‘Procurement’ has become something of a dirty word in some quarters. Procurement teams are often the whipping boy, positioned as the blocker or the bottleneck preventing large organisations from buying services efficiently.
Nowhere is this more acute than in financial services, and particularly in capital markets. The financial services sector is desperate to buy innovation in order to ease its sclerosis; technologically-minded vendors are desperate to sell it. It’s a no-brainer, right?
Well, not quite. In fact, despite the huge demand for new ideas and better solutions within financial services, many service providers find it a near-impossible market to break into. Over the course of this series of articles, interviews, and events, we’re going to look at the vendor-procurement relationship in financial services. We’re going to explore the challenges and priorities for all the major categories of player in the market, ask what each could do to foster better understanding of the others, and consider some possible routes through which financial services procurement can improve – to everyone’s benefit.
Vendors, procurement, Enablers
This market is split into three broad groups: vendors; procurement teams (along with other client-side stakeholders); and the small but growing crop of Enablers – consultancies and other service providers set up to ease the process.
Vendors, of course, want to sell in their products to willing buyers. But many find that the barrier to entry is unfeasibly high, reporting lengthy contracting and onboarding times, and little visibility of their position in the procurement process.
Vendors also complain of ‘boilerplate’ compliance demands, with a single and inflexible list of documentation requirements that does not reflect the nature of the vendor’s business or the proposed commercial relationship. From the perspective of newly-established vendors, the smoothness (or otherwise) of a procurement process can represent the difference between survival and failure.
Clients, meanwhile, have their own set of specific requirements. In particular, Tier 1 and Tier 2 organisations continue to face significant regulatory pressure. This percolates through the value chain, manifesting as more onerous demands on vendors not only through the procurement process but beyond.
Individual institutions also, of course, have their own risk appetites and assessment criteria. There is no guarantee that what is satisfactory to one client will be satisfactory to another.
The market for financial services technology remains an immature one in which efficiencies and rationalisation are, according to many stakeholders, much needed. Our third group, the Enablers, are a particularly important piece of this puzzle. These businesses essentially exist to oil the machinery by which the vendor-client relationship operates. Through consultancy and professional services they aim to ease the way into the market, particularly for newly-established vendors.
The Enablers are also laying the groundwork for the ‘marketplace-ification’ of financial services procurement, envisioning an arrangement in which vendors and clients are either connected through a platform that also handles some of the back-office tasks, or ‘matchmade’ by specialists.
Over the course of this series we will be speaking to stakeholders from all three groups, and asking what they think can be done better. How can the procurement process be made less onerous for vendors? Is that even something that we should aim for? How can the onboarding process be streamlined? Is there a way to rationalise procurement across the sector? And, most fundamentally, how can the sector ensure that it is innovating in the most efficient way possible?