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Optimising time savings in indirect IT procurement

Markit outlines a blueprint and methodology to measure, value and optimise sourcing and purchasing process times in indirect IT P2P processes.
This report shows how almost every international company can reduce its current or future IT hardware & accessory sourcing and purchasing process times by significant amounts.

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Optimising time savings in indirect IT procurement

  1. 1. OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT UNLOCKING EMPLOYEE TIME TO CREATE MEASURABLE NEW VALUE OPPORTUNITIES JULY, 2020 Markit outlines a blueprint and methodology to measure, value and optimise sourcing and purchasing process times in indirect IT P2P processes. This report shows how almost every international company can reduce its current or future IT hardware & accessory sourcing and purchasing process times by significant amounts.
  3. 3. July 2020WWW.MARKIT.EU 3 OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT REDUCING PURCHASING COSTS HAS CONSISTENTLY BEEN A TOP PRIORITY FOR PROCUREMENT ORGANIZATIONS. HOWEVER, IN 2020 REDUCING TOTAL COST OF PROCUREMENT IS NOW THE NO. 1 ISSUE. Source: 2020 PROCUREMENT KEY ISSUES Achieving Procurement Excellence in the Age of Digital Disruption by The Hackett Group SUMMARY • Markit outlines a blueprint and methodology to demonstrate that almost every international company can measure, and potentially reduce, the time spent on its current or future IT device sourcing and purchasing processes by a significant amount. The same methodology can be used to analyse past process performance and historic purchasing processes for benchmark purposes. • Markit has developed a time saving calculator for Indirect IT Sourcing & Purchasing which also allows users to attribute an estimated notional financial value to the time saved. The Time Savings Value Calculator is available at WWW.MARKIT.EU/TIMESAVINGS • Markit’s indirect IT procurement managed services and marketplace can unlock in the region of 70- 90% of a buyer’s time in the key sourcing and purchasing steps of their P2P process. Markit clients, in 34 countries, have created significant value by massively reducing their IT sourcing and purchasing process times and increased their IT procurement teams’ efficiency in simple, transparent and measurable ways. • Further evidence of Markit helping clients succeed in reducing their total cost of IT purchasing requirements can be found in various Markit client and partner success stories and Markit’s nomination in the Finals of the World Procurement Awards (2020) is an additional validation of our expertise in this area.
  4. 4. OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT July 2020WWW.MARKIT.EU 4 Andres Agasild CEO Markit Holding AS This report outlines how you can measure, benchmark, optimise and place a financial value on the exact amount of time spent on your company’s future, current or historic purchase-to-pay processes related to IT hardware & accessories. To support our recommendations, we analysed and combined two main types of data. 1. Research from trusted independent sources including Eurostat, the International Labour Organization, Leipzig University & Mercateo and others. 2. IT hardware and accessory spend patterns of Markit’s top 100 clients (in 2019) and the habits and opinions of some of the most experienced client-side IT buyers using the Markit system. INTRODUCTION Markit brings together leading-edge IT purchasing tools and processes, the largest dedicated global IT device marketplace, and 17 years of IT category experience within a highly efficient team of 130 people spread across 35 countries. Read the Markit Factsheet “I like to think we understand the goals and challenges of international companies. Our teams in 35 countries serve over 9500 companies, some of which have been with us for more than 15 years. What we have learned along the way is that every company’s situation is unique – and yet there are some core commonalities. This has taught us to listen deeply, to dig for the details affecting all the key stakeholders before proposing a collaborative & customised IT procurement solution to reach their time and money saving goals.”
  5. 5. July 2020WWW.MARKIT.EU 5 OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT SITUATION & GOALS Leading international companies are examining, testing and employing a wide range of digital procure- ment services to reduce the direct cost of their IT devices and reduce the time spent (operational costs) buying them. These savings are not sought as one-offs but rather they form part of a year-on-year goal. Only technically strong supply partners who are committed to flexibility and agility will be able to constantly innovate to meet shifting client goals. At the same time procurement leaders want to uncover new sources of value in their indirect IT P2P pro- cesses. These sources of value are sometimes challenging to discover and even harder to measure in fi- nancial terms. This is partly due to lack of spend visibility data, limited insights from IT category experts, cloud-based procurement inexperience, and limitations or system incompatibilities of the solutions on offer. In order to release staff to work on other tasks, and in more strategic areas, procurement teams un- derstand the need to automate manual tasks and that a high level of technical & account management support from partners are vital for successful IT purchasing optimisation. These acknowledgements have been covered in many research papers in recent years. The ongoing digital transformation of procure- ment is inevitable. The search for “more time” to make strategic impacts or take actions that add direct- ly to the bottom line is a part of that inevitability. The virus situation has also highlighted a key dilemma facing international companies- whether to con- solidate IT suppliers to save time (and money) and build closer supplier relationships based on mutual trust and interests or whether to diversify IT category supplier bases locally to mitigate the risk of supply disruptions. We have already presented our thoughts on the solution for this in a separate report: The Indirect IT Pro- curement Dilemma - Solved. INNOVATION MATTERS A solution that works today may not be flexible enough in a few years’ time. Companies want to know about product and service development plans so not only does supplier innovation matter, but it must be accompanied with a high level of transparency and mutual trust.
