The recent plummeting in technology sales and stocks may not be such a bad thing for purchasers. The euphoria, peer pressure and IT’s potential to deliver massive savings have meant that, over the past few years, software suppliers and their agents have had a field day. At times, it almost seemed that a supplier only had to offer a new product for it to be snapped up.

Seldom, if ever, were new tools introduced as part of a coherent on-going investment strategy. Offerings were seldom prioritised or related to the real needs of the business.

Take the example of e-procurement for indirect goods, which was developed to manage requisitioning and ordering of stationery and other non-core requirements. In a typical company, process automation and control of non-core products can only deliver potential savings of 2 per cent for purchasing - hardly the area to deliver the biggest bang for your buck!

Yet many companies were persuaded to go ahead. Sometimes this was the result of the supplier conducting an expensive “opportunity assessment” but, more often than not, even this thoroughly biased analysis was dispensed with in the headlong rush to implementation.

Other more productive areas for investment were often not considered. But hopefully the sharp slowdown in new technology will now give purchasing managers breathing space, so that in future they buy the purchasing tools they need, rather than what the supplier has developed and wants to sell.

And a little breathing space is just what is needed, because the going for procurement is already getting much tougher. Most of the low-hanging fruit has already been harvested. Supplier spend has been leveraged across the organisation, unnecessary costs have been eliminated and all kinds of other quick-wins have already been fed through to the bottom line.

The nature of these savings means they cannot be repeated year after year without having an effect on quality and service, so it is important to demonstrate the dangers inherent in viewing easy wins as an annual harvest. It is clear that purchasing’s contribution in the future will require new, more sophisticated procurement strategies and these strategies will require new, equally sophisticated tools.

In some instances, the first step should be better communication. For example, it might be necessary to categorise how and why past savings have been achieved and show these alongside the potential for similar savings in the future. Once senior managers understand that it is unrealistic to expect repeats of previous savings ad infinitum, it will be much easier to get the need for new purchasing strategies accepted. This, in turn, should pave the way for the investment in the tools that will drive and enable the new strategies.

But the need for investment in purchasing is only part of the battle. There’s always the matter of where the money is going to come from. Fortunately, unlike most other parts of the business, the purchasing department can commit to pay for its own investments out of savings. All that is required is a clear link between investment and future savings, helped on its way with some simple arithmetic.

So the way to combat future pressure to implement expensive, low-priority tools is take the initiative now. This means using the time afforded by the current slowdown to develop new procurement strategies. The subsequent identification and prioritising of suitable tools should, of course, be conducted independently from people trying to sell you the systems. Only then will the next phase of investment in procurement truly meet the needs of the business, rather than those of the software suppliers and their agents.

Kevin Fane-Saunders is managing director of Fane Consultancy, a specialist independent procurement consultancy

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