Procurement of emerging technology: Three key challenges to watch out for
Businesses that tend to heavily rely on technology have historically always been at the forefront of procuring emerging services and products that are in the very early stages of development.
However, in today’s tech-savvy world, all types of businesses, particularly those that are heavily customer-facing, are now increasingly relying on the latest technology to stay ahead of the game.
But as technology platforms evolve, for instance, from mobiles to smartphones, and from smartphones to tablets and on to smart devices, the potential solutions that fit on them are also constantly adapting, requiring businesses to keep up or risk falling behind their competitors. Take mobile wallets, for example, fundamentally, they’re no different to contactless cards, but what they do is complement the cards and offer more flexibility and value to customers, who may already have their phone in their hand when purchasing goods.
While these emerging products may open up the world of technology to industries that traditionally haven’t used technology, they also bring with them a raft of challenges for procurement teams looking to purchase them in the best possible way for their business.
Challenge 1: Being involved
It’s not uncommon for the majority of emerging solutions to become apparent to members of the wider business before the procurement team. Certain business areas have their ear closer to the ground than others and, as a result, tend to hear about new products and/services before procurement.
It’s particularly common for procurement to be seen as a reactionary function, responding to requests from afar, as opposed to meeting with people and being aware of what’s cropping up before it actually does. However, there’s an inherent risk that an employee may negotiate an agreement on a new technology without involving procurement (and potentially other important business functions).
This can carry significant consequences, as business users are likely to be more blinkered and focused on achieving their aims, than a procurement team that should ideally act as the glue that binds the different business areas together.
Challenge 2: Following the right process
Even if procurement teams are involved from the outset, then it’s highly likely that the right, and most effective, process won’t be the procurement team’s go-to methodology, especially if the technology is still in the development phase.
Unfortunately, traditional, rigid procurement structures and methodologies surrounding strategic sourcing or tactical buying aren’t sufficient enough to deal with emerging products. Forcing a complex request for proposal process on to a flexible and ever-evolving solution won’t work and could be disproportionate to the level of risk.
The basic ‘three quote’ approach doesn’t work if there are only one or two suppliers out there. Equally, a strategic sourcing methodology, whether it involves four, seven or nine steps, is often focused on achieving savings on a product or service that’s already being purchased. The initial steps are usually focused on baselining and defining exact specifications. However, this isn’t likely to be possible for something that’s never been purchased before, especially if the solution may not even be finished yet.
Challenge 3: Being on the front foot
Again, traditional procurement processes are often lengthy and can take anything between five and eight months to complete. It’s a timeframe that’s at odds with the ever-changing technology landscape and trying to implement new services before the competition.
What’s more, it could even lead to business members choosing not to involve procurement in the future. But not involving procurement can have wide-reaching implications, ranging from involving the wrong people, to failing to understand the full business cost of the solution.
Reacting quickly when the initial inkling of something with value starts to emerge, is undoubtedly key for procurement teams looking to overcome the challenges associated with purchasing emerging products and/services. There are many ways they can become more agile, including reviewing and refining their existing processes to ensure they:
Are more flexible and adaptable to requirements – purchasing departments can use a strategic sourcing methodology for most sourcing exercises, but they also need to recognise when not to use it and be more fluid. Key questions they may want to consider include, ‘At what point should we stop following traditional processes? How should we approach meetings slightly differently to reach the agreed end goal?
Have an end goal and intermediary goals along the way – there’s always the risk that if the process becomes too flexible, then things drag on. Clear targets should be set that can be used both as evaluation points for suppliers and for the team to work towards internally.
Conduct ongoing reviews – even once a chosen supplier has been selected, the procurement process hasn’t finished if the finished product is still being developed. Ongoing reviews are required, amendments to timelines and Letters of Intent occur, changes to total cost need to be tracked and risks need to be managed. These are all fundamental steps that need to be factored in and carried out in a thorough and timely manner.
As with most rapidly-evolving landscapes, today’s ever-changing world of technology brings with it many challenges, but it also brings with it many opportunities for forward-thinking procurement teams who are prepared to move at the same speed, if not faster, use the right processes, keep their ear firmly to the ground and react quickly to the latest developments.
About the Author
James Bousher is an Operations Performance Manager, specialising in procurement and supply chain, at Ayming UK. James has a degree from Cambridge University in Land Economy & Management.