  6. 6. OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT July 2020WWW.MARKIT.EU 6 Peeter Tamm Head of Development Markit Holding AS P2P PROCESS IN THE INDIRECT IT CATEGORY Whilst the P2P process varies in detail between companies, for the purposes of this report we have chosen a non-category specific stages model and timing benchmarks identified in a report from 2017 called: Indirect purchasing in focus: between savings potential and future opportunities by Mercateo in partnership with Leipzig University of Applied Sciences (HTWK Leipzig). We like its simplicity and clarity and it also proves useful as we use some of their data to help benchmark and compare with our own (later in this report). SAVING TIME IN IT SOURCING AND PURCHASING “We are continuously innovating - discovering and refining ways to drive down IT sourcing and purchasing process times at an accelerated pace. Saving clients time and money is what we do.” Markit’s proprietary technology and processes are customer-lead. Clients feedback requirements and development requests through dedicated account managers. This kind of flexibility and deep desire to help clients succeed partly explains why 20 % of Forbes 2000 choose Markit to source and purchase their IT hardware and accessories. See client success stories at
  7. 7. July 2020WWW.MARKIT.EU 7 OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT Markit aims to help clients save time and money at every stage of the P2P process. It’s in the key areas of sourcing and purchasing where we excel and where we focus most of our attention in this report. When we talk about saving time in this report, we are not looking at reducing process cycle times (although that is an important and a well-known KPI which we do contribute to). In this case, we are looking beyond cycle times into the actual time spent in minutes for each step of the IT sourcing and purchasing process. SOURCING: SUPPLIER/PRODUCT SELECTION Supplier/product search, request creation, offer vetting, offer negotiation, supplier selection, master-data maintenance PURCHASING: ORDER Create purchase order, send purchase order, order confirmation, order monitoring. STEPS TIME SAVING OPPORTUNITIES WITH MARKIT REQUEST CREATION Markit’s catalogue of 3 million IT hardware and accessories provides near real time prices and delivery times for in-stock items. Detailed product specifica- tions supplied by CNET allow fast verification of the quality and features of the products. Parametric and other smart search functions allow you to quickly and easily find in-stock products that match your requirements in 34 country mar- kets and over 20 languages. Clients also have the possibility to: • Limit the products available in the catalogue (restricting the choice and therefore reducing the time spent searching) • Create favourite lists (of preferred or required products/vendors) • Configure product bundles e.g. laptop, docking station and headset so one click buys all products in the bundle. SOURCING: SUPPLIER / PRODUCT SEARCH
  8. 8. OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT July 2020WWW.MARKIT.EU 8 STEPS TIME SAVING OPPORTUNITIES WITH MARKIT OFFER VETTING Markit’s catalogue is in fact a marketplace with direct feeds from almost 300 of the world’s largest IT distributors (read: Ingram Micro IT Distribution success story with Markit where 750,000 IT products were delivered to 12,000 compa- nies). Price comparisons are by default allowing to choose the lowest cost, fastest delivery or most environmentally friendly products in seconds. Because Markit handles deliveries, RMAs and invoicing, all product comparisons are made on a like for like basis. This micro-tendering ability in real time makes offer vetting extremely fast. OFFER NEGOTIATION Real-time transparent distributor level pricing in the marketplace effectively removes the need for negotiation. The total price you pay is pre-determined and includes a small, transparent, pre-negotiated percentage for Markit’s service. Of course, for large orders and special requirements there can be leeway for further direct negotiation. This step effectively takes no time at all once a master agreement is in place. SUPPLIER SELECTION This step takes almost no time at all because there is no need to select a supplier. Markit is the supplier, however the goods are directly dispatched from whichever distributor is stocking the products you require at the time of order. Markit is a marketplace which takes full responsibility for all orders. MASTER DATA MAINTENANCE Clients who buy their IT hardware and accessories through Markit’s market- place only have one supplier profile (Markit) to maintain - rather than dozens or hundreds. That saves a significant amount of time. Our success stories include examples of how companies have consolidated their international IT device buying into Markit. For example, Danfoss reduced their IT suppler count from 130 down to 1. Note: Danfoss has been listed as World Procurement Leaders Award Finalist in 2020 for this successful project. SOURCING: SUPPLIER / PRODUCT SEARCH
