What Happens When You Don’t Understand Procurement
You’re excited to purchase a new software solution for your company. You have a few identity vendors in mind. Before you pull out your corporate credit card to buy, a colleague asks if you have consulted procurement. Suddenly, you have a barrage of procurement questions and emails to answer. Before long, you wonder if it is worth the time and effort to buy the software. Don’t give up!
There is good news here. Instead of viewing procurement as a barrier to your goals, this unit can actually help you to become more productive. Your starting point lies in applying Stephen Covey’s classic advice from “The 7 Habits of Highly Effective People:” Seek First to Understand, Then to Be Understood. After you understand procurement’s value, you will be able to work with them more effectively.
Understand Procurement’s Value to the Company
Why does procurement exist at your company? If your first impression is the scenario mentioned above, you are likely to have a negative view of procurement. In reality, procurement has a valuable role to play in contributing to the company’s goals.
Procurement managers and leaders are aware of the “perception problem” they face. That’s why they are actively working to change that perception by focusing on value. There’s just one problem. Procurement insights do not always make it out into the business. Research reported in the Harvard Business Review found:
“Many procurement managers are trying to demonstrate internally that they have strategic value. They’re gathering intelligence systematically about the company’s stakeholders and communicating their successes. But it isn’t getting much further than that. Less than 30% of the time do we see procurement managers customizing value propositions for internal customers and stakeholders, tracking satisfaction levels and setting targets for satisfaction.”
To gain procurement’s insights, understand what the department offers and proactively seek their guidance. Here are some of the ways that an effective procurement function adds value to the company.
- Negotiation Expertise. Procurement professionals buy from vendors month after month. That means they know effective strategies for buying and obtain favorable treatment from vendors. This expertise makes a difference in more complex services such as security software. If procurement is too focused on price, read “Why Price Shopping for Security Software is a Mistake” for a broader perspective.
- Technical Contract Expertise. In the past year, how many contracts have you read? Whatever your answer, procurement has probably read more. As a result, procurement is better able to detect contract problems relating to liability, audits and other issues.
- RFP Advice. Governments and other large organizations sometimes issue RFPs to the public to seek the best value from the market. Ask procurement for help in developing the RFP and evaluating the vendor responses.
- Relationship Management Advice. When you purchase services and complex products such as identity management software, you may need to consider relationship management. Who will manage day to day communication between your organization and the vendor? Procurement may have someone to suggest for this role or have training materials for your team.
- Identifying Alternatives. When you decide to purchase a solution, you may not be aware of all the options on the market. In contrast, procurement regularly conducts market research. This research includes the identification of new suppliers and specialized providers. Why limit yourself to the best known brands in the Fortune 500 when there may be a better fit for your needs?
- Creating Your Identity Management Business Case. Business technology purchases are typically complex activities. You may have to complete a financial business case to finance and present to management. Ask your procurement partner for advice as you go through the business case process.
- Perform Risk Management Due Diligence. Did you know that poor vendor behavior, including lax cybersecurity, reflects on you as the buyer? To minimize the likelihood of such an event, in some industries, you may have to complete a risk assessment on the vendor. Procurement can be a resource in completing all of these requirements. Keep this point in mind if you are a publicly traded company or work in a highly regulated industry such as financial services.
Procurement adds value to the table. It is up to you as the buyer to seek their input early and often.
Step by Step to Working With Procurement
In this section, let’s assume that you are based at a large company with a reasonably well staffed procurement department. In that case, how can you engage with procurement?
- Get to know your procurement people. Don’t wait for a procurement project to start — pick up the phone and introduce yourself to procurement. Naturally, they will ask about your goals.
- Ask about procurement processes and expectations. Look for common ground that you may share with procurement. They may be interested in improving the organization’s cybersecurity and risk situation. If so, procurement is likely to be interested in helping you to select an identity management vendor.
- Ask about preferred suppliers. Some organizations have preferred suppliers for certain products and services (e.g. everyone must use a specific company for paper shredding services). Find out if this list applies to technology and identity management purchases.
- Find out if there is an expedited or streamlined buying process. Purchases vary in cost and complexity. Ask procurement if you can use a streamlined process to purchase the software you need.
- Determine requirements for purchasing technology and software. Buying technology sometimes entails complicated expenses (e.g. maintenance charges, implementation services, etc). To manage those expenses, procurement may require you to carry out additional analysis.
- Determine if you need to use an RFP or similar buying process. Did you know that preparing an RFP for highly complex technology can take months to complete? If that level of process is required at your company, find out early.
Sources
Five things: Getting the basics right in procurement (EY)
The Problem with Procurement (Harvard Business Review)
The 7 Habits of Highly Effective People by Stephen R. Covey (Book)
