Pinching pennies through a streamlined procurement process

As state and local government budgets across the country further tighten their already tight belts, there exists a growing need to look at how government operates on a line-item level.

Now, more than ever, it is important that public sector institutions look at how they buy the everyday items that make up the nuts and bolts of their operation. Or so says Bill Schaefer, vice president at IBM Procurement Services.

“Strategic sourcing of indirect spend [software, office supplies, official travel] is quite large for the average firm or public sector institution,” Mr. Schaefer said in an interview with CivSource last week. “Around 10 to 20 percent.”

Last week, IBM announced an expansion of their procurement services, including strategic sourcing services and new procure-to-pay services. Although the announcement was primarily directed toward prospective customers in the private sector, Mr. Schaefer said IBM’s offerings are “very relevant to the public sector.”

“IBM has been in the business of managed business process services and procurement for over ten years,” Mr. Schaefer said. “We’ve grown to the point where we do about $48 billion in manage spend around the world. And we can drive tremendous savings for the customer.” And due to the unprecedented financial troubles facing just about every state in the Union, Mr. Schaefer said IBM’s, “public sector prospects are looking harder at this than in the past.”

IBM logoThrough their strategic sourcing services, customers have access to spend-category experts who can analyze their spend, develop new sourcing strategies and negotiate improved contracts with suppliers. Or for institutions that rely on localized resources to perform back-office operations, they can use IBM’s global shared services capabilities for procurement and payables.

Mr. Schaefer says IBM “provides either component services or end-to-end solutions because everyone is trying to do more with less.” But for Mr. Schaefer, the magic sauce is with the employees and for their bottom line.

“e-procurement is important,” Mr. Schaefer said, “But we provide services and technology – I’ve known companies or institutions who think that if they buy the system everybody will be happy, but in reality you need the right people, the right expertise and the right processes. Last, but not least, is the right software.”

The real innovation, Mr. Schaefer says, is that individual firms or agencies can only optimize their procurement process to a point.

“A big problem [for the public sector] is expertise,” he said. To understand the level of expertise Mr. Schaefer is talking about, take managing travel, for instance. “To make sure you were getting the most out of your travel budget, you’d need someone who came out of the airline or hotel industry to understand the what’s happening. That’s where IBM comes in.”

There are some slightly different priorities [between the public and private sector] and a lot of challenges with how to deliver the highest quality service and drive end-user satisfaction, according to Mr. Schaefer. In the public sector, there are competing and different constituencies with stringent procurement policies that cost a lot of money.

“At IBM, we really focus on the procurement process to make sure the employees are satisfied. If you just through tech at it, people aren’t satisfied – at IBM, we fit the pieces together to bring the most value for the customer.”

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