  9. 9. July 2020WWW.MARKIT.EU 9 OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT STEPS TIME SAVING OPPORTUNITIES WITH MARKIT CREATE PURCHASE ORDER Once the items have been added to the basket, you simply add delivery details and PO number if there is one and a purchase order is automatically generated SEND PURCHASE ORDER Hit submit. One click is all it takes. ORDER CONFIRMATION Order confirmation is instantaneously displayed and at the same time an email confirmation is triggered and sent to the person placing the order and any other stakeholders who have requested to receive notifications of orders placed. ORDER MONITORING It takes just a few minutes to track the status of an order. The order confirma- tion email contains a link to the order confirmation page in the Markit system. Each product line is accompanied with a tracking link supplied from the courier e.g. DHL There is an additional option to subscribe to an email alert which will inform you when a product has been dispatched, delivered or been invoiced. This feature is rarely used as Markit delivery times are on average between 2-3 days. When the order is completed a further notification is automatically sent. PURCHASING: ORDER
  10. 10. OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT July 2020WWW.MARKIT.EU 10 OTHER P2P STAGES WHERE MARKIT SAVES TIME FOR CLIENTS Whilst savings are highest in the sourcing and purchasing stages of a client’s indirect IT purchasing P2P process Markit also helps reduce the overall P2P process time in other ways. PURCHASE REQUISITION AND APPROVAL NEEDS ASSESSMENT, STOCK CHECK, NEEDS ENQUIRY, NEEDS-RELATED EXAMINATION, NEEDS APPROVAL Whilst some companies have preferred vendors, others define preferred or mandatory product parame- ters e.g. a certain specification for a monitor. Combining filters with Markit’s parametric and save search functions allows companies to build a precise saved list of products that can be considered a solution to the needs’ enquiry and examination steps. Given these tools not only identify the right products and specifications but also show real time stock availability this has the added value of saving time on checking stock by email/phone. A growing number of Markit clients are taking advantage of the marketplace’s advanced spend control features which have the by-product of saving time. • Favourite lists are simple to build for staff and team buyer e.g. preferred brands. • Catalogue access can be restricted down for 3 million products to any number e.g. just a few hundred if the company wants its teams to only buy from a narrow pre-approved selection of vendors or products with defined parameters. • Product bundling can save a lot of time. Pre-configured company-approved bundles can be added to the catalogue view e.g. Laptop, docking station and headset. Just one click and all 3 products go to the basket. GOODS RECEIPT GOODS ACCEPTANCE, GOODS CHECKS, RECORD GOODS, STORE/DISTRIBUTE GOODS Clients can require that a PO number is added at the checkout stage (as a mandatory step). Enforcing this means the PO number appears with any other special package/delivery notes e.g. which entrance/ building the goods should be delivered to. These clear labelling details can save valuable minutes. More related to cycle times than process times but still worth mentioning is the fact that due to the nature of Markit’s distributor-supplier network, orders are usually delivered from local distributors. The average order delivery time in 2019 was just over 3.5 days. This short last mile approach is built in so buyer time isn’t wasted looking for fast deliveries.
  11. 11. July 2020WWW.MARKIT.EU 11 OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT April, 2020WWW.MARKIT.EU INVOICE AND PAYMENT INVOICE RECEIPT, INVOICE REGISTRATION, INVOICE CHECK, INVOICE POSTING, PAYMENT RELEASE Consolidated invoicing by region/time period decreases the number of invoices in the system which makes the process faster (less invoices to process). For fast invoice processing, clients can choose pdf and/or xml invoices to be sent automatically to the right person or department (a designated email address) as ERP-compatible attachments without the need for third party procurement platform integration. Clients can choose centralised or local-to-local invoicing options. Local to local is often the best in terms of time saving, averting the need for internal invoicing within companies and the various transactions and communications that may entail. OTHER WAYS TO SAVE TIME WITH MARKIT Sustainable IT purchasing – finding eco-labelled products that meet your requirements can be time con- suming. The Markit catalogue includes 7 ECO-filters to accelerate discovery of environmentally friendly IT products. Punchout integration is a well-known speed and spend control enabler. Markit is experienced in a wide range of punchout Intergrations. There are no (zero) integration (e.g. punchout), setup or licensing fees from Markit. The fact that savings can be won “immediately” means the speed of onboarding can be significantly faster than with suppliers who require “systems payments”.
