Over the last two years I have had direct dealings with procurement teams in major organisations and it has not been a pleasant experience. A canal side discussion with leading CIOs following this title’s Innovation Leadership Summit in September 2017 made it clear that procurement is a thorny issue for CIOs and organisations as a whole. But this week’s Horizon CIO podcast is not an attack on the procurement community, but a discussion that explores the problems and the opportunities that forward thinking procurement leaders are following to make their role and outcomes as agile as those of a CIO.
The pressures of digital disruption and continued austerity in the UK have meant that the CIO community has had to become agile and iterative in the way they work. To deliver digital services to customers and end users today’s transformational CIO works with a wider range of specialist suppliers than at any time before. Projects and deployments are short and sharply intensive. Specialists providers do not ‘land and expand’ the way the old systems integrators did.
This new way of operating is posing challenges to procurement teams, especially in the public sector, as this Horizon CIO podcast focuses on.
“The Government Cloud Store went live in February 2012 with 257 suppliers on it, with commodity services and I was the first buyer,” James Findlay, former CIO of HS2 and the Department for Transport says. “And that was a challenge at the time, but it took me just 24 hours to tender.
That was a special moment, one of the things I realise now is that I was able to do it is that because I had an incredibly good procurement team.”
Sadly Findlay reports that this experience was unique and that many of his CIO peers in Whitehall and across the public sector are struggling with procurement teams whose culture has not kept pace with developments such as cloud computing and software-as-a-service (SaaS).
“I would certainly echo that. Going back five years ago when I was CIO for the Department for Education and it was a constant battle and I keep having to have the same battle on working jointly on procurement,” says Rachel Murphy who has recently completed a role as Digital Delivery Director at NHS Digital and is now supply side with Diffrent.
“Strategically the Cabinet Office, Government Digital Service (GDS) and Crown Commercials have got it right and that gives buyer some fantastic services from a rainbow of suppliers, small, medium and large and there are some commercial teams that are really embracing those changes, but I have to say they are in a minority,” Findlay adds. “There is a permafrost of old fashioned procurement practices.”
“We are saying procuring technology in the public sector is difficult, the reason it is more difficult in public sector is there are certain levels of governance,” says David Kershaw a procurement leader with significant experience in the Cabinet Office, NHS, GDS and charities. “Procurement is wide reaching and we should applaud some of the good things that procurement has done, but they tend to be in very commoditised areas. What we need to do now is see a shift because we are seeing a shift in the way our customers are working,” Kershaw says, admitting that his community are not keeping pace with the agility IT and CIOs demonstrate.
In 2007 to 2009 the CIO community was accused of not being aligned with the needs of the business and for being the department that said no and worked to its own ideology. The parallels with procurement today are striking.
“Five, six, seven years ago we were struggling with agile, alignment and delivery at pace, and it was too focused on legacy systems, it was systems integrators and it was outsource a problem. We have all moved on,” Murphy says of her peers in the CIO community. Murphy, Kershaw and Findlay all believe that the procurement community needs to change in order to enable organisations to continue with digital transformation.
“We need to transform the way we procure digital and we need to look at how we help our colleagues deliver,” Kershaw admits. He adds that the procurement world has not come to realise that the iterative way that CIOs work today lowers risk. He and Murphy also believe procurement needs to learn co-location from IT. “We need to work more closely and I am more than happy to lower as many barriers as I can,” Kershaw says.
“It is only hard when you are not prepared not to get out of your camp and I have worked with procurement teams that will not get into bed with the client. I sit with my users and sit next to them all the time so I understand them and you live and breath and share the same world,” he says.
Murphy, who has specialised in being an interim CIO/CTO insists in co-location in the organisations she works for. “I think the multi disciplinary team piece is essential. Who works for who has to immaterial.” She adds that you should be able to look across a room and see 200 people working on a task and be unable to tell who is from IT, from a frontline service, from a supplier and from the procurement team. “The only thing that is consistent is that everyone is pulling in the same direction,” she says.
“The problem we have is that most of my users need things delivered daily and traditional procurement people like a nice ordered delivery pipeline,” Kershaw says. “So I call this the trinity of conflict, who do I keep happy? Do I keep the Delivery Director happy by delivering what they want? Or the head of legal by being compliant or do I keep the FD happy by keeping costs down? Who is he real boss of the procurement team?
“I can see that challenge. The complexity is how we as organisations are measuring delivery. I cannot be held accountable if I am not accountable for a specific outcome,” says Murphy. She therefore believes that procurement and the delivery of technology led change have to be embedded together to guarantee success. She says at present the procurement process “sits in no man’s land”.
“Procurement reporting into a different line of business is a problem we have had across silos,” says Harry Metcalfe, MD of DXW a supplier to the public sector. “You have procurement problems as people don’t understand the situation and that creates the clash as you end up with teams that do not understand each other’s work. So teams working together is the solution and digital teams need procurement within them, so put everyone in the same room physically so you reach a shared outcome.”
Flat management structures have helped IT teams become more agile, but Kershaw says the procurement world is too hierarchical.
