How Cloud Computing is influencing procurement

Analysts suggest that by 2020 more than 50% of infrastructure will be outside the data center. Even government agencies–typically characterized as slow to embrace technology–are turning to the cloud.

Recently the U.K. government announced plans to formally adopt a “cloud-first” procurement policy. How long before most of corporate services infrastructure is all cloud-based and outsourced systems?

What should Procurement, Sourcing, and Human Resource Professionals know to be ready?

Well, many industry leaders are predicting a shift towards procurement and supply chain departments as a whole moving away from complex ERP-built reporting tools and replacing them with new “app” driven user interfaces and cloud-based analytical platforms which let users purchase from enterprise app stores 24/7. This trend was even mentioned by Tom Linton, CPO of Flextronics, during his presentation on the top 10 trends that will affect procurement over the next 10 years, at the World Procurement Congress in London.  Many of these cloud-based solutions are lower cost and very reliable. They will also facilitate the sharing of information within global supply chains, even among people in different organizations. Some cloud-based solutions, such as powerful SaaS platforms, will deliver value that in-house solutions can’t match. Firms may be able to reduce IT support costs by outsourcing hardware and software maintenance and support to their SaaS provider. There may be some challenges with adoption of new disruptive cloud technologies including data security and finding employees with the requisite skills. Since it seems that procurement professionals will be largely responsible for the roll out of cloud-based services, this shift will require procurement to seek out employees with new skills in managing the supply chain cloud. One solution is to seek out a strategic technology partner with a huge focus on service that can act as a Services Procurement solution and a resource. A global supply chain can result in constantly changing internal buying requirements. Cloud computing will allow procurement team members to get information at the click of a mouse. When used correctly, cloud computing helps reduce the risk of disruption and improves supplier relationships. According to Oliver Belin, Business Development Executive at PrimeRevenue, a leading provider of multi-bank Supply Chain Finance (SCF) technology and services, “It’s a huge benefit for the companies because on one side the buyers have an opportunity to extend their payment terms which is very important in today’s market. Working capital or cash is king today. In order to improve your cash flow, either you collect the money from your customers earlier, you manage your inventory better, or you pay your suppliers later. This is why procurement loves this type of solution because on the one side they can increase payment terms. On the other side, they improve their relationships because they allow their suppliers worldwide to get paid earlier.” Cloud computing may not work for every organization but it looks like we’ll be seeing more cloud-based solutions in the procurement arena. This is especially true since SaaS and other cloud solutions allow businesses to focus on their core strengths instead of being slowed down by IT obstacles.

How do you see Cloud Computing affecting procurement?

Leave a comment and share your thoughts.

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