Making a business case for procurement technology investment in your organisation

We caught up with Jenny Draper, General Manager for Europe at Spend Matters Technology, about a hot topic for many people – where to start and how to get your organisation on board with procurement technology.

In a recent survey, conducted by Efficio, 63% of procurement leaders admitted to completely rethinking their procurement approach as a result of new technologies. And 78% of those actually felt it should be a boardroom priority. This may not be new news, but it emphasises why technology should be a priority. 

The same survey revealed that 82% of organisations preferred to make better use of existing technologies before investing in new ones. This reveals that many organisations are not getting the full benefits available from those technologies, and, in turn, suggests organisations need to really validate any technology investments. This is why a business case is so important.

The required outcomes
The first step is to look at your current technology and whether it actually meets the outcomes you want. Ask yourself, is your tech old, unreliable, and not fit for purpose; or actually, is it your processes? Generally, we see it’s a mix of both – the team needs different processes to work more efficiently. Also ask yourself, will new technology help to fix that problem? Everybody thinks they want data, but it has to be for the right reasons. For example, is it for reporting, is it to reduce maverick spend or offline processes? Is it to identify who you’re spending your money with? Even today, many organisations don’t know the supply base, and as a result they are spending so much money off-contract. It is vital to understand the problem, before you try to fix it. 

Old vs new tech
Next, try plotting your current versus desired state; what do you want your procurement function to look like in 12 months’ time, in 24 months’ time? And this isn’t just directed to CPOs, this is directed to category managers and the leadership team too. Plot the impact on stakeholders of what you’re looking to do. If you start to plot that out, you should start to see where the benefits of old and new technology could come from.

Will technology change how you work, and do you want it to? If you make the investment, even if it is a small technology addition, it will make a difference to how you work today. But is it just a process change, or team change too? Is your team ready for change? It isn’t just technology, it’s people; so, understand the team, understand the dynamics, and make sure all can pull in the same direction. 

Process or technology driven?
As outlined, you will need to consider any processes that will need to change to make the most of any tech investments. Very often, you will find that technology will drive a process change rather than process change driving technology. So, look at how that might affect the landscape for the future and really determine your current maturity level, whether you’re looking at analytics, purchase-to-pay, sourcing, contract management, supplier relationship management, etc. across the board. It is really important to not overcomplicate things. If you’re earlier on that maturity level – i.e., you’ve not invested heavily in technology in the past or you’ve had something in place for several years and it’s been fit for purpose – don’t try to go to the other end of the spectrum and get a highly complex solution, when actually, you’re not ready. Understand where you are on the cycle of maturity and plot accordingly.

Look to the future
Make sure that you consider the future; and align with the business strategy. Consider where the business is going, what the strategy of your organisation is, could there be any mergers or acquisitions, etc. This will help decide whether any huge investment is going to be worthwhile. Look at the company vision and make sure there is alignment. Develop your roadmap to help ensure that your technology buying decisions deliver long-term value, and don’t become a waste of money or time two years down the line. Don’t lots of time on an implementation that could be obsolete in a couple of years.
 

The business buy-in
Once you are happy with your roadmap, you are going to need investment; you are going to have to put a case to the leadership team. There are some tactical steps to making that business case:
  • Actually build it – whether you are a CPO or a category manager, there is no point just talking about it; document everything that you’re thinking, your problems, what you’re looking for.
  • Include an executive summary because this will go to a board which has to make decisions on whether or not to invest in the technology.
  • Include relevant details – what is the return on investment? Not just financial, but efficiency returns, regulatory compliance, risk management, etc.
  • Give a benefits overview of the suggested solution/s and highlight business benefits for each.
  • State what would happen if the investment wasn’t made – what is the organisational and market impact of no investment? Would you lose suppliers, for example? Would staff leave due to complex, out-of-date processes and systems?   
  • Consider including a stakeholder assessment and business needs statement – don’t approach this with a siloed point of view, look at the entire business of new technology as well as the impact of not investing to the rest of the organisation.
Research, research, research
It is vital to understand your technology landscape. If possible, start the process 18 months in advance of making any selections. Talk to communities, procurement professional colleagues, peers and consulting organisations for input. Talk to technology providers – like Proactis – they want to help solve a problem and to make sure that if you’re going to invest, you’re making the right decision for you. They also very often know their own landscape much more than we do as buyers. Reach out to them and tell them what your problems are – make this is a real collaborative approach. This will really help steer you, and your organisation, in the right direction.

Download our step-by-step process to build your organisation’s business case for deployment of P2P.