The roles of procurement and the chief procurement officer have grown steadily in importance and scope in recent years—particularly as they pertain to digital transformation efforts.
On the one hand, CPOs are increasingly responsible for technology procurement that drives digitization efforts for the overall business. At the same time, they increasingly recognize the vital role technology plays in procurement itself. This confluence of factors is driving a need for CPOs and their counterparts in IT departments to better collaborate on their shared goals and coordinate their efforts.
To further explore this critical dynamic and uncover ways CPOs and Chief Information Officers can better collaborate, Icertis recently sponsored a survey by ProcureCon and WBR Insights to see how procurement leaders are navigating digitalization efforts and how their work with CIOs was (or wasn't) facilitating said efforts.
Out of the gate, the study exposed the depth and breadth of opportunity to digitally transform procurement: CPOs recognize the need for holistic, end-to-end digital procurement solutions, but most are only partway along the paths of their own digital journeys.
The survey found that less than one-third of respondents—30 percent—consider themselves to have reached an "advanced" stage in their digital transformation journey, while 48 percent consider themselves "mid-way" there.
The survey also found most respondents feel better coordination is needed between CPOs and CIOs to achieve technology adoption, with a lack of adequate collaboration reported by 59 percent. This is not surprising given that, despite their increasingly overlapping responsibilities, the two have traditionally held differing priorities.
Per the study, this lack of coordination between procurement and IT is a key roadblock to technology adoption. In today's market, organizations cannot operate in silos. CPOs, CIOs, and other leaders must accept the challenges that traditional dysfunctional engagement has brought and make collaboration a focus to unlock the tremendous value-adding potential of digital transformation.
Contracts are key to digital transformation
Contracts are at the center of procurement—in fact, they've been described by Forrester as the "beating heart" of an enterprise. They are the output of every supplier relationship—including relationships with technology vendors.
As one survey respondent put it: "When you enter into an agreement with a supplier, you have to make a decision. Will this contract be a marriage license or a hunting license? If it's a hunting license, the supplier will have their own targets, and they won't be interested in following the rules. If it's a marriage license, everyone will work together for mutual benefit and it will be a relationship that's based on a plan with goals. That's how you determine if they are a strategic supplier."
Given the critical importance contracts play in procurement, contract lifecycle management (CLM) software presents CPOs and CIOs a golden opportunity to collaborate on a digital transformation project that aligns their priorities and pays ongoing dividends for the company.
From the CIO's perspective, CLM can help the IT department gain full transparency across its third-party software landscape and identify opportunities for improvement (e.g., potential discounts, unrealized savings) or sources of risk (vendor solvency, unexpected price escalations).
From the CPO's perspective, CLM can act as the cornerstone for a true end-to-end digital procurement process. In fact, an advanced Contract Lifecycle Management platform can itself provide half of the 12 managed digital services which survey respondents said they were considering. Beyond Contract Management alone, an advanced CLM supports: Compliance Tracking (Are we compliant with all our obligations?), Strategic Sourcing (Which suppliers are performing strongly against contractual commitments?), Spend Analytics (What prices have we agreed to historically? Where can we negotiate better terms?), Business Intelligence (How are our overall commercial agreements performing?), and Supply-Chain Data Management.
By strategically focusing digital transformation efforts on contract processes, a wide range of siloed processes (and technology solutions) can be unified on a single platform. This goes a long way toward achieving the CPO's goal of creating an end-to-end procurement process, it improves procurement's performance for IT sourcing tasks, and it reduces the number of solutions IT has to work with in its tech stack. It's a win-win-win!
Little surprise, then, that the study found that 40% of organizations will be using or adopting contract lifecycle management (CLM) software in the year ahead. This mirrors other tech trend data, including a Gartner report showing client inquiries about CLM are up 40% in the last year.
Wider technology trends are helping to drive this interest in CLM—particularly artificial intelligence (AI). The survey showed that 100 percent of respondents—yes, all—recognize the need to use AI to help interpret the unstructured information in vendor contracts. With AI, procurement departments can push beyond contract management into contract intelligence—a state in which companies can dynamically analyze contracts in the context of their systems and processes, expand their understanding of how contracts drive all aspects of their business, and ensure that the intent of every contract is fully realized.
This is must-have technology for CPOs and CIOs, with clear, shared benefits that can achieve digital transformation goals that have been, to date, elusive.
To learn more about CPO and CIO collaboration to drive digital transformation, download ProcureCon's full report: Guide to a Successful CIO-CPO Relationship.