In the past, technology procurement leaders had two jobs: minimize costs and mitigate risks. But with the rise of cloud services and the digitization of all business units, CIOs have added new tasks to the job description — generate revenue, drive innovation and retain customers.
“Technology procurement is no longer a tactical function,” explains Luke Ellery, research director at Gartner. “It now plays a strategic role and has the ability to differentiate the organization from the competition.”
By 2021, 55% of technology procurement staff will require additional business, digital and analytical skills to realize business innovation and growth
As organizations increasingly access technology through cloud services, leaders in technology procurement need to develop new skills to successfully manage their increasing technology stacks. Gartner has identified two trends that these leaders should prepare for and capitalize on now.
Trend No. 1: New skills for a new world
The more strategic role of the technology procurement teams calls for an extended skill set that has not yet been achieved. Leaders have underinvested in the development of their teams and need to course-correct immediately.
“By 2021, 55% of technology procurement staff will require additional business, digital and analytical skills to realize business innovation and growth,” explains Ellery. “Digital transformation and an increasingly complex vendor system require skills beyond the traditional scope. There is definitely a skill gap between procurement and business staff.”
As technology vendors focus on services targeted at specific markets — as seen in fintech and healthtech — and collaborate with governments, established businesses and emerging technology organizations, more industry-specific hubs will develop. Technology procurement teams have to understand the relevant market specifics to effectively engage their business counterparts.
“As a procurement leader, you have to understand how the business units within your organization are changing and how procurement can assist in the transformation process,” says Ellery. “You need to compare your team’s current skill sets with the requirements and work with HR to create a training and development plan.”
Trend No. 2: The rise of indirect spending
Technology spending by non-IT business units has increased and will continue to do so. For example, 22% of the marketing budget went into marketing technology, according to Gartner’s 2017-2018 CMO spend survey. Procurement leaders need to take control of this spending.
“We expect that by 2021, indirect spending will be led and directed by technology procurement leaders in 60% of large enterprises,” says Ellery. “Indirect sourcing at this scale, without proper due diligence and transparency, poses significant risks to organizations.”
However, procurement generalists will have a hard time negotiating and buying technology for non-IT business units such as marketing and HR. They likely don’t know enough about the businesses’ products, services and the overall market situation. This leads to significant operational, security and financial risks due to ineffective contracts.
“Procurement professionals need to educate themselves on technology products and services to confidently manage the buying process for non-IT business units,” says Ellery. “Large organizations should consider creating a center of excellence (COE) to own the procurement policy and processes and provide market insights.”