Procurement transformation is a much larger task than fixing a single process or buying a single system. It often involves new suppliers, new technology and new ways of working, and it presents additional challenges such as integration and implementation across an entire workforce.

This article explores what the term means, how digital and IT-led change fit in, the challenges you are likely to meet and how to deliver a programme that works.

Procurement transformation is a planned programme of change to how an organisation buys goods and services. It typically covers strategy, operating model, processes, technology, data and skills, with the aim of moving procurement from a transactional function to one that delivers measurable savings, better supplier performance and lower risk.

What Is Procurement Transformation?

In practice, a transformation is usually prompted by a problem that day-to-day improvement cannot solve. Spend may be fragmented across departments, contracts may be renewing without review, or the business may have grown faster than its purchasing processes. The common thread is that the procurement function needs to change, not just work harder.

A transformation programme will normally look at several areas together:

• Strategy – What procurement is expected to deliver, and how that supports the wider business plan.
• Operating model – Who buys what, where decisions are made and how procurement works with budget holders.
• Process – How requirements, sourcing, contracting and payment are carried out.
• Technology and data – The systems used and the quality of the spend and contract information they hold.
• People – The skills, roles and capacity of the team.

The principles are the same in every sector, although the emphasis changes. High tech procurement transformation and software industry procurement transformation tend to centre on licensing, cloud spend and fast-moving supplier markets. Telecom procurement transformation, which you may also see called telco procurement transformation or telecommunication procurement transformation, is often driven by network equipment and infrastructure spend. Entertainment procurement transformation usually has to deal with content, production and rights alongside technology.

It is always advisable to begin with a thorough requirements capture. This involves mapping out organisational capabilities and needs to understand where processes can be adapted and improved. Many organisations bring in procurement transformation consultants at this stage, as an outside view often identifies issues that internal teams have learned to work around.

Digital Procurement Transformation

Digital procurement transformation is the part of the programme that deals with technology, data and automation. It replaces manual, paper-based or spreadsheet-driven activity with systems that record what is bought, from whom and on what terms.

• Technology – Tools for sourcing, purchasing, contract management and supplier management, either as a single suite or as separate products that integrate.
• Data – Clean, categorised spend and contract data, so that decisions are based on evidence.
• Automation – Routine tasks such as purchase order approval, invoice matching and renewal reminders handled by the system.

In reality, technology on its own does not transform a procurement function. A new system placed on top of poor processes and unreliable data will simply produce the same problems more quickly. The process and the data should be put right first, or at least alongside the system implementation.

Planning a procurement transformation? Talk to us.

IT Transformation and Procurement

IT transformation is the process of implementing new technology into a business to improve its organisational activities. It is typically a large-scale project that provides solutions across a number of areas within the company. Procurement has a central role, because the programme depends on selecting and contracting the right suppliers.

IT transformation procurement, meaning the buying activity that supports an IT change programme, differs from a simple software or hardware purchase. Businesses will rarely find a single supplier for everything required. Typically, the programme will need a number of software suppliers, hardware suppliers and system integrators, and specialist technology procurement support is often used to manage them.

The benefits to organisations that get this right fall into three areas:

• Organisational transparency and strategy – IT teams and key stakeholders gain much more clarity over the organisation as a whole, which supports strategic decisions about the business.
• Agility and efficiency – Connected systems improve communication between departments and give growing organisations the infrastructure to scale their operations.
• Your bottom line – There are direct benefits, such as automating processes that were previously manual, and indirect benefits from better information.

Procurement supports the programme by capturing requirements, running a fair supplier selection, agreeing contracts that reflect how the systems must work together, and planning the transition from incumbent suppliers.

Common Procurement Transformation Challenges

Ultimately, the majority of challenges stem from poor preparation and management throughout the process. The most common are set out below.

Stakeholders

Planning requires a full analysis of existing business operations and input from a number of stakeholders. Budget holders who are used to choosing their own suppliers may see a new procurement process as a loss of control. Early engagement, and a clear explanation of what the business gains, reduces this resistance.

Data

Most programmes find that spend and contract data is incomplete, held in several systems or categorised inconsistently. Without a reliable baseline it is difficult to set targets or prove results. Many organisations are also still holding on to legacy systems because of concerns about the security of migrating data to the cloud. A staggered migration gives IT teams the time needed to make sure data is protected and accessible to the right people.