  12. 12. OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT July 2020WWW.MARKIT.EU 12 MEASURING THE FINANCIAL VALUE OF TIME SAVINGS Jüri Aleksandrov Head of Customer Support Markit Holding AS “A purchasing solution is only effective if widely understood and adopted. Client champions who have committed to internally evangelize and promote higher levels of Markit usage have seen the highest returns and buy quicker than those who don’t.” One of my team’s goals is to help clients to master the rich feature set of our marketplace to help optimise their IT purchasing experiences. The full methodology including how the calculator works is intellectual property of Markit however we are happy to share it with clients, approved partners and companies who wish to evaluate Markit as a potential supplier. Please contact Head of Sales, Margus Vahemäe for further information CALCULATE THE TIME SAVING POTENTIAL OF USING MARKIT IN YOUR ORGANISATION! WWW.MARKIT.EU/TIMESAVINGS Open Time Savings Calculator
  13. 13. July 2020WWW.MARKIT.EU 13 OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT MEASURING IT DEVICE SOURCING AND PURCHASING TIMES In this report we look at three key elements that can be measured in your IT device sourcing and purchasing activities 1. The actual time take in minutes to perform each step. Recording these steps will tell you how many minutes or hours each order takes (sourcing, ordering, monitoring). 2. The notional financial value of the time saved. This is measured by calculating the total labour costs of the employee(s) who performed the various steps. 3. The actual financial value of the time saved. Reducing time taken means employees can focus on other tasks. How they use time (from coffee & chat at the water cooler to securing a new supplier deal that cuts millions of the bottom line) is the ultimate determinant of its value and the hardest element to measure. THE STEPS WE CHOSE TO MEASURE AND BENCHMARK SPEED SUPPLIER / PRODUCT SELECTION: supplier/product search > request creation > compare offers > offer negotiation > supplier selection > master-data maintenance ORDER: create purchase order > send purchase order, order confirmation, order monitoring To determine the step speeds using Markit we asked our Head of Customer Service, Jüri Aleksandrov, to go through them one by one and screencast video each step. He did the process 3 times, with orders of 3,4 and 5 product lines. We then rounded up the numbers to reflect the fact that this was a master user and the timings are optimal. No client buyer probably has this level of familiarity or experience with the Markit system. However, choosing him to perform the task was an important choice. It shows the potential average savings that buyers can achieve.
  14. 14. OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT July 2020WWW.MARKIT.EU 14 RESULTS AND COMPARISON The results and comparison with Leipzig University/Mercateo’s findings about process times on average orders with 3.7 product lines (depending on company size). Step / action Non-uniform purchasing process (n=19) Uniform, manual purchasing process (n=34) Digital purchasing process (n=28) MARKIT PROCESS SUPPLIER / PRODUCT SEARCH Supplier search 41.3 min 38.4 min 40.8 min 1.1 min Request creation 24.0 min 22.1 min 23.9 min 0.1 min Compare offers 21.0 min 23.3 min 18.5 min 1.0 min Offer negotiation 14.5 min 14.5 min 15.5 min 0 min Supplier selection 8.7 min 8.3 min 11.7 min 0.37 min Master-data maintenance 14.3 min 15.6 min 23.5 min 2 hour per year * ORDER Create purchase order 10.5 min 13.2 min 4.0 min 1 min Send purchase order 8.2 min 4.6 min 0.7 min 0.1 min Order confirmation 5.3 min 4.7 min 1.6 min 0.1 min Order monitoring 3.9 min 1.9 min 1.8 min 0.6 min * Markit saves companies an extremely high of amount of time on their MDM requirements because unlike in many marketplaces where the buyer has numerous supplier data to update, with Markit, there is only one. It’s also worth noting that Master Data Maintenance timings vary enormously between companies. The high numbers we see in the Leipzig University/Mercateo report may be influenced by a few variables. The buying companies involved in the survey had many suppliers who they only placed one or two orders with - -pushing up the annual MDM overhead and average MDM time per order by a significant amount. The high timings from Leipzig University/Mercateo may also reflect the fact that their data looked cross category while we focus on just one niche - indirect IT procurement. Master Data Maintenance requirements in some categories may be a lot more time consuming. So, while the savings we report are correct the reality is it may not be a fair comparison with Leipzig University/Mercateo ‘s findings. An estimate average of MDM time spent by Markit clients is 2 hours per year. In most other marketplaces you will need to multiply that figure by the number of suppliers in your database. NOTE: We used Leipzig University/Mercateo average product line count per order of 3.7 in our benchmark calculations. Obviously, the number of product lines can significantly affect sourcing and purchasing times. For the record, Markit’s TOP100 clients order an average 2.39 order lines per order. As you can see in the table above there is a huge difference approved manual, maverick and general digital purchasing process times as observed in Leipzig University/Mercateo’s research. In the Ordering Stage (per order) timings (Digital purchasing process v Markit Process) are comparable (8.1 minutes in Mercateo data v 1 minute with Markit). Markit’s timing of 1 minutes assumes the buyer has already registered in the Markit system prior to ordering. Registration of a business entity with Markit to allow purchasing involves adding an invoice information and one delivery address as minimum – this takes no more than 5 minutes.
