What is IT Procurement Process and How to Manage It?
IT procurement and purchasing activities within the framework of project management are essential to any organization which uses information technology (IT) systems and equipment to manage projects, processes and talent. Actually, today you can hardly find a company that doesn’t utilize various IT systems and solutions to plan and carry out strategic and operational processes. Computers and procurement software solutions are integrated parts of the enterprise-wide project system.
The management of IT procurement process needs to be carefully learned and examined in order for technology leaders to create a solid foundation for providing a company with high-quality and effective supply chain systems, telecommunication equipment, hardware, and software (read this Project Procurement Management Template to learn more).
What is IT Procurement?
IT procurement is a series of activities and procedures referring to acquiring information technology. Often IT procurement activities are combined into a single process defined as follow below:
IT Procurement Process is one of the key strategic business processes within an organization. It is the way to make the organization “feel” better and do its business projects because all necessary hardware, software and networks are available and in service. The process allows determining requirements for IT systems, communicating with suppliers, administering procuring contracts, managing IT assets and assuring quality of the products/services procured.
Why IT Procurement Process Matters for Businesses
Without much dispute, the acquisition of software, hardware, systems, and technology services is at the core for all organizations across industries. This relates to both suppliers and buyers.
First off, information technology procurement plays a fundamental role in actualizing IT assets and building a healthy and extendable infrastructure of physical, software and network components. With emerging technology disrupting markets and the competitive nature of businesses, IT executives have to ensure that their IT infrastructures are equipped with all necessary procurement items, so that changes can be made quickly and without impacting the business continuity.
Next, the financial facet of the technology procurement process directly affects both the company’s profitability and its supplier relationships — virtually every partner in the supply chain. Depending on the nature of the business, IT procurement and purchasing costs alone range from 35% to over 70% of each sales dollar, according to IBM Global Procurement.
Finally, the efficiency of IT buying has a direct impact on the business’s capability to respond effectively to ever-changing marketplace demand and consumer behaviors. Because of its great impact on revenues, costs, and operational efficiencies, IT procurement management is a key driver of technology transformation.
IT Supply Chain and Procurement Diversity
Technology professionals recognize that a diverse IT supplier base is integral to company profitability, security, and strategic objectives. Supplier diversity solidifies the connection between continuous IT procurement and business growth.
Besides, maintaining an up-to-date base of diverse IT procurement partners strengthens the company’s ability to quickly adapt to supply chain disruptions, time-to-market pressure, and ever-changing customer expectations.
However, 67% of top CPOs (Chief Procurement Officers) reported that they embedded a supply chain diversification strategy into their IT procurement management processes versus 24% of lower-performing CPOs (mainly in startups and growing businesses), which shows that there are still many organizations that are not yet adequately leveraging supply chain and procurement diversity opportunities (Deloitte Global CPO Survey 2019).
That being said, IT procurement professionals need to focus on growing their supplier base and build more expendable IT infrastructures since diversity is one of the factors inhibiting procurement speed and agility.
A Generic Model of IT Procurement
In every company there should be implemented an extendable model of IT procurement process to exchange the information about managing procurement procedures and tasks, and to maintain collaboration between people involved in the IT procurement process. Such a model serves as a framework used by management teams to make the process of acquiring information technology easier yet comprehensive. This will provide the company with required IT hardware, software and systems and will help follow project procurement best practices.
An generic IT procurement process model means a representation of the process as a suite of sub-process groups, such as:
Let’s view each of the sub-process groups in detail.
Group 1: IT Procurement Implementation
The sub-processes of this group include activities and procedures that entirely describe the life-cycle of IT procurement an individual product or service steps through.
Every separate procurement starts with setting up IT requirements, then sending a request for quotation (RTF) to vendors for contract sign-off, and completing the procurement contract in the specific terms and on schedule. The group consists of the following IT deployment sub-processes:
- Requirements Setting refers to reviewing IT investment business case and determining business justification, specifications and approvals to initiate the IT purchasing process. It includes such procurement procedures and tasks as:
- Organizing project teams;
- Using investment analysis techniques (like cost-benefit analysis);
- Finding alternatives, measuring IT procurement opportunities and risks;
- Determining benefits;
- Obtaining necessary approvals to proceed with the IT procurement management process.
- Acquisition engages IT procurement managers in evaluating and selecting appropriate suppliers and signing information technology procurement contracts and purchase orders for the necessary products/services. It includes
- Identification of strategic sourcing solutions;
- Creation of communication channels with procurement vendors;
- Evaluation of IT supplier proposals;
- Negotiating best delivery terms with procuring vendors.
- Contract Execution is targeted at managing and coordinating all the activities associated with the fulfillment of IT procurement contract requirements. The sub-process includes:
- Expediting of orders;
- Contract administration;
- Acceptance of products/services;
- Installation of systems;
- Management of warranty and maintenance services.
Group 2: IT Procurement Management
This group of the IT procurement process includes all the procedures associated with the overall governance of IT procurements. Such procedures are usually general to all purchase events occurring within an organization. The group includes the following sub-processes:
- Vendor Management includes IT procurement procedures and tasks related to the optimization of customer-supplier relationships in order to add value to the business. Vendor management allows developing procurer portfolio strategies, administering IT supplier relationships, measuring purchasing performance, and communicating with procurement contractors.
- Asset Management: it refers to optimizing the use of all IT assets within the company throughout their entire life-cycle in order to achieve IT procurement best practices considering the existing business needs. It includes such activities as:
- Development and maintenance of asset management strategies;
- Administration of information systems;
- Cost analysis of IT asset ownership;
- Management of asset disposal policies.
- Quality Management engages IT procurement teams in assuring and implementing continuous improvement in the procurement management process, and in all the products and services provided for IT purposes within the company. This sub-process includes such procurement procedures and tasks as:
- Product testing;
- Acceptance testing;
- Product quality checks;
- Procurement contractor reviews;
- Facility audits.
The listed groups and sub-processes define a model of the IT procurement process. Such a model allows a business organization to create a foundation for efficient purchasing activities and to reach best practices of IT procurement.
IT Procurement Software
The process cannot be managed without using strategic procurement and sourcing software solutions. Such software provides a set of planning tools to use the model, organize the sub-processes, related tasks and workflows.
A complex procurement management software solution allows for:
- Creating procurement items lists
- Establishing communication channels between procurement departments and contractors
- Tracking and controlling status of IT purchasing contracts
- Organizing procurement documentation
- Establishing IT inventory management
- Implementing quality control and assurance
Powerful IT procurement ERP systems make sense of each iteration within the procurement management process. Managers are enabled to track changes made to IT procurement projects, measure relative risks and create response strategies, implement IT procurement solutions, and take procurement opportunities.
The Web offers online systems (e-procurement software) that besides the listed benefits allow managing the recruitment process, keeping track of current IT procurement jobs, organizing it procurement training and measuring staff performance.