Lowe's knows a thing or two about buying and selling, so it means something that the Mooresville, N.C., home improvement retailer established a procurement department to help its various divisions make better deals.
Now Tom Nimblett, director of procurement for IT, HR, finance and Lowe's dot-com divisions, reaches out to IT managers at all levels, including the CIO as needed, to consult on tech purchases -- which are not inconsiderable given the company's 1,000-person IT staff and annual IT budget of $1 billion-plus.
An expert in procurement, Nimblett, who reports to the CFO, leads a 12-member team that knows how to negotiate contracts that protect corporate information, mitigate risk, ensure consistency and save money -- even on complex products like hardware, software licenses and cloud services.
Nimblett is well aware that Lowe's process differs from many other organizations, where CIOs and the IT department take charge of buying technology and still retain tight control over it.
"The theories from the past, and a lot of organizations still have those, say that because it's an IT product, no one else is intelligent enough to know about it or is intelligent enough to negotiate for it, and therefore it's held within IT," says Nimblett, who worked in IT at other Fortune 500 companies before moving into procurement at Lowe's.
But when purchasing is siloed in that way, not only do you tie up talented IT people doing a job that's not their core competency, you often end up with deals that favor vendors and not the company, say both IT and procurement experts.
The emerging best practice for IT procurement mitigates those drawbacks by bringing procurement professionals and technologists together.
Nimblett's team recently handled a new contract with a vendor to provide IT services in the field. The procurement group contributed its expertise on sourcing, while IT brought its expertise on specifications and technical designs. Together they were able to review with confidence information provided by vendors.
"The partnership allowed emotion and opinion to be tabled while a common solution was found," Nimblett says. "The end result created a well-defined service model for our stores at a cost-effective price."
Procurement pros' specialized skills
In this new partnership model for IT procurement, the key components of the job aren't setting parameters, establishing budgets, detailing equipment specs or even drafting contracts -- though these things are all still important. It's about rolling up all those pieces into the task of relationship management so the organization can maximize all the benefits it can get from the vendor, whether it's low cost or expert support -- or both.
And that task requires a specialist who has skills beyond those that techies typically possess. (See IT procurement: Key skills for details.)
"IT managers are quickly learning that having a good procurement pro on their side can mean significant gains in efficiency, cost savings and overall effectiveness," says Mike Lee, procurement supervisor at the University of California, Riverside.
The benefits don't end there. Other returns include:
- Right-size contracts. Procurement specialists working with IT can structure deals that allow services or equipment -- as well as costs -- to grow and shrink over the course of a contract's life.
- Consistency. Because procurement is the sole thing these professionals focus on, they're able to streamline and replicate purchasing processes, which creates efficiencies that in turn save money.
- An eye on the fine print. A skilled procurement professional generally knows what parts of standard vendor contracts need to be reworked to better protect their own organization.
- Leverage with vendors. Salespeople can be allies, too, and can often deliver insight on how a business can maximize the value of its products through innovative uses or streamlined processes. Experienced procurement professionals know how to cultivate relationships with vendors to develop partnerships where there's an exchange of ideas that can benefit the organization.
- Governance and risk mitigation. Sure, it's possible for IT to manage contracts over the course of their lifetime, but it's not always probable. Having procurement professionals who count this among their primary responsibilities ensures that the task gets the attention it deserves. That means, in turn, that the organization will be more likely to know in advance about any issues, such as mergers or bankruptcies, that could affect a vendor and its delivery of IT products and services.
Procurement partnering isn't about IT blindly handing over responsibilities or gleefully dumping a mountain of routine paperwork on the desks of highly skilled sourcing staffers. Both sides bring specific skills that complement the other, and both sides need to learn about each other's roles.
It doesn't much matter where IT purchasing decisions ultimately reside -- the CIO, the CFO or the COO -- as long as that collaboration and teamwork are in place, says Jim Jones, a managing director in KPMG's CIO Advisory service network. "The model we've seen not work well is where IT tries to procure without procurement skills or procurement tries to procure without IT skills."