“For the people in the digital space there is no hierarchy. It is ok to wear a suit and it is ok to wear jeans. I remember when I did my first procurement role with the GDS I was very proud to turn up with Prince II manual and Prince 2 is great if I want to build a new bridge or a new tunnel. What I realised very quickly in order to use this new agility you need to strip away the hierarchy,” Kershaw says.
“The reason that the procurement world is seen as being a bit behind that is because the procurement world has a lot of hierarchy with levels of spend authority. However, you have seen the delegation of authority stripped away and so I am making a plea to procurement departments lets strip back your hierarchy.”
“That delegated authority piece is so important as you get all sorts of areas of governance where the people that are in a position to authorise something are so far away from the actual work that is being done,” agrees Metcalfe. “The only way they can make those procurement decisions is through the lens of a report, which is made up of the findings of several other reports,” he says. Metcalfe says the pace of business and technology change means that using reports guarantees that the information is out of date by before the procurement is made, leading to an incorrect procurement.
“We need to switch this around and think about it in terms output strategy and the process and give the governance authority the reassurance that there is a good team and then set the budget at a very high level, but then the authority to spend that budget should be delegated to the authority that is responsible for delivery,” Metcalfe says.
“What do our users actually need? Sit down and listen to them and I have started to do that and I sit with them to work out what makes them tick, do they know their supply chain, do they know their market,” Kershaw says.
Change is happening though: “We have seen the rise of chief procurement officer (CPO) and we have seen the role of procurement move from the backroom to the boardroom,” Kershaw says of how a C-level head of procurement is helping create a more strategic view, in the same way as the emergence of the CIO has helped IT become a core part of the business.
Findlay adds: “I have been working really closely with the Cabinet Office, Crown Commercial and GDS to actually build an agile procurement partnership approach as it focuses beyond the holy trinity.”
Murphy of Diffrent believes shadow procurement is taking place, just as shadow IT has, and that this could lead to problems unless procurement teams adapt to the modern way organisations work.
“The reality is that there will be stuff set up all over the place in procurement if we are not careful. I think there is a real challenge around that now,” she says.
Central government procurement will be impacted if the UK leaves the European Union. The Official Journal of the European Union (OJEU) has shaped public sector procurement for many years.
“Coming out of EU will affect us on the prices we pay for things, it will affect the way we have access to physical products, digital and people, as it is going to be harder to get those things to work with us,” Kershaw says. CIO Findlay believes whatever the outcome of Britain’s changed relationship with our European neighbours it must be used as an opportunity “to open up the market to all flavours of business”.
“The reality is, whether public or private sector procurement has been a challenge for some time and Brexit is not going to be a benefit and we will have to box clever. We do have the Digital Outcomes and Specialists (DOS) framework and G-Cloud and I think if any fellow CIO thought they would get the answers through CR1 there are some real problems ahead,” Murphy says of visa regulations post Brexit.
SMEs and the public sector
“We have a peculiarly British way of interpreting all regulations in the most onerous way, so it has a greater impact on SMEs than large companies. One of the other things that happens is that procurement gets loaded up with all sorts of other things like environmental standards, ISO standards and they all add to the burden,” Metcalfe says of how existing procurement practices fail the UK’s SMEs.
“Some procurements require all these standards like ISO and green credentials and some procurement people don’t know this digital tech and agile market,” Kershaw says of how procurement teams treat all procurements the same and don’t consider the nuance of commissioning a digital service. “I have seen in my career how often the procurement team has people deployed and the last job they did was procure lifts in an office, then the next role will be a digital outcome. So it is a plea to ask the digital world, to ask for some specialists. It has taken me five years to understand these areas.”
“On the flip side we as suppliers need to recognise that the public sector has challenges; they are spending public tax money and some in the SME market think that the G-Cloud is a magic money tree. The public sector is a market like any other market and you have to court it,” supplier Metcalfe says.
Once selected suppliers have to join the procurement platforms that connect into the enterprise resource planning (ERP) tools used by public sector departments and in many cases, whether in the public or the private sector, these tools are time consuming and challenging to use. All of which creates another barrier for the UK’s SMEs to work with the public sector.
“With the exception of the Digital Marketplace every procurement tool we have used has been awful,” Metcalfe says. “I often get the feeling they are built from a perspective that the user will grin and bear it, as if they do not, they wont get the work.”
“User experience should be the number one priority,” procurement leader Kershaw says. James Findlay adds: “The tools are a reflection of the processes that the procurement people have to go through,” but not the needs of the user or the supplier who could deliver value to the public sector.
The former CIO gives an anecdote. “I was going into a commercial board meeting and the opening lines were, ‘are you here to provide another bid from a supplier from my least favourite framework?’ Meaning the digital marketplace.”
Having procurement as a separate operation that CIOs, facilities managers and other business leaders go to is failing the public sector. The complexity and the opportunity for technology to modernise the public sector means specialist procurement leaders need to be part of the change teams delivering technology into the pubic sector. “I do think that the complexity that we have goes back to a need to be bringing teams together. It should only be outcomes based delivery that we should be commissioning, Murphy says.
Our speakers this week: