Topic: IT Resourcing

Is IT Procurement Broken?

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7 minute read

By Jake Ellis

Are you building too little IT, buying too much—or vice-versa?  Are Line-of-Business departments now too influential when it comes to IT procurement decisions?  Are Central IT and Procurement teams being side-lined?   Is an alternative seismically better approach to IT procurement being ignored?  In this article we lift the lid on IT procurement discussions in 2024 and what decision makers should be thinking about.

IT procurement has always been a necessary evil in organizations.  The activity comes with the laborious challenges of selecting the right vendor and technology assets for your business, setting the right price and contract terms, etc.

The role of procurement teams to get all these balances right is hugely impactful on the end result stakeholders want, namely a unifying digital ecosystem that does everything, …and reliably too! Yet, as the technological landscapes shift and new business challenges emerge, the adequacy of traditional IT procurement methods is being called into question.

Building vs. Buying

Organizations have two choices when trying to find the perfect IT platforms, either build a custom solution tailored to their precise specifications or to buy off-the-shelf software that seems to fit the bill. This is like deciding whether to make a special tool for a job or use tools that are already out there but might not be perfect.

Buying software is faster and might seem easier, but it could mean that you end up with something that doesn’t do everything you need. These ready-made programs might not grow with the business or work well with other systems, potentially leading to a tool-shed full of single-function tools that overlap or leave gaps in functionality. On the flip side, the decision to build can be daunting. This requires significant investment in time, skills, and resources, and there’s always the chance it won’t keep up with changes in the business over time.

When it comes to making build or buy decisions for IT, often it’s who shouts loudest gets their way.  That’s not a great way to run IT procurement!

Line of business departments are taking it on themselves to find better IT

To keep up with the pace of innovation, technology purchases have seen a significant shift towards decentralized decision-making.  Line-of-Business (LoB) departmental leaders within organizations, often accused of bleating about the shortcomings of technology they are required to use, are taking it on themselves to fix their own problems by sourcing appropriate apps and tools.   To try and speed things up, IT and procurement leaders—often sick of being accused of holding progress up—can be understandably inclined to ‘step out of the way’ and (as far as they can) leave LoB heads to their own devices.

This self-servicing of IT creates its own challenges.

When departments make independent IT decisions operating in silos, it can lead to a fragmented data and applications infrastructure, where compatibility and security may be compromised.

Why this is a problem

The self-servicing of IT by departments can encourage a behaviour whereby organizations research, buy and even implement IT solutions before looping in the procurement and central IT teams. This “after-the-fact” approach to procurement and IT architectural decision making can lead to significant roadblocks further down the line.

Without a coordinated strategy, the result can be a mishmash of systems that are difficult to maintain and integrate. The task of training employees on a variety of platforms, as well as having to manage numerous software licenses, means these technologies don’t scale well and can often come with hidden costs. 

The role of procurement experts is critical from the beginning. They have the skills to negotiate and understand the details of contracts, which are vital for protecting the organization’s interests. Bypassing their expertise can result in inefficient resource use and added demands on the organization’s IT infrastructure and support teams.

The real fix is to make procurement and central IT departments an integral—not to be ignored or avoided—part of IT purchase conversations from the outset.

 How can we bring this all back together?

To fix the scattered way departments are making IT choices presently, we need new rules and protocols that make the process clear and consistent. These rules should aim to help departments to realize their innovation opportunity while still making sure choices fit the whole company’s goals.

One approach is to categorize IT decisions based on their risk and complexity.

For example, for low-risk functional tasks, department heads could be offered pre-vetted SaaS tools without needing long-winded approvals, particularly when these apps reside on cloud services already pre-checked for performance, resilience and security, etc.  Conversely, for more complex decisions, particularly those involving Systems of Record that perform mission-critical data processing, a more rigorous scrutiny process should be applied—given that these decisions impact core business operations. 

This categorization hinges on creating a set of criteria that evaluates the complexity and integration requirements of each IT solution. For solutions that are self-contained and meet specific criteria, be it security, compliance, or functionality, procurement can allow departments the freedom to act within a defined boundary. This autonomy, however, comes with a checkpoint: if a solution requires integration with existing systems, it triggers a more involved evaluation process, needing procurement’s sign-off.

A graduated scrutiny approach ensures that both high and low-risk procurements receive the appropriate level of attention and expertise. In this way, organizations can accelerate decisions while improving safeguarding.

Working together is crucial

Any new operating protocol demands a collaborative approach between procurement and IT departments. All stakeholders in IT decisions must accept the important role other contributors perform, otherwise it doesn’t work. The role of procurement and IT in this context is to act as gatekeepers for all the right reasons, ensuring that selection choices and integrations are thoughtfully planned and every system of record is robust enough to support the company’s long-term data needs.

Why this leads to categorization

However, the likelihood of encountering a platform that operates in isolation, without the need for integration or data sharing with other systems, is slim. That’s why it’s important to be clear about the different kinds of IT solutions your business uses and why it is essential to separate them this way.

Categorizing decisions not only aids in swift adoption and implementation but also opens the dialogue about data frameworks and system integration. A solution that fits neatly into the organization’s data framework without needing extensive integration and adaptation is a rare find. As a result, understanding what systems you currently use to integrate with others, alongside your wider data framework, becomes pivotal. Through this approach, procurement can effectively balance the scales between agility in departmental innovation and maintaining a cohesive, secure, and integrated IT ecosystem.

This strategic categorization and the nuanced understanding of integration requirements are not just procedural enhancements, they are fundamental to creating a collaborative environment where procurement and IT work together. This collaboration is essential to future-proofing your organization’s IT investments.

Final Thoughts

The old ways of buying IT solutions just don’t cut it anymore. Letting departments pick their own IT solutions has its benefits, but it needs to be matched with big-picture planning. Otherwise, this freedom can turn into inefficiencies that slow down your organization’s overall operations and long-term plans.

The best path is one where the fast needs of different departments and the big-picture thinking of procurement and IT experts comes together. Being smart and thoughtful about technology purchases is essential for a company’s ability to keep up with the fast-moving digital landscape. In essence, a well-informed collaborative approach to IT procurement is vital—not just advantageous—for the ongoing success and adaptability of an organization.

Ready to reshape how your organization handles IT procurement? Join us for “Rethinking IT Sourcing: How to optimize IT spend in 2024,” a virtual panel discussion that will redefine your approach to IT decisions.

Our panel of experts will tackle the tough questions and offer insights on collaborating effectively between IT and procurement teams.

Sign up now to be part of the conversation about the future of IT sourcing strategies. Book your seat and discover how to transform your IT procurement approach in 2024!

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