  15. 15. July 2020WWW.MARKIT.EU 15 OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT RESULTS AND COMPARISON The result that really stands out is how much faster Markit is in the Supplier Selection stage. Surprisingly perhaps, Mercateo’s research shows that Digital Purchasing is slower than Maverick or Approved Manual Processes for most steps of Supplier Selection. Mercateo’s report acknowledges this. “In the phases... “3. Order” (average time-saving approx. 18 min- utes) ...a clear reduction in the processing times is evident... while more time is required for supplier selection (approx. 11 minutes on average). This suggests that, in the digital process, more time can be deliberately spent on this phase, which should ultimately be reflected in concrete cost reductions or improved product quality.” The argument that more time is spent in the selection phase to achieve better product quality or lower product costs make sense however in Markit’s case this issue seems less evident as the data shows. Further investigation is required, but it seems that the real-time price and delivery comparisons in mi- cro-tender format in Markit’s marketplace allows buyers to solve the quality and cost comparison issue much faster than the averages identified in Mercateo/Leipzig’s research. In a sense Markit’s results can be considered an “outlier” in a positive sense of the word.
  16. 16. OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT July 2020WWW.MARKIT.EU 16 THE NOTIONAL FINANCIAL VALUE OF TIME SAVED Efficiency gains in procurement are highly sought after and measuring productivity is a well-accepted KPI in any business function. Doing more with less time is on everyone’s agenda. At Markit we see this area as vitally important. Our Revenue per Employee is over 1 million euros - that’s impressive when you consider the average is less than 300,000 euros in the technology sector. Saving time is a key factor in improving RPE, by making our teams more efficient (through automation) bring measurable benefits. Most notably it means we can accurately forecast future staffing levels. Hiring and training bottlenecks are heavily reduced when you need less people to “do more”. If you can reduce sourcing and purchasing time significantly then not only do you get the intangible benefits of “free time” but you will lower your future cost base as the company grows and the outcome of that is measurably higher profitability. Seeking efficiency gains is not the sole remit of procurement, it applies to every business function. Still though it’s worth reminding ourselves of the financial value of it in the long term. If Markit saves you 200 FTE days per annum that would ultimately show up in the company results and impact the P&L in 3 possible ways: 1. Personnel cost reductions short/medium term 2. Cost avoidance on future hiring and training 3. Profitability is improved by handling more procurement spend and activities with less people which indirectly leads to a higher revenue per employee for the whole company Calculating potential procurement time savings is possible, valuable and has been well established as a procurement priority, freeing the team for other more pressing or strategic matters. What these facts mean is that we must acknowledge that the current view is that time savings produce a notional finan- cial saving in the short term. Let’s first look at the notional financial value of time saved assuming you used Markit to source and purchase your IT hardware and accessories. We have already established earlier in this report that it’s possible to measure and identify potential time saving in minutes per sourcing/purchasing step. To calculate the notional financial value of each step you would need to know precisely who made that step. Was it an end user in an accounts department or someone in procurement for example? And where were they located? And what was their salary? We calculated the total labour cost of each of the process steps (see in ASSUMPTIONS, METHODOLOGY & LIMITATIONS) and so we could confidently state that the staff cost of a step was “x”. Once we know the total labour cost of a step the rest is simple math to calculate a financial value.
