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Why service sourcing innovation starts with the CIO

(Image credit: Image Credit: TeroVesalainen / Pixabay)

Do you get excited about filling out lengthy request for proposal (RFP) forms? Is scoping the backlog of supplier requests on your department’s to-do list the highlight of your month? Thrilled by the idea of comparing multiple bids, structured and formatted differently, from a dozen-plus suppliers? No, I didn’t think so. I’d say it’s time to upgrade our thinking and ways of sourcing services.

Procurement for IT services needs a dramatic reinvention to meet the realities of our modern, digital age, and it starts with a disruptive CIO.

There are already tectonic shifts affecting both the sourcing process itself and the technologies applied to it. CIOs who don’t address these shifts by adopting solutions that can scale to future requirements will further distance themselves from the customers they serve, the business stakeholders they assist, and the teams they manage. This is especially true for ever-changing generational needs and the rise of the millennials, who are quickly becoming the largest section of the workforce. Millennials expect the same intuitive, digital process they’re used to in their personal lives as individual consumers.

Although many disciplines have progressed significantly by applying innovative technologies like artificial intelligence (AI) and machine learning, procurement is unfortunately behind the curve. There are a number of vendors offering ‘solutions’ that address specific parts of the existing, analogue procurement process, but they do little past making an archaic process slightly faster, and they are inherently unable to address the full requirements of scoping services, which remain extremely burdensome and time consuming. Sourcing services still requires lots of work outside of what individual tools bring, and procurement experts still deal with conducting offline meetings, performing extensive analyses, and negotiating with internal stakeholders.

Defaulting to usual suspects

Even after often nebulous requirements are defined, finding service suppliers that are able to meet all of them also remains a challenge. Many of us have a reliable set of go-to vendors, but those businesses may not be the right fit for every situation. Although consumers are used to a multitude of options for services that make their day-to-day lives easier, such as sourcing travel, food delivery, and vacation homes, the B2B environment has woefully lacked the same advances — until now.

Other obstacles include the major effort of assessing which companies respond to the RFP, reviewing those suppliers, and determining which ones warrant further exploration. We’ll likely receive a large number of bids from a variety of service suppliers; some will be well qualified, others less so. The trouble is that the proposals are often in different formats, offer different approaches to the work, have different pricing schemes, and result in different capability levels. Although there may be some excellent options among them, comparing and vetting them takes an enormous amount of staff time and energy — it often feels like comparing apples and procurement professionals.

Given how onerous this can become, it’s no wonder that many CIOs default to our usual suspects, even if that doesn’t result in the best choice or price for a particular service. In other words, we don’t want the associated risk of new, different vendors.

Weeks or months later, we choose that (hopefully) perfect supplier and the actual buying process unfolds. Purchase orders are cut; systems and processes get set up; suppliers present invoices generated by the various billing systems they use; and the workflow must be integrated to accommodate the entire ecosystem. All of this happens before any real work begins.

The journey needs to start now

This is a process and system that, in today’s digital, global economy, simply no longer works. Our internal customers are demanding better, and so are the best suppliers. If the buyer’s process costs the supplier too much, it’ll move on to the paths (and customers) of least resistance; suppliers that do respond to RFPs will not be of the highest quality, and neither will their results.

IT services sourcing is not the only target — categories across the company need strategic services, but IT is a natural place for CIOs to start. Practically speaking, we expect the new IT systems we employ to be agile and adaptive, so why wouldn’t we expect the same from the way we procure them?

Growing digital dependence means that, at this transitional moment, IT has the unique opportunity to drive business objectives by applying advanced technologies to fundamentally improve foundational processes for itself — and for the rest of the organisation. With the advent of AI-based sourcing tools, there’s an exponentially more efficient and effective way to develop the most accurate service scope, identify quality suppliers at realistic cost estimates up front, objectively evaluate vendors, and then engage and experience maximised results.

All of this will help with attaining greater cost savings for the organisation. Having advanced, streamlined, and less burdensome systems will also enable CIOs to strengthen communications with business stakeholders and achieve greater alignment with their priorities, which is a high-value proposition for those willing to step up and take advantage of the new opportunities.

Skills are scarce for many of the newer technologies, and it might seem like building a solution takes time. The journey needs to start now if it hasn’t already begun. We need to position ourselves, our teams, and our function as innovators whom can support, educate, and guide our companies through the next phase of its development, to truly take the business to that next level by delivering value, driving growth, and increasing our competitive advantage.

Carrying procurement into the modern era

Our world is being disrupted by radically innovative technologies such as AI, machine learning, IoT, and blockchain, at a rate that has never been experienced before. It won’t be long before what now seems radical comes to look like the touch screen smartphone — just a regular part of life — and this includes deeply entrenched business processes like sourcing.

At this unique moment, it’s time to carry procurement into the modern era of exciting possibilities and seize the most obvious and impactful one that a modern CIO can affect — the way companies find the best suppliers at the right price for any sourcing need across every category.

Martin Henley, SVP, Technology Services, Globality