Time for IT Procurement Teams to Start Thinking Beyond SMAC Technologies

Digital interruptions and the technologies underlying them are transforming business frameworks. And procurement, similar to other business functions, has been engulfed in this wave of transformation. Unlike earlier days, when procurement was recognized and rewarded solely on the basis of different cost-cutting initiatives, the present day procurement has the onus of making higher-value, strategic contribution.

IT procurement teams are suitably positioned to drive business value and provide strategic contribution by staying abreast of trends in a market that is counted amongst the most dynamic. Most IT procurement offices are well abreast of the impact of SMAC technologies today and the more progressive teams, keen to differentiate themselves, are already exploring emerging concepts like the ‘Robotics Process Automation (RPA)’ and the ‘Open Compute Project (OCP)’ to drive further business value in their respective organizations. For those who are yet to make their first move, here’s why you should:

1. Robotics Process Automation (RPA):

RPA allows companies to configure software (robot) to capture and interpret existing applications for processing a transaction, manipulating data, triggering responses and communicating with other digital systems.

Robotics Process Automation (RPA) as a concept isn’t quite contemporary. However, its application and relevance to the world of BPOs and companies wishing to automate shared service centers and back office processes certainly is!

RPA’s impact can be felt most in the back-office centers running high-volume, repetitive, rules-based work. End-user companies are likely to evaluate the impact of RPA and implement RPA solutions across back-office tasks administered by Finance, Accounting, Customer Services and HR in specific work streams such as call centers, FAO, order processing, etc. RPA will also offer a way to retake control of outsourced activities and lower costs.

RPA has immediate value proposition for the CPO’s & CFO’s office because it promises to significantly cut the number of FTEs that organizations deploy for performing repeatable tasks across horizontal processes (New Product Development, Finance & Accounting, HR, CRM & Sales, etc.). IT procurement offices must take note of tangible benefits that RPA promises:

  • Cost reduction: RPA tools can be up to 60% less expensive than offshore-based FTEs
  • Efficiency: One robotic FTE (rFTE) can typically replace between two to five traditional FTEs across work streams
  • Improved Audit & Regulatory Compliance: Every transaction registers on a detailed audit log enabling the use of advanced business analytics and improved compliance with industry and government regulations

In the IT sector, one can already see the sizeable focus of suppliers on RPA resulting in shrinking workforces. Many leading global technology solutions providers have already announced their RPA platforms in the last couple of years.

There are similar such initiatives from across Tier 1 and Tier 2 IT companies to build their capabilities in process automation.

RPA is truly on its way towards disrupting the traditional IT outsourcing model. And it is imperative for IT procurement offices to be well aware of the potency of RPA as they look to renew existing outsourcing contracts or sign fresh deals.

2. Open Compute Project (OCP):

The Open Compute Project (OCP) is an open, community-driven project initiated by Facebook in mid-2011. The OCP project, which still is an emerging concept, currently has a pool of nearly 200 participants from across vendor and end-user communities. The initiative is focused on driving efficiencies within data center infrastructure. It is focused on sharing specifications and designs for data center infrastructure elements within the community and collaborating with the community members to identify areas for further improvement.

The OCP initiative is a paradigm shift for the IT industry where the end-user community is driving the innovation rather than the technology vendors. The initiative is expected to deliver results across key areas which remain a concern for most infrastructure and data center operation professionals currently:

  • Energy Efficiency: OCP-based data center hardware can result into 20 to 30 percent energy reduction across a company’s data centers.
  • Cost Savings: Original Design Manufactured (ODM) servers are gaining increased traction when compared with servers designed by Original Equipment Manufacturers (OEMs) due to their lower costs and innovative, effective and open designs. IT procurement teams are exploring the possibility to source directly from ODM companies, thereby disrupting the traditional sourcing channels established by OEMs.

This is a huge opportunity for IT procurement teams to tap into – they can either procure cost-effective equipment from ODMs or drive aggressive negotiations with OEMs who are under pressure to drop prices due to the increasing relevance of ODMs.

Companies such as Facebook, Goldman Sachs and Fidelity Investments have been able to save significantly (Facebook has saved $1.2 billion in three years through OCP initiatives) by being early adopters of OCP.

IT procurement teams involved in sourcing data center equipment must take note of OCP’s innovations around scale and serviceability, and its potential to introduce significant savings in data center deals. They are advised to factor in the relevance of ODMs to their business model and build business cases to selectively migrate a part of their data center environment to an OCP-led model.

For more interesting thinking on procurement, visit the GEP Knowledge Portal

IT & Telecom

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