An Interview With Industry Leader John P. “Jack Miles About the Current State of Procurement in Financial Services: Part One

To get a deeper perspective of procurement in Financial Services firms, Arkestro sat down with procurement and business expert, Jack Miles, to gain his insights on the nuances of procurement in financial service firms and procurement in general. Along the way, Jack gives his unique perspective on the procurement industry based on his many years of experience.

Procurement in Financial Services: Challenges and Why Procurement Is Not Just About Saving Money

Arkestro: Thanks for speaking with us today, Jack. We’ve got a lot to cover, so let’s get right into it. In your estimation, what would be the pain points in financial services procurement?

Jack Miles: It’s sort of the same thing as everybody. One of the challenges in the business — and unfortunately, this hasn’t changed in decades — is that everybody seems to think that the only thing procurement does is muscle people under on pricing. And that’s not the main thing that we do. As a matter of fact, I’ve always suggested that there are many other things that we do, and the concept of saving money goes on the tail end of all of that.

There are many examples of where we’ve done good work that had nothing to do with pricing and actually helped business groups be in a better place from a risk standpoint or to run their business because of some of the things that we did.

So it’s not just price. Procurement also has the responsibility to take a look at the viability of doing business with the company. Can they handle your business? Do you have too much business with one particular supplier where they’re kind of dependent on you? You never want to be in that spot.

Procurement in Financial Services firms ultimately is working with people. It’s demonstrating what the value proposition is, and communicating well with the businesses to let them know the best way for the two organizations to work together for the best outcomes for all stakeholders. When you need to get involved, why it matters, why understanding requirements is important. You also have to know your audience and who you’re working with.

Arkestro: Many organizations struggle to manage their spend efficiently. Where do you think financial services firms face the biggest gaps – whether in direct spend, indirect spend, or services procurement?

Jack Miles: The challenges that financial services firms have are very similar, if not the same, to the challenges that other industries have. I tend to focus on the sameness, not the differences, and most of them are pretty much the same. When you look at the different spend categories, direct, indirect, and such, they don’t have all that within financial services.

For instance, in the manufacturing environment, you’re making things, and those things usually have standards around them, drawings, specifications, or whatever. In the financial services business, you don’t really have that. You have folks that want things, and sometimes they have a hard time describing what they want. Procurement can help facilitate getting to the “what” they want.

What makes financial services a little bit different is the fact that you have to have people who are able to uncover exactly what people want and are looking for. That goes beyond the standard stuff that you would be buying in an organization, be it technology, supplies, or the things that keep the operation going.

In service procurement, you look at not just bringing down the price of things but also at how much of that stuff you’re buying. If you’re able to reduce what you’re buying, it’s not a matter of saving 10 or 15 percent — it’s basically saving the full price of the item.

The Case For Modernizing Procurement Systems

Arkestro: Legacy systems and manual processes often hold organizations back. From your experience, how have these factors impacted procurement efficiency in financial services, and what steps can be taken to modernize?

Jack Miles: The systems have clearly improved over the years, but there’s a lot of work that we could do without having a system. What does a system or technology provide you? It provides you with an awful lot of the data and information that you need to be able to do a better job on sourcing. What are you buying? How much are you buying? How many suppliers?  What’s the value proposition? And last but not least, what are the prices?

And also it’s the ease of being able to buy. You need to have systems and technology that are going to make it relatively easy for people to get the things that they want. If it’s not easy, they won’t use it. They’ll find another way.

How Procurement Leaders Can Change The Perceptions of Procurement and Drive Real Business Value

Arkestro: What role do organizational culture and stakeholder alignment play in addressing procurement challenges?

Jack Miles: That’s been a challenge for years, and I hear the same comments that I heard 30 years ago. Comments like, “We need to get a seat at the table,” and I keep saying there is no table. You have to earn the engagement with people and be able to demonstrate what you can do for them and how you do it. You change the perceptions of what they think you do, which is very often just negotiating price. Plus, you have to have somebody leading procurement that is willing to lead and take some risk.

One of the responsibilities that I feel is important in a procurement organization is to stay current on what’s going out and going on in the environments that you have some responsibilities for. Once in a while, you can actually bring an idea, concept, or something new to the business, so you’re a resource, and I think it’s critical to be in that role. You also need to be willing to acknowledge that somebody has something that you don’t necessarily know about and be willing to change, adjust, and adopt.

What are you going to do? Just sit there and wait for one of the lines of business to come to you and ask you to do something? No, you should be out there with them. If there’s some new stuff going on or some things that sound interesting, you should be able to have those conversations with them.

Also, it’s all part of the supplier management slide. My door was always open for new folks to come in and chat about something that they thought would really be of value to the organization, whether it’s financial services, healthcare, or something else. You want to be in that position where you can understand some of this and help them get to the right people in the organization.

Stay tuned for Part Two of our interview with Jack Miles, where he discusses how technology and Arkestro are shaping the future of financial services procurement.