American universities and colleges are under financial pressure. Statistics show the severity of the situation with 43% of institutions spending more than they can afford, according to a study by Bain & Company.
Debt is, naturally, unsustainable, so the question is what can Boards of Governors do about it? It requires investing in the future, and doing so intelligently. Fortunately, there is unlikely hero lurking in the halls. Procurement.
Spending is often an institution’s biggest cost item, sometimes on par or exceeding private sector organizations.
Not surprisingly, many a chancellors’ office looks here first for savings and unaccounted cash. However, they soon realize it’s not an easy task because there is no centralized view of purchasing and accounts payable across the entire institution.
It may be difficult to believe that in the 21st century organizations struggle with basic spend analytics but you’d be surprised by how many procurement leaders yearn for detailed spend visibility even in the largest companies in the world!
I won’t go into the specifics but reasons often cited by procurement heads for not having spend visibility include a lack of mandate, an absence of skills and capabilities, and outdated technologies. This is far from an exhaustive list.
Every higher education institution takes a different road toward procurement excellence, using a variety of resources on the journey. Over the years, consultancies and software companies have made a lot of money advising schools, from recommending new organizational structures to what technologies they should buy for spend analytics and contract management to name two. This can be of great value especially for an institution going through much-needed change.
However, I have seen first-hand a number of universities and colleges remain self-sufficient on external partners for far too long – and this can cost dearly in lost savings because the procurement department is not in control of its own destiny. It relies on the service provider for the littlest manual change request such as re-categorizing a Dell computer under ICT, for example.
Today, procurement is well positioned to transform and financially strengthen the entire institution, demonstrating the commercial value of spend analytics. This is good news, and it’s exciting.
The not-so-good news is it requires you, as the buyer of technology, to do your due diligence, ensuring that what you buy will meet your expectation today and in the future.
To help you modernize your decision-making capabilities, you may need more information. Please consider reading, “Five Tips to Implementing Self Service Spend Analytics,” a blog post written by my colleague, Paul Cook, a former chief procurement officer.