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By Susanne Wrage, Senior Director , Center of Excellence, Denali Sourcing Services
Susanne Wrage, Senior Director , Center of Excellence, Denali Sourcing Services
To be competitive, organizations continually strive to do more with less and IT and Procurement departments are no different. Adding to this challenge are the number of technology initiatives undertaken by organizations to empower employees to make better decisions, be more efficient and collaborate better. With Big Data, Mobility, Cloud, ERP and IoT initiatives, it is crucial that IT and Procurement professionals are aligned and efficient. They need to ensure that technology is made available to unlock employee potential.
A starting point for building alignment between IT and Procurement departments should be an understanding of each organization’s mission statement, objectives and vision and strategic plan to reach the objectives. For example, if there is a 3-year plan to implement a Big Data initiative, Procurement and IT should align on the requirements, funding, sourcing opportunities, budgetary targets and timing for each project making up the initiative. Leaders of each organization should align on these items and communicate accordingly to the resources assigned to execute each project.
The next level of alignment should be on philosophy, principles and playbooks. Does the IT organization publish principles for Enterprise Architecture? If there is a large push to move to the cloud, what are the guidelines for SaaS, PaaS, IaaS and the decision points for when something is maintained on premise? As more is moved to the cloud, how is Data Security handled? Proactive organizations will have a documented data security process with defined roles and responsibilities for IT, Project Management, Procurement, Legal and the Supplier. Is there standard language for SLAs, severity levels, and response and resolution times? If not, Procurement can help to turn the business requirements into meaningful language and then work with the Legal department to finalize.
Documenting and communicating the topics above will make the sourcing process more effective, as it ensures that the company purchases the technology that meets the organization’s true needs. However, this often results in the development of IT review and approval processes to ensure cross-functional alignment. Procurement should be knowledgeable enough about these processes, to inform project managers how to incorporate them into their project timelines. In fact, Procurement can take a leadership role in facilitating the review and approval process to build credibility with IT and be seen as a strategic partner within the organization.
Procurement can partner with IT, Legal and the PMO to answer the following questions to improve cross-functional alignment:
1) Architecture – Have you followed an architecture review process to prioritize projects and ensure different projects requiring the same functionality don’t go in different directions?
2) Security – Have you followed the data security process and engaged the appropriate subject matter experts? Have you defined the different levels for data security classification that drives different levels of process rigor? Have you assessed for their capability of new suppliers to meet the data security standards of your organization?
3) Threshold – Have you followed the appropriate process based on dollar thresholds for external spend? For example, for everything over $250 thousand, a sourcing process is required. Or for everything over $1 million, there is a Project Management Office process where specific deliverables are reviewed by executives who raise concerns to address or give the approval to proceed.
4) Executive Reviews – Have you planned how you will provide a recommendation to executives? If there is a regularly scheduled meeting for reviews and approvals, have you been added to the agenda?
5) Legal Engagement – Have you planned for when you will initiate the involvement of the Legal department?
6) New Suppliers – Have you followed the process for establishing non-disclosure agreements, adding RFx suppliers, setting up suppliers for invoicing and payment?
Answering the questions above and following the established processes will help the IT project manager mitigate risks associated with purchasing new products and services. Since Procurement professionals perform these processes year-round, they are in a unique position to communicate to IT project managers how long each of these tasks typically take, when they should be initiated, the roles and responsibilities of the team and whom they can contact for clarity regarding each of these activities. The Procurement lead should be a valuable resource for the IT Project Manager to properly include these activities into the project plan during a project’s kick-off meeting.
Defining, communicating and aligning on process is essential for effectively managing procurement projects, however, the use of tools and automation can also have a significant impact on the efficiency of sourcing projects. Common tools in your ‘procurement toolbox’ should be:
1) Spend Analytics: Reliable spend analytics solution that can filter by supplier, dates, product or service category, internal department or cost center.
2) Esourcing and Project Management: Platform that allows for task creation, scheduling, reporting, template creation, time stamping, electronic distribution of RFx and responses, and scoring.
3) RFx and Contract Templates: Templates for RFx and Contracts that can be customized quickly for new projects.
4) Automated Review and Approval Workflows: Solution that allows for automated routing of RFx and Contracts based on spend levels and HR hierarchy.
5) Contract Repository: Archiving tool that allows employees to search for documents by meta data fields.
These tools are pretty standard for most mid- to large sized organizations, and they are extremely useful for Procurement staff to move away administrative tasks and focus on more value added activities.
In summary, IT initiatives are increasing as organizations want to leverage advancements in technology to innovate and drive competitive advantage. These initiatives often have tight timelines so that functionality can be implemented to align with the schedule of corporate initiatives. Procurement and IT departments must partner to quickly understand market trends, evaluate suppliers’ capabilities, benchmark proposals and contract with the right supplier for the right solution at the right price. To do this, these departments must align on their mission and goals, communicate their vision, develop cross-functional processes and invest in tools to drive efficacy and efficiency in the IT Procurement process.
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