  17. 17. July 2020WWW.MARKIT.EU 17 OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT THE REAL VALUE OF TIME SAVED Calculating the real bottom line value of process time saved in indirect IT procurement is a conun- drum that can only be solved by closer collaboration between procurement and finance. A solution must exist to track how the saved time is used and its direct financial benefit. It should track the status of the various initiatives induced by time saved. Forecasts can be made from the data and integra- tions with financial systems. Those forecasts could project future (or calculate historic) hard savings or revenue benefits from the impacts. Historic figures could be translated to the P&L. These forms of historic and predictive analysis would not only help identify the real value of the time saved, they would also highlight the vital and increasingly important role that procurement plays. This would engage more of the C-suite in procure- ment lead initiatives, especially those that have the potential to save a significant amount of time in the P2P process. Imagine if an end user saves an hour a day and uses the time to have a cappuccino and check social me- dia then the value is nil. If a procurement executive saves the same hour and over the course of a few months uses the time to close a new supplier deal or revise terms on a large supplier then the value could run to millions of euros. The Hackett Group found process cost savings are recognized by some finance departments but not all. Among the non-cost value steams (in the non- price cost reduction category) to measure labour savings from supplier solution, e.g. outsourcing processes, improved efficiencies. Source: Procurement Value: Measuring Realized Savings
  18. 18. OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT July 2020WWW.MARKIT.EU 18 TIME SAVING CALCULATOR FOR INDIRECT IT PURCHASING The Markit Time Savings Calculator can measure and benchmark your sourcing and process steps and then valued in a simple way. TRY THE CALCULATOR NOW AT: WWW.MARKIT.EU/TIMESAVINGS We recommend that Indirect IT CPOs consider sharing the calculator with the members of their teams that are hands on in the various process steps. Each step of your sourcing and purchasing processes can be tested independently. If the CPO gets enough feedback from the various stakeholders that substantial savings potential is reported by the calculator then it’s obviously an area to explore more deeply. Our calculator is customizable tool for clients to evaluate the value of time savings by using Markit for their indirect IT procurement. This tool is also used to make a business case to prospective clients to show savings that could be made by comparing their existing process timings with those of Markit or comparing Markit with other digital procurement platforms. It can be theoretically modified, with a minimal amount of effort, to suit other categories as the process steps used in P2P are almost universal across product categories.
  19. 19. July 2020WWW.MARKIT.EU 19 OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT CALCULATOR ASSUMPTIONS, METHODOLOGY AND LIMITATIONS ASSUMPTIONS Agreements are in place with potential suppliers or if not, they are not considered part of this study given the huge range of timeframes possible to conclude successful supplier-contractor negotiations including setting KPIs, SLAs and so on. Time is worth more than money (or the notional financial value attributed to it) and is worth saving. It’s a strategic resource to coveted and integral to the success of any organization. The calculator does not consider time spent on: • Purchase requisition and approval: Needs assessment > Stock check > Needs enquiry > Needs-related examination > Needs approval • Goods acceptance > Goods checks > Record goods > Store/distribute goods • Invoice receipt > Invoice registration > Invoice check > Invoice posting > Payment release METHODOLOGY The fine details of methodology and calculations of how to measure potential time savings are Markit intellectual property but here are some of the key points: 1. The TOP 100 Markit clients (companies) order 369 times per annum on average. We set this as the adjustable default for calculating per annum time usage and savings. 2. The average number of product lines in a Markit order from the TOP 100 was 2.39. However, we chose 3.7 as the benchmark default for order step timings. The reason being we wanted to bench- mark results against the P2P process steps (approved manual and maverick options) reported in the Indirect Purchasing in Focus Report (a Mercateo Study 2017 — in partnership with Leipzig University of Applied Sciences (HTWK Leipzig)). 3. We analysed more than 30 million euros of TOP100 client spend including the composition of baskets with 3,4 or 5 product lines. We tested our processes with similar compositions to get accurate tim- ings and determine variables related to product line volume per order and how they affect process step timings. 4. We took into consideration maverick spend percentages and behaviour. Calculator users can define the maverick % split. This is important because the “end user” has a different profile and total labour cost to other roles. In our case we assumed the end user to be average office worker and used corresponding country data. Maverick process time varies too. Some sourcing/purchasing steps can be faster in maverick scenarios.