Change Management

Transformations have a wide impact on everyday activities. The time it takes employees to adapt to new procedures can cause operational disruption, especially where an organisation moves from legacy systems to complex, integrated solutions. Whilst new procedures will always cause some disruption, proper planning and training ahead of implementation will minimise it.

Timing matters too. It can be tempting to complete a full transformation within a short timeframe, but a multi-step approach allows employees to adapt at a manageable pace and allows the business to iron out issues in a controlled manner.

Skills

Supplier decisions can be difficult without a strong understanding of how different systems work together, and category management, contract negotiation and data analysis skills may not exist in-house. Some organisations opt for a managed service, in which a system integrator is contracted to organise and oversee the whole process. Others build the skills internally as part of a future-proof procurement strategy.

How to Deliver a Successful Transformation

A successful programme is delivered in phases, with clear governance throughout. The phases below are a practical starting point.

1. Assess the current state – Review spend, contracts, processes, systems and skills to establish a baseline.
2. Define the target and the business case – Set out what the function should look like, what it will cost and the benefits expected.
3. Design – Agree the operating model, policies, processes and technology requirements.
4. Implement in stages – Introduce changes category by category or site by site, with training before each stage.
5. Embed and measure – Track benefits against the baseline and adjust where results fall short.

Governance is what keeps the phases on track. It is recommended that you put the following in place before work begins:

• Executive sponsor – A senior leader with the authority to resolve disputes between departments.
• Steering group – Procurement, finance, IT and operational leads, meeting regularly.
• Programme lead – A named individual responsible for the plan, risks and reporting.
• Benefits tracking – An agreed method, signed off by finance, for measuring savings and other results.

Contracts should be part of the scope from the outset. A review of existing agreements often shows where value is being lost, and a wider contracts transformation can run alongside the procurement programme.

Case Study: A £20m Transformation Programme

One example from Athena's own work is the £20m transformation programme for Yodel. Yodel required an enhanced commercial strategy to support a £20m transformation programme for handheld terminals. We developed and delivered that strategy and led the RFP process, including drafting the procurement terms and conditions and managing the end-to-end procurement, whilst maintaining strong relationships with stakeholders.

Programmes of this size show why the points above matter. The commercial strategy, the supplier selection and the stakeholder engagement all need to be planned together, as a weakness in one quickly affects the others.

Key Takeaway

Procurement transformation is a change programme, not a system purchase. Technology and data are important, but results depend on preparation, stakeholder support and a phased plan with clear governance. Most of the common challenges can be avoided if they are planned for at the start.

How Athena Can Help

We can help your business understand what your true requirements are before you make any decisions. We assess your current procurement position, review your existing contracts and set out a practical plan, so you avoid automatic price increases, capacity limits and cancellation restrictions in the agreements that follow.

Choosing the best suppliers can be an overwhelming process. We can help with market research, formal proposals, negotiating your terms and making sure remedies are in place if a supplier doesn't perform. We can also oversee the programme from start to finish, managing your contracts and leading the transition so that changes are delivered on time.

Planning a procurement transformation? Talk to us.

Frequently Asked Questions

What is procurement transformation?

Procurement transformation is a structured programme to change how an organisation buys goods and services. It covers strategy, operating model, processes, technology, data and skills. The aim is a procurement function that delivers measurable value instead of simply processing orders.

Are digital transformation and IT transformation the same?

Though the terms are sometimes used interchangeably, they are not the same. IT transformation is about improving an organisation's internal systems and processes, whilst digital transformation takes a more customer-centric approach and is concerned with the customer's experience. Digital transformation usually requires an organisation to have already undertaken an IT transformation.

How long does a procurement transformation take?

It depends on the size of the organisation, the quality of its data and how much of the operating model is changing. A phased approach is advisable, with early stages delivering visible results whilst longer-term changes to systems and skills continue. Setting a realistic timetable at the start is more useful than promising a fast result.

Do you need external support for a procurement transformation?

Not always, but many organisations do not have the experience in-house to run a programme of this kind alongside their normal workload. External specialists bring knowledge of what has worked elsewhere and can add capacity at the busiest stages. It is worth being clear about which skills should be transferred to your own team before the support ends.