The rise of procurement in buying financial services solutions

Accountancy Age

Are you grasping a new opportunity? The rise of procurement is changing the way organisations are buying financial services solutions.

Expertise, resources, accessibility, results, price, and contacts have always been, and will continue to be, critical factors in gaining and keeping loyal clients.  To these, you can now add an understanding of “Procurement”. 

In many large organisations Procurement is paying its own way as an increasingly influential department.  What was once very much a back office function is now performed by graduates who have studied Procurement at the UK’s leading universities. 

Historically, Procurement became involved in financial services decisions only at the latter stages, typically testing the market and negotiating.  Today you are still unlikely to be aware of their presence until a Request for Proposal ("RFP") is issued. But you can be sure that they are in the background running the process at all stages.  If a review of a company’s financial services spend is triggered, Procurement will take responsibility for "owning" the process and ensuring the milestones are met. 

Procurement group like suppliers into categories.  Typically, Financial Services spend is either in a category on its own or it is part of the Professional Services category, depending on the nature of an organisation.  Procurement’s strategy and approach towards you is driven by the shape of the category you are in. Generally Procurement has a large number of suppliers in each category (it can be 100s) and they only focus on the suppliers they deem "critical", which are those with whom the organisation spends the most money, or who provide a unique service.  These usually account for the top 5 to 10 suppliers per category.  The other suppliers receive very little management or development, and are considered "uncontrolled". 

Generally Procurement’s strategy is to move their business from ‘uncontrolled’ suppliers to ‘critical’ suppliers.

What does this mean for you?

In financial services, the reduction in the number of suppliers to major City organisations which Procurement processes brings about has also been fed by Sarbanes Oxley which requires tighter controls, more visibility of processes inevitably creating pressure to reduce the number of professional advisers.  

Sadly, financial services providers have developed a poor reputation for the speed and quality of their responses to RFPs, relative to other professionals.  You might greet this news with relief at not being alone, or perhaps more shrewdly, your firm could perceive this as an opportunity to steal a march on the competition, by recognising Procurement as a means for you to secure and perpetuate relationships with your key clients. 

You can embark on two key processes if you wish to engage with Procurement:

• Educate your partners and business development teams so that they know when and how to react.  Remember, the process is consistent and predictable. 
• Engage your clients' Procurement teams: let them help you to sell your services to them!

Whether you regard your clients' Procurement department as a “gate-keeper” or a new opportunity, just remember the process is here to stay. 

Alan Day is the Managing Director of State of Flux Limited a supply chain change consultancy (www.stateofflux.co.uk).  Alan has more than 15 years in Procurement and supply chain, from designing and running Global Supply Chains for City organisations, to consulting to the UN on E-Trade and supply chain.