  20. 20. OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT July 2020WWW.MARKIT.EU 20 MARKIT LOCATIONS IN EUROPE Austria Belgium Bulgaria Croatia Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Netherlands Norway Poland Portugal Romania Serbia Slovakia Slovenia Spain Sweden Switzerland Turkey United Kingdom MARKIT LOCATIONS IN THE WORLD Australia Canada Hong Kong Mexico Singapore United States 5. To calculate the notional value (staff members’ total labour cost) of the time savings was quite a complex task. Firstly, we needed to identify the possible job roles for each of the steps. Sourcing a product might be done by an end user (punchout purchasing or maverick) or could be done by IT support, a department head or someone in procurement. Their locations will vary. In an international company the buyer may have regional responsibilities (e.g. CEE) but may be situated in Germany or Denmark. The end user or IT support person may be in an entirely different location. Imagine if one purchasing step is made by a senior buyer in a Nordic country or a junior office worker in Eastern Europe - the salary implication of that time spent can be significantly different. In order to identify we took data from the International Labour Organization and Eurostat to get estimations of the average gross salaries, including social contributions and taxes payable by the employee, for a given job profile. The results were estimated based on regression models using Structure of Earnings Survey data for reference year 2014 and extrapolated to year 2019 through the wage component of the Labour Cost Index. Further proprietary enhancements were made to the EU data to calculate new variables and data for non-listed job roles in Serbia, Turkey, UK, Norway, Swit- zerland. These are important countries as they are members of Markit’s growing global network of 35 countries. It is also true to say that some data is just not available easily and so in a few cases we calculated a total labour cost variable for the missing role data based on comparison of other roles with neighbouring countries or countries with similar economic profiles.
  21. 21. July 2020WWW.MARKIT.EU 21 OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT LIMITATIONS The calculator we have developed is in Phase 1 and whilst we are confident it is a very good indicator it has its limitations: • The crisis may have affected salaries in 2020 and so it’s possible the 2020 savings should be dialled down a few percentage points to account for this possibility. • Where salary and TLC figures were stated in non-Euro currencies, we converted them to Euros based on the exchange rate at the European Bank on 01.07.2019 (mid-year for the data we are using). • The calculator asks for your industry. This is important because the same job role in the same country can be rewarded differently across business sectors. The drop-down selector in the calculator offers 5 options, there could be 50+. • Some of the missing or extrapolated data that was calculated to the best of our ability is based on our mathematics which has not been subjected to peer review so we accept the output data could be made even more accurate. • As it’s impossible to know who conducts each maverick purchase, we have assumed that person is an average end user in the specified country and attributed a Total Labour Cost accordingly. • We match total labour costs to 5 generic job roles i.e. Buyer, secretary/admin assistant, ICT support, supply/distribution manager and “end user”. This is because the TLC data for more specific job roles (e.g. indirect procurement manager, CPO, IT category procurement manager and so on) in all Europe- an countries is simply not readily available. It’s an area we obviously look to refine in the future. • TLC variables per sector were calculated based on European Business Service Economy data. To calculate and apply variable for each sector in each country for each job role is a monumental task and it was deemed unnecessary as the calculator is only meant to give an estimate of the potential savings with Markit. It’s not a rigorous financial tool. • The negotiation/onboarding/punchout integration phases and the time taken for them are not included. Calculations assume that negotiations and any technical integrations have been completed and users have a basic understanding of the Markit solution (it is very easy to use). • To better understand if Markit is the right partner for you and the potential time (and money) savings that you could enjoy as a client you should speak with one of our experts rather than relying solely on the results from the calculator.
  22. 22. OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT July 2020WWW.MARKIT.EU 22 CONCLUSIONS TIME IS A MEASURABLE STRATEGIC RESOURCE WITH A FINANCIAL VALUE • Time saved in in the indirect IT P2P process is a strategic resource with high potential value which can be measured with close alignment between procurement and finance. • Using Markit’s calculator step process time for the sourcing and purchasing stages of the P2P process can be measured and benchmarked against researched data, an alternative digital platform or a company’s current, prospective IT procurement platform or the Markit solution. • Time saved using Markit is considerable, often more than 90%, when compared to other digital platforms or manual processes. • Of course, choosing an IT hardware and accessory supplier isn’t simply about which one provides the best time savings. There are numerous other factors to consider. SAVING TIME IS NOT THE ONLY KEY TO SUCCESSFUL INDIRECT IT PROCUREMENT An overarching research question in this area is - under what conditions does a new technology or partner truly help produce better solutions rather than more complicated processes? As pointed out in still valid research conducted for DeLone and McLean’s Information Systems Success Model (DeLone and McLean 1992) there are five variables: system, information and service quality, user satisfaction and use or intention to use which influence the level of adoption and, ultimately the success of a new solution. We would be happy to be evaluated against such criteria. Source: Post-implementation analysis of a B2B e-marketplace
