Tech businesses are increasingly shifting their focus towards procurement excellence and cost reduction with the objective to enhance margins.
Rapid top-line growth has rightly been the prime focus for many years with many success stories underpinned by the grabbing of market share, establishing product dominance and customer loyalty. However, as growth naturally slows, and the organisation matures, focus must turn to margin, and the management of costs as well as revenue growth.
Strategic procurement has often been dismissed as unimportant in this sector, but a number of our recent projects have shown that tech companies can use Procurement Excellence as a lever to enhance profit margin but also improve service delivery and enhance employee satisfaction.
Delivering Procurement Excellence in the Tech sector must be considered from 4 sector perspectives
Tech companies do not have a spend profile like a retailer or a manufacturer. A professional services spend profile is weighted towards spend categories that are either IT and Communications (hardware, software, telecoms, data and services) or People-focused spend such as Staff Health & Benefits, Travel, Accommodation, Recruitment and Outsourced Services.
However, our experience shows that often these areas have not been professionally sourced and good savings opportunities exist as well as accessing supplier-led innovation, particularly in people-focused spend areas. A recent project delivered nearly $2m of profit improvement to a global technology development business.
An initial Spend Analysis will identify and profile the spend and an Opportunity Assessment will define precisely where margin improvement opportunities can be realised. We recently helped US tech company GlobalLogic identify savings and create a roadmap to build a global procurement capability. Read the GlobalLogic Case Study.
The three key benefits of Procurement Excellence for tech firms
1) Margin Impact
Excellent procurement can bring significant results to Tech companies. Our recent project for a global tech development company delivered nearly $2m in EBIT improvement whilst at the same time implementing suppliers and services that improve client service delivery and enhance employee satisfaction. Read the Case Study.
2) Sustainable Management of Spend
Procurement isn’t a one-off project. With a rapidly changing spend profile, evolving business and project-based requirements, a dedicated procurement capability in-house is important. Our clients in this sector have leveraged cost reduction projects to then put in place Director-level Procurement resource to provide ongoing strategic and corporate-level management
3) Managing mavericks through a Purchase-to-Pay system: Employee self-serve
Engineers and developers are used to just sorting what they need. Without some form of control through a Purchase-to-pay system, suppliers and commercials put in place will not get used. A P2P system will make sure that spend is budgeted, approved and spent with the right supplier at the right price. The key is to make buying easy for employees so that they can self-serve from the right suppliers.
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