Departments within businesses often operate in a scattered manner without coordinating with one another. This way of functioning restricts personnel expertise to the premises of a department, making the organisation miss many opportunities. In this article, we’ll see how cooperation within departments can elevate a business’s efficiency.
Two departments that can benefit significantly from working together are the IT and Procurement departments. The procurement department is responsible for arranging goods and services that the organisation needs from third-party vendors.
On the other hand, the IT department involves evaluating the most appropriate technology for an organisation. When the IT team works alone to get the technological goods and services the department requires, it may not be able to look at the full picture while selecting vendors and negotiating deals. Here, the procurement department can aid it. Let’s discuss in detail how that goes.
1. Negotiating Better Deals
The IT department comes with its own set of requirements to ensure all the company’s digital systems are up, running, and secure. These systems are often expensive, but leaving them outdated can result in inefficiencies and leave the company vulnerable to cyber security risks. To minimise costs while keeping IT systems running efficaciously, the procurement department can coordinate with the IT department.
With the help of the procurement department enlisted, IT personnel can identify their requirements and select products. Then the procurement team, through vendor management tools can determine whether the vendor that IT usually orders from has a good history with the company. If so, they can offer them a mutually-beneficial contract and set a renewal date to encourage long-term relations and secure better prices.
In cases when existing vendors are not available, the team can refer to digital catalogues, raise RFQs, and help identify suppliers that offer competitive prices. The IT personnel can then see the product/service specifications and choose vendors with the vendor management process that fit their requirements. In this way, IT stays running while enjoying up-to-date infrastructure, and the procurement team manages to secure savings.
2. Avoiding Supplier Risks
Supplier risks can pose considerable threats to an organisation’s finances and its reputation, among many other things. When IT and procurement teams are not working together, the procurement department may forward Purchase Orders to an IT-recommended vendor without sufficient insight. Meanwhile, IT teams are generally not equipped to assess risks, so it is likely they would not have factored them into their recommendations. The results of such an arrangement can be undesirable.
If the IT and procurement departments work together, they can work their way around supplier risk management. Procurement teams can assess past supplier performances and send them questionnaires prior to establishing contracts. When viable, they can request on-site audits to help understand vendor functions better as well. Procurement teams can analyse all geopolitical, regulatory, and commercial risks associated with the vendor to protect the organisation.
IT teams can help here by assessing product-related risks like quality, availability of warranties, etc. In this way, vendors can be strategically selected to fulfil a business’s IT-related requirements in a holistic manner.
3. Avoid Duplicate/Redundant Purchases of Systems and Technology
Duplicate and redundant purchases are an unnecessary drain on an organisation’s finances. They also waste the IT team’s time and effort.
Even though procurement teams try their best to save on costs, they often do not possess detailed information about software. This can result in procurement personnel approving Purchase Requisitions about software applications or gadgets that offer the same functionality as some of the existing ones within the company.
For example, suppose the organisation already has a cloud-based procurement platform. In that case, it may not need to invest separately in budget management software as the former will likely have it as a feature already. Strong coordination between IT and procurement departments can solve this problem.
Procurement teams can enlist the help of IT whenever a tech-related PR is raised, and IT personnel can check it against existing infrastructure. This will eliminate the purchase of incompatible and old, redundant systems, and the company will be able to purchase better equipment with its budget, facilitating IT and saving money.
4. Identifying Alternative Solution Providers
Though IT personnel have information about an organisation’s technological needs, they usually do not benefit from insight into suppliers. In such a situation, they may be hesitant to change the vendor they deal with. Or, they may be unable to find a decent alternative solution provider if their existing one can not fulfil their requirements anymore.
As the procurement departments have contacts with multiple businesses and have expertise in market research, they can identify strategic alternatives which may even surpass the performance of the previous ones. That can reduce costs and even introduce numerous other technologies to the company, which it can leverage to improve its operations.
5. Help with RFIs to Identify the Right Vendors to Evaluate
Buyers use Request for Information documents to get more information about a product or service they intend to purchase. In the case of IT-related purchases, IT personnel may draft these documents per their requirements.
In the case where IT and procurement do not collaborate, procurement personnel can forward such RFIs without assessing them. This can result in insufficiently detailed documents as RFIs are not IT’s area of expertise. In the case where more than one vendor is being evaluated, RFI responses seem similar to IT personnel on the basis of technical aspects of services offered. In reality, there could be hidden costs and compliance issues associated with some vendors.
When these departments coordinate, procurement can help with RFIs drafting and analysis. IT can shortlist vendors with the best technical services, and procurement can then further research the vendor’s performance to identify the right one to work with. In this way, IT enjoys the right services, and the organisation, as a whole, benefits from investing in strategic suppliers.
Endnote
The procurement department can adopt an approach of treating the IT department as a customer. In this way, the expertise of both the departments will be put to use. IT will be able to manage its project budgets better and secure partnerships with good vendors. In this way, the organisation altogether will benefit from streamlined processes, reduced costs, and better deals.
Author Bio:
Prasanna Rajendran is the Vice President at Kissflow. Prasanna heads up the business operations of Kissflow Procurement Cloud, a flexible procurement software for procurement teams to streamline all their purchasing processes in a single place. He has over 20 years of experience in technology and has helped Fortune 500 companies with custom solutions in the sourcing and procurement space.