  23. 23. July 2020WWW.MARKIT.EU 23 OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT THE IMPORTANCE OF SERVICE IN PROCUREMENT Whilst at Markit we continuously drive towards fully automated indirect IT procurement for all the time and money savings it offers, it’s important to note the role of customer service and satisfaction. In 2019 Markit’s average NPS (client satisfaction rating) was 64.5. We move onwards and upwards to- wards 70%, a truly world class benchmark. Purchase automation is an important metric and a desirable goal - 61% of all Markit purchases orders were fully automated in 2019. However, there can be concern about the role of person-to-person rela- tionships in this new era. B2B buying is shifting to online interfaces with limited, or sometimes, no human interactions at all. Person-to-person relationships may become minimized and interdigital interactions take on a more prominent role. However, this could ultimately result in digital fatigue. At Markit we highly value and maintain personal relationships through regular calls and virtual/physical meetings to avoid this scenario. We continue to seek ways to streamline information and product de- livery and engage with customers in a more sophisticated manner. It is also important to recognize the increasing pressure on IT procurement and purchasing departments to become even more strategic. THE IMPORTANCE OF USAGE OVER FUNCTIONALITY Let’s imagine you want to adopt a new digital indirect IT purchasing solution. An essential fact to remember is the need to prioritize usage over capacity or functionality. Let’s assume for a moment that you have found a “perfect solution for your company” - be it Markit or any other IT purchasing solution. Unless it’s rolled out and adopted throughout your organization you will never realize the full time (and money) savings potential. Efficient onboarding, company-side champions and company-wide adoption are key factors to ensure maximum return. This is why our methodology of Helping Clients Succeed is focused on the long haul. Always looking ahead for ways how to deliver increasing, and long-term, value not just to the procurement function but to all the key stakeholders in our clients’ companies including the CTO, CIO, CFO, important department heads and of the end IT user.
  24. 24. OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT July 2020WWW.MARKIT.EU 24 Margus Vahemäe Head of Sales Markit Holding AS LET’S TALK ABOUT YOUR INDIRECT IT PROCUREMENT CHALLENGES Our extensive experience, industry-recognized abilities and singular focus on the indirect IT category mean we know how to unlock the time and money savings potential in your IT purchasing processes. Markit is transforming the indirect IT procurement function. We have helped over 400 Forbes Global 2000 companies save time and money on their IT hardware and accessory purchasing. We do this by listening carefully, deeply understanding the challenges and tailoring a managed service and IT Marketplace Solution to deliver significant savings for our clients.
  25. 25. July 2020WWW.MARKIT.EU 25 OPTIMISING TIME SAVINGS IN INDIRECT IT PROCUREMENT FURTHER READING There are plenty of resources and opinions that could help you reduce the time and cost of your indirect IT P2P process. Here are a few that we have found interesting or useful. Providing these links does not imply we endorse any of the services offered but we do think they are worth a read. How B2B online marketplaces could transform indirect procurement by McKinsey Maximizing the ROI of P2P Automation Transforming Procurement, AP, and Payables into Profit Centers by Levvel Research Revolutionizing indirect procurement for the 2020s by McKinsey Indirect purchasing in focus: between savings potential and future opportunities by Mercateo in partnership with Leipzig University of Applied Sciences (HTWK Leipzig) Indirect Procurement: A Literature Review and Study of Trends (section 2.22-2.24 about indirect IT procurement) Time as Strategic Resource in Management of Organizations by Suresh Kumar Procure-to-Pay for Indirect Spend Report by GEP Defeating Dark Purchasing by Corcentric Transforming procurement and finance to fuel business growth by Corcentric The Deloitte Global CPO survey 2019: Complexity: overcoming obstacles and seizing opportunities Maverick purchasing means slower, more costly purchases by APQC Digitization in B2B Buying and Selling from the Proceedings of the 53rd Hawaii International Conference on System Sciences 2020 2020 Procurement Key Issues: Achieving Procurement Excellence in the Age of Digital Disruption by The Hackett Group Procurement Value: Measuring Realized Savings by The Hackett Group
  26. 26. TAKE THE CHASING OUT OF IT PURCHASING WWW.MARKIT.EU DISCLAIMER This publication includes data estimates and general research, and therefore some recommendations may be inappropriate for your specific situation and current needs. Before making any decision or taking any action that may affect your IT purchasing processes, you should consult a qualified professional adviser - for example a Markit IT procurement specialist - to identify the optimum solution to increase and accelerate your time savings potential in indirect IT procurement. No entity in the Markit network of companies shall be responsible for any loss whatsoever sustained by any person who relies on this publication. As used in this document, “Markit” means Markit Holding AS (MarkIT Holding AS, Pärnu mnt. 102c / Jalgpalli 1 11312, Tallinn Estonia). Follow Markit news and views on our blog, LinkedIn, Twitter & SlideShare Copyright © 2020 Markit Holding AS This report is made available under the Creative Commons Attribution-ShareAlike License.