The CIO and CPO have traditionally not always been best friends. Conflicting priorities and a lack of understanding are often cited, leading to a lack of alignment felt through to the front lines of Technology and Procurement practitioners.
Is there a fundamental disconnect?
The CIO is responsible for far more than ‘keeping the lights on,’ whether that be end-user computing or using technology to streamline critical business processes and optimize the customer journey. In most instances, the CIO oversees an agile workforce, responding quickly to changing requirements to ensure minimal business impact.
The CIO is responsible for enabling wider business goals by adopting and implementing new technologies, from implementation to infrastructure management and everything in between, including security.
Meanwhile, the key aim of the CPO is to deliver value for money through effective contracting, often including a cost-efficiency target. Working with business units to manage an annual pipeline of requirements, the CPO is responsible for both supplier and cost management while effectively managing organizational risk exposure and monitoring third-party supplier performance.
The CPOs teams are commonly waterfall by design, with procurement teams more often than not employing a linear approach to gathering requirements and completing a full project based on the initial requirements.
The clash between adopting innovative technology solutions, the procurement team’s drive for cost efficiencies, and the ongoing Agile versus Waterfall debate creates significant conflict. Yet, as technology demands escalate and budgets tighten, the necessity for a unified approach becomes irrefutable. Collaboration is essential for the CIO and CPO to achieve mutual success in this challenging landscape.
Why CIO & CPO can’t thrive without each other
CIOs face mounting challenges in modernizing the technology estate while optimizing cost and delivering an enhanced internal and external customer experience.
Suppliers quickly seize this opportunity to sell additional products and service lines to help solve these problems without considering or fully understanding the bespoke complexities existing for each CIO. This often leads to misplaced trust and sunk costs in solutions that ultimately do not provide the required functionality and interoperability for the organization.
CPOs are grappling with the escalating challenge of meeting ever-increasing cost reduction targets amidst an economic backdrop of high inflation and rising prices. This pressure falls heavily on the CPO, who is tasked with reducing the bottom line and controlling third-party spend across the organization. As technology becomes ever more pervasive throughout all areas of business, the CIO budget is progressively a primary target for cost reductions and additional scrutiny.
This challenge from the Procurement team to their Technology counterparts often leads to conflict due to misalignment of approach, despite the ultimate goal being the same – optimizing budget.
The benefits of close collaboration between the CIO and CPO are extensive, including:
- Accelerating the pace of change – releasing budget to fund priority change programs through in-life contract re-negotiations, facilitating the timely exit of legacy suppliers, and onboarding new suppliers.
- Optimizing cost – working collaboratively to identify areas of under and over-utilization and negotiating commercial agreements to reflect actual usage, bringing in market competition to drive preferential pricing and combining market insight with operational requirements to drive optimal delivery models.
- Implementing the optimal cost model involves contracting in the most appropriate way to ensure maximum value is achieved and working with suppliers to modify the charging mechanisms to ensure they work in the interests of their organization rather than solely for the supplier.
- Enhanced supplier relationships – collaborating appropriately with strategic suppliers and building partnerships to extract innovation and efficiency opportunities without giving away valuable negotiating positions.
- Risk mitigation – optimizing contractual arrangements and providing sight of shadow Technology spend to effectively mitigate key risks through robust contracting and resilient service level agreements while identifying key areas of duplication in tooling, software, and services.
- Time efficiencies: This frees up the time of technology experts to focus on maximizing value-added activities while procurement experts focus on negotiating and finalizing contracts with suppliers.
Changes required to the Procurement approach to Technology
However, these benefits will only be fully realized with changes to the current approach of the CPO and procurement teams:
- Understanding CIO strategy—Often, the procurement team has a limited understanding of the overarching CIO strategy, which can cause conflict when providing advice on the route to market and contracting approach.
Procurement teams must fully align and understand the CIO strategy, showing how the selected procurement processes will progress toward the CIO’s goals.
- Agile Contracting—Most technology teams either already operate in an agile way or desire to do so in the future. Traditional contracting is waterfall by design and does not support this way of working.
Procurement teams should consider alternative contracting approaches where appropriate that support agile methodology, think outside the box and design bespoke and flexible solutions where required.
- Market insights – when solving key problems, it is natural to consider how others have tackled the same situation. This helps to formulate new ideas by understanding the art of the possible.
Procurement teams must bring key market insight from the perspective of market offerings and consider how other organizations are solving similar problems. This insight is invaluable and ensures common pitfalls are avoided.
Changes required to the Technology approach to Procurement
As per the above, the efforts of the procurement team will not realize benefits without key alterations to the approach from the CIO and their respective teams:
As well as significant cost optimization, flexible multi-location strategies boost supply chain resilience. When done effectively, there is a prime opportunity to implement global workflow methodologies such as ‘follow-the-sun,’ where teams in various worldwide locations enable 18+ hour delivery daily, enabling key enhancements and driving products to market at an accelerated pace.
This offers added agility to deliver strategic objectives, even during peak trading periods. Locations can be specified based on your specific requirements, linked to language, business locations, or access to required skills and experience. A little market knowledge and supplier familiarity go a long way in architecting the optimum setup.
- Strategy development – CIO strategy and program business cases often have limited involvement from procurement colleagues. This can cause significant issues when delivering against the strategy or business case.
The CIO and their teams should involve procurement colleagues from the outset. This ensures buy-in and provides key insight into best practice approaches to implementing required contracts and making changes or exiting existing arrangements.
- Pipeline and backlog—Technology teams use and review pipelines and backlogs daily. However, procurement colleagues rarely have access to either, let alone understand its contents.
Taking the time to provide access and explain key priorities to the procurement team will ensure alignment on key requirements and deliverables. This will, in turn, allow the procurement team to plan and ensure all relevant procurement processes are completed on time rather than blocking progress.
- Supplier interactions—contact between strategic suppliers and members of the technology team is a necessity; however, discussing commercial deals and agreeing to changes is not. Deals are often compromised, and efficiency opportunities are lost through commercial conversations taking place without procurement involvement.
The technology team should lead operational conversations with suppliers. However, prior to any commercially focused conversations, Procurement should be engaged to understand where they should be included to ensure the organisation’s financial interests are protected and any future deals are optimised.
Mutually Assured Success
As with any effective relationship, collaboration, compromise, and communication are critical to long-term success. Together, the CIO and CPO, alongside their respective functions, drive change and commercial optimization more effectively.
The benefits are far-reaching, impacting the entire organisation. At a macro level, this enables the CIO to do more for less, unlocking efficiencies and driving higher-quality outcomes. It improves the internal and external customer journey while reducing the organisation’s risk exposure. In other words, it is a recipe for mutually assured success.
