Agile IT procurement in a post-COVID world

Over the last several months, IDC has hosted several virtual roundtables with sourcing and IT executives on technology sourcing and COVID-19 recovery practices. One theme that emerged is that agile sourcing practices are driving their recovery strategies.

For some, the shift to agile procurement happened out of necessity. “When COVID hit, I had to accommodate new IT procurement requests by doing master agreements in less than three hours,” one senior procurement executive told us. “But then we went back to our risk-based negotiation, doing speedy risk assessments to see where the tolerance was and whether we could mitigate risk in a contractual relationship. If we couldn’t mitigate certain risks, we did a risk advisory,” she notes. “We used a quick risk assessment of the situation to expedite negotiations or click through terms and keep going. After COVID, we’ll come out with a leaner and more practical, flexible, and agile procurement process.”

Towards an agile approach

Organizations have long recognized the difficulty of the traditional procurement cycle, anchored with the ubiquitous request for proposal (RFP). As one Fortune 500 CIO recently commented, “We spent a year developing ERP specs to include in an RFP only to find that the technology landscape and capabilities had changed. We literally fell a year behind.”

Indeed, with digital disruption, an overly cautious and extended traditional procurement process introduces its own risk component: when competitors move more quickly and the technology changes more rapidly, slow-moving procurement can leave a company flat-footed and vulnerable.

Leading-edge procurement executives recognize the need to deliver a required set of business objectives using a completely different approach. Although RFPs are still being used, no longer are they as cumbersome as they have been in the past, and technology executives have begun to rely more heavily on alternate sources of information to evaluate competing technologies. The goal is to transform the procurement process to be faster, leaner, and more flexible, and deliver value to the business sooner.

Getting started with agile procurement

The Institute for Public Procurement (NIGP) defines agile procurement as an “approach to procurement that is flexible, adaptable, collaborative, and results driven.” Further, the NIGP suggests cultural changes that are required for successful agile procurement, with several key shifts: from contract centered to project centered, from buying a service to entering into a relationship, and from contract management to performance monitoring.

Implementing an agile procurement process requires a clear commitment from procurement leadership. If agile methods are new to the organization, considerable time and outside expertise may be required to understand how agile works. In the past year, professional organizations such as Sourcing Interest Group (SIG) and the International Association of Commercial and Contract Management (IACCM) have provided seminars and training on agile procurement. Contact organizations in your industry to understand how they are implementing agile procurement.

In organizations where agile has been used successfully in delivery of information systems, it may be useful to leverage the skills and knowledge to guide the development of the new agile procurement process. Align sourcing organizations with critical business and digital transformation needs and tailor strategic sourcing practices to your existing business culture.

 To begin, identify a few small pilot projects where agile procurement can be used, with the understanding that all procurement projects will be candidates for agile. Ideally, select projects that have a short delivery period and are in support of a digital transformation goal. Codify lessons learned from the agile procurement pilot projects and begin a formal rollout. Then, selectively implement agile procurement across various procurement projects.

The right tool for the job

Not incidentally, in the agile procurement context, the RFP is only one tool out of many. We recently talked to a CPO whose procurement organization was trying to enhance itself as an RFP sourcing team, to the point that procurement was choking the company’s innovation. He told them, “If you issue an RFP without my express approval in advance, you’re fired.” His threat forced the team to quickly learn how to have higher-level, more transparent negotiations with suppliers, enabling both parties to get down to the core things that each side needs.

The executive noted that this move away from RFPs “elevates relationships with the key suppliers in the key categories where you choose to take this approach,” he said. “It requires great discipline as a sourcing leadership team to maintain your broader teams’ discipline, professionalism, and competitive edge. It can be done and there’s a time and a place for it. And this pandemic may be the time and place to experiment with this approach, and then selectively choose when to take this approach. You can make your procurement team to up-level its skillset.”