We'll get to the points straight away.
1. For Non capex, Indirect Procurement and Subscription Driven SaaS Procurement requirements :
Investing in esourcing suite doesn’t make sense anymore in 2024! Stop it. Here are some of the reasons
There is hardly any value in running RFPs for such categories in 2024! As a CPO, you Need to prioritise agility over running 6 month long RFPs.
If you'll stop running RFPs on such categories, most of the esourcing suites will become redundant as they don't have relevance to handle most of strategic sourcing.
In 2024, you are spending 6+ months, hundred of thousands dollars in license cost and then in change management, for a mere indirect sourcing platform to run RFPs, you are not better not to do it at all. Find a better way.
Ask your teams to either build a solution using low code/no code. Why not use a free version (Hello Supernegotiate) or any 30 usd per month non integrated suite that can run automated negotiations!
Key thing here is stay Non Integrated. Avoid customizations at all cost. Customizations and Integrations are nightmare to deal with. Not only these are expensive (time and money wise), these factors will force you/lock you with your current provider. You will not be able to move out of a substandard platform.
Also, if you are pitched, PR-PO automation (their creation and approval automation etc), please note these PR-PO automations are over rated. Given the number of PRs-POs generated, approving them or managing them becomes an admin nightmare. People dont like to drown themselves on platforms and endless clicks.
Infact, The effort vs return ratio (for PR-PO automation work) is not worth it. As a solution, please explore using RPA to achieve the same output. It is much more flexible, scalable and doesn't lock you in any contract.
2. Second : Outsource/Eliminate/Automate Mediocrity and Specialize in Excellence:
I dont usually talk about Team Management in Procurement CoE. But, it is becoming one of the topic that needs some attention now and there is one clear differentiator between Poor Procurement CoE setups and High performing Procurement CoE setups. So, please fix this for me!
Most high performing Procurement COE setups eventually becomes a collection of Exceptional Individual Contributors (IC) and these ICs doesn't need micromanagement.Â
Most importantly, these ICs need a forward momentum and high growth path to stay motivated! This culture is here to stay and thrive, especially with younger generation entering into workforce!Â
We think the middle management layer needs a better approach. If Middle management layer is purely doing Project Management Work (PMO work) and KPI management only, they are most exposed to becoming irrelevant as Open Ai/ Gen Ai replaces the coordination and KPI management work! The risk of replacement becomes more if the middle managers are not industry respected thought leaders!Â
So, what can you do as a CPO?
Ruthlessly eliminate/automate below average performing resources. You can reallocate them to alternate functions if you must but don’t tolerate mediocrity! Please reward excellence over mediocrity. (I Welcome criticisms on this point)
3. Pay Market Prices to Skip Meaningless Procurement? Sales Revenue will always be prioritized over Procurement Savings:
Don't get us wrong on this. Strategic Procurement is vital. It's the running the RFPs culture for Non Capex, Indirect and Subscription Based Procurement requirement!
Here is a question to ponder upon as a CPO for non capex, indirect and subscription based Procurement requirements!Â
If your company decides to pay market prices and priorities to work with the market leader vendors to skip the tendering (or RFP) process (single source by default), do you still need procurement? No more commercial negotiations and contracting and only technical evaluations!Â
The answer will surprise you.Â
Given a choice to pay market prices and launch the product in 2 months in market versus suffer through a tedious rendering exercise of 6 months or more and save mere 20% on market prices, I am sure majority will choose the first.Â
And this is exactly what is happening in startups and small enterprises. New Gen CPOs are execution driven and impatient!Â
That’s why RFPs are so 1940s for non capex, indirect and subscription based Procurement requirements and such activities don’t have any future in next 3-5 years. I see this trend becoming more mainstream (lesser and lesser RFPs) as GenZ CPOs will assume their offices in next 3-4 years!
Sales revenue will always be prioritized over Procurement savings everytime. So, stop fighting the cost avoidance vs sales battle!Â
So, the key takeaway for your as a CPO is can you define categories where you can just choose to skip the tendering exercise and prioritize agility. What are those categories? Ask your Procurement CoE to give you a list on this next week!