT capability within existing procurement functions, but it became a non-issue at the end of the day because we don't have a centralised procurement function currently," he says.

"Because we are so federated every business has its own procurement function, so if I wanted to bring things together to start looking at global procurement solutions I didn't have a basis to do that within the business," he adds.

Had there already been a centralised procurement function in place, the decision might have been easier, he says.

"If we get to that position in the future I think there will be a healthy debate about whether we should just consolidate that IT procurement function into the [central] procurement function," he states.

But despite plans to introduce a specialist IT procurement team, Seeber doesn't believe that IT procurement is different to any other type of procurement, or indeed that it requires a specialist skill set per se.

"I don't think so, because we tend to call in the specialists to take part in the procurement process. Procurement is a management activity and when we get to a specific solution or requirement we will call in the right architects who will join the team to design the solution... My procurement team doesn't have a huge amount of specialist knowledge of IT," he says.