By Amy Burke, Principal, Ernst & Young LLP and Jeff Lewis, Senior Manager, Ernst & Young LLP.
The landscape of the procurement function is changing. Gone are the days when the procurement function was just an order taker, a tactical buyer looking for the lowest cost. Today, thanks to unprecedented global interconnectivity, advances in big data and analytics and the comprehensive internal and external viewpoint that is required by procurement, the function has the potential to be an information powerhouse, generating knowledge to serve all functions of the enterprise.
Procurement professionals have access to both internal and external data the C-suite would find useful – data about third parties, markets, commodity strategies, geopolitical risks, operations and trade flows. As a direct result, the function is uniquely positioned to leverage these data sources and to act as an information hub delivering insights that will enable the organization to improve performance.
At the same time, the procurement function is also the face of the organization to external parties including suppliers, regulators and government agencies. As expectations of transparency in business continue to rise, procurement will not only be a focal point for the insights it brings to the enterprise but also for the insights it delivers to the market.
So why should this compel the CIO to become close allies with the procurement function?
- Firstly, procurement is heavily reliant upon the IT department to achieve the transformation – for cloud-based systems, data sources, data integrity, data security, and advanced analytic tools and capabilities. As allies, the collaboration will result in competitive advantage to the enterprise.
- Any transformation needs to be enabled in a way that protects the enterprise – requiring experience and services to address data privacy and cybersecurity concerns, and the increasing push for transparency inside and outside the enterprise.
Key factors to a successful CIO-CPO collaboration to deliver new insights
- Walk in each other’s shoes: CIOs need to understand the challenges and priorities of the procurement function and how technology can positively influence procurement performance. The IT function can serve as a valued business partner to procurement by finding the balance between the risk of new technologies and the value of deploying them to help the company optimize, grow and innovate.
- Respect each other’s capabilities: Collaborations are successful when both parties respect each other’s contributions. In this case, IT should respect the procurement function’s business requirements and procurement should respect the technological expertise IT brings to the table. In order for IT and Procurement to successfully collaborate, their respective leaders should define an operating model to establish how this can work and serve as a role model to their respective organizations. Ultimately, it will go a long way when procurement and IT leaders take a more collaborative – rather than a competitive approach.
- Capitalize on big data and the cloud: Most functions are moving from on-premise to the cloud; and procurement is part of this migration. Therefore, data privacy, authorization, compliance, data management, standardization, legal liability are all items that move up on the CIO’s agenda. Leveraging cloud-based technologies and big data for improved insights and business enablement while protecting the business from risks will be key.
- Integrate mobile and IoT into your strategy: The CIO should consider both how to deliver new and critical insights to the enterprise through collaboration with procurement and how professionals in the organization will consume the insights. Integrating mobile and IoT early into your strategy will allow you to optimize the design efforts while mitigating potential risks. CIOs need to understand how data is being accessed to assess the risk associated with unauthorized access to confidential data and other privacy related challenges that come with mobile and IoT technology such as wearable devices. Again, through collaboration and partnership, the business can enable the consumption of insights to drive improved performance without introducing unnecessary risks.
With the amount of information housed in the procurement function and the rapid pace of technological innovation happening in IT, closer collaboration will open up new possibilities for both these functions and the organization as a whole. For CIOs, taking advantage of this convergence of the procurement function’s unique position and recent digital technology advances translates into an opportunity to collaborate more and deliver benefits for the business as a whole.