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Technology companies cannot buy their way to competitive advantage. Or can they?

The best sourcing and procurement organizations manage costs and drive business growth.

OVERVIEW

As they transition from selling products to providing innovative solutions, tech companies are recognizing the need for a more strategic sourcing and procurement (S&P) capability. Savvy leaders are already waking up to the fact that their S&P functions should focus not just on cost containment, but also on growth.

Seizing the strategic sourcing opportunity requires a design-to-value mind-set, new ways of working, and a refreshed sourcing and procurement organization. Above all, it requires leaders who recognize that, in the battle of supply chains, sourcing and procurement is the new source of competitive advantage.

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KEY FINDINGS

Accenture Strategy’s client experience and benchmarks show that 50 to 60 percent of tech companies’ S&P organizations should be strategically focused on growth. The vast majority of S&P programs, however, are still bound to a cost-only mind-set. With that unbalanced approach, one-third of future revenue streams are at risk.

One way tech companies can achieve a healthier growth/cost balance is by establishing a dedicated new product development sourcing function. When S&P works alongside (and unifies) product engineering and sales:

  • Future revenue is protected.

  • Engineering time is reduced by 20 percent.

  • New business win rates rise by 10 percent.

  • Supplier collaborations become the source of up to 50 percent of product innovations.

Tech companies that fail to use S&P strategically during the NPD process, in contrast, incur 30 percent higher product costs. That increases the likelihood they will lose new product wins to competitors.

RECOMMENDATIONS

To position S&P as a new source of growth and competitive advantage, technology leaders need to:

Commit to treating S&P as a strategic discipline, push for new practices, and gain the buy-in of affected groups.

Invest in new partnership models that enable engineering, sales and sourcing resources to collaborate during new product development.

Empower Chief Procurement Officers (CPOs) to: create digitally enabled procurement organizations that maintain transactional excellence; design a new talent strategy that attracts, develops and retains more strategic workers; and establish new and more strategic roles that will drive growth.


Authors
Vikrant Viniak

Vikrant Viniak
Managing Director
Accenture Strategy,
Communications, Media & Technology

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Andy Kohok

Andy Kohok
Senior Manager
Accenture Strategy,
Operations

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