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November 19, 2018
Make or buy? The million-dollar question in digital procurement.
By: Kristin Ruehle

The frantic pace of today’s do-better-with-less business environment is old news to procurement executives. They grapple with this new normal every day, acutely aware of the need for agility and speed. In fact, 84 percent of procurement organizations think digital transformation will fundamentally change how their services are delivered in the near future. Yet just 25 percent are confident they have the right resources and competencies now to make this a reality.1

This readiness gap is driving a critical question for procurement organizations. Leaders are asking: “Should we develop digital procurement capabilities internally, or should we work with a partner?” I think of this as the great make-versus-buy debate.

Make: Going it Alone

The “make mindset” is a common-sense approach. However, it has a fundamental flaw. The hard truth is that most procurement organizations don’t have the capacity, capability and capital funding to do this right. Companies are directing any scant resources they might have toward the pivot to digital in the front office—exploring new markets, developing new business models, and more.

Procurement organizations are also fighting a losing battle against the pace of innovation. Things change so fast that companies that actually find a way to invest risk getting stuck with technology that is out-of-date even a year later. In the digital world, the better mouse trap is always just around the corner.

Even companies that have selected cloud-based e-procurement solutions are struggling to keep pace. While it’s great that these providers offer new and emerging capabilities for the enterprise, offering and implementing are two very different things.

Whenever a new capability is released, Procurement should assess benefits and impacts fast. This is key for the rapid-fire ROI the business demands. But procurement organizations are not hard wired for this. Add to that the quantity and complexity of tools, vendors and categories of spend that should be addressed. The key takeaway? While software vendors provide future-forward capabilities, many procurement organizations are not taking full advantage of them.

Feeling overwhelmed with the pace of change in digital #procurement? Here’s why you don’t have to go it alone.

 
 

Buy: Strength in Numbers

On the other hand, procurement organizations that invest in partners and go the “buy route” can benefit from several critical advantages. For one, buying provides access to specialist skills at the ready when, where and how they are needed. These skills, like analytics and data science, are in such high demand that hiring for them has become like hand-to-hand combat.

There’s also the issue of scale. Instead of making small or isolated investments that can’t move the needle fast enough, buying provides flexible scale that can be dialed up or down as needed. What’s most exciting is the exponential impact that comes from connecting with a provider that does this work at scale across multiple clients. Procurement organizations tap into leading practices and stay ahead of the latest digital technologies without having to continually invest themselves when new capital expenditures are out of the question.

With the case for buying so strong, what’s stopping procurement leaders? It’s a question of control—a fear that any kind of partnership arrangement will take away decision-making power from leaders. This is a myth.

The reality is that Procurement has more control in this arrangement. Access to leading tools and technologies provides richer data insights and process visibility for next-level decision making for each company. Far from being bystanders in their own future, leaders are fully-informed participants in the digital transformation of procurement for their organization. To make or buy? It’s a question every procurement organization will ask. What will your organization’s answer be?

References

1 The Hackett Group, The CPO Agenda: Keeping Pace With and Enabling Enterprise-Level Digital